Classified in: Mining industry, Transportation, Business, Covid-19 virus
Subjects: ERN, ERP

Caterpillar Reports Third-Quarter 2023 Results

• Third-quarter 2023 sales and revenues increased 12% to $16.8 billion
• Third-quarter 2023 profit per share of $5.45; adjusted profit per share of $5.52
• Returned $1.0 billion to shareholders through dividends and share repurchases in the quarter

IRVING, Texas, Oct. 31, 2023 /PRNewswire/ -- Caterpillar Inc. (NYSE: CAT) announced third-quarter 2023 sales and revenues of $16.8 billion, a 12% increase compared with $15.0 billion in the third quarter of 2022. The increase was primarily due to favorable price realization and higher sales volume.

Operating profit margin was 20.5% for the third quarter of 2023, compared with 16.2% for the third quarter of 2022. Adjusted operating profit margin was 20.8% for the third quarter of 2023, compared with 16.5% for the third quarter of 2022. Third-quarter 2023 profit per share was $5.45, compared with third-quarter 2022 profit per share of $3.87. Adjusted profit per share in the third quarter of 2023 was $5.52, compared with third-quarter 2022 adjusted profit per share of $3.95. Adjusted operating profit margin and adjusted profit per share for both quarters excluded restructuring costs. Please see a reconciliation of GAAP to non-GAAP financial measures in the appendix on page 12.

For the nine months ended September 30, 2023, enterprise operating cash flow was $8.9 billion, and the company ended the third quarter with $6.5 billion of enterprise cash. In the quarter, the company paid dividends of $0.7 billion and repurchased $0.4 billion of Caterpillar common stock.

"I'd like to thank our global team for delivering another great quarter, as demonstrated by double-digit top-line growth, strong adjusted operating profit margin and robust ME&T free cash flow," said Chairman and CEO Jim Umpleby. "We remain focused on supporting our customers' success and executing our strategy for long-term profitable growth."

CONSOLIDATED RESULTS

Consolidated Sales and Revenues

Consolidated Sales and Revenues Comparison
Third Quarter 2023 vs. Third Quarter 2022 

To access this chart, go to https://investors.caterpillar.com/financials/quarterly-results/default.aspx for the downloadable version of Caterpillar third-quarter 2023 earnings.

The chart above graphically illustrates reasons for the change in consolidated sales and revenues between the third quarter of 2022 (at left) and the third quarter of 2023 (at right). Caterpillar management utilizes these charts internally to visually communicate with the company's board of directors and employees.

Total sales and revenues for the third quarter of 2023 were $16.810 billion, an increase of $1.816 billion, or 12%, compared with $14.994 billion in the third quarter of 2022. The increase was due to favorable price realization and higher sales volume. The increase in sales volume was driven by higher sales of equipment to end users, partially offset by the impact from changes in dealer inventories and lower services sales volume. Dealer inventory increased more during the third quarter of 2022 than during the third quarter of 2023.

Sales were higher across the three primary segments.

 

Consolidated Operating Profit

Consolidated Operating Profit Comparison
Third Quarter 2023 vs. Third Quarter 2022 

To access this chart, go to https://investors.caterpillar.com/financials/quarterly-results/default.aspx for the downloadable version of Caterpillar third-quarter 2023 earnings.  

The chart above graphically illustrates reasons for the change in consolidated operating profit between the third quarter of 2022 (at left) and the third quarter of 2023 (at right). Caterpillar management utilizes these charts internally to visually communicate with the company's board of directors and employees. The bar titled Other includes consolidating adjustments and Machinery, Energy & Transportation's other operating (income) expenses.

Operating profit for the third quarter of 2023 was $3.449 billion, an increase of $1.024 billion, or 42%, compared with $2.425 billion in the third quarter of 2022. The increase was primarily due to favorable price realization, including a favorable geographic mix of sales, and higher sales volume, partially offset by higher selling, general and administrative (SG&A) and research and development (R&D) expenses, and higher manufacturing costs. The increase in SG&A/R&D expenses was primarily driven by investments aligned with strategic initiatives, higher short-term incentive compensation expense and an unfavorable change in fair value adjustments related to deferred compensation plans. Unfavorable manufacturing costs were driven by lower freight being more than offset by higher material costs, unfavorable cost absorption, increased period manufacturing costs and the impact of manufacturing inefficiencies. Cost absorption was unfavorable as inventory increased during the third quarter of 2022, compared with a decrease in the third quarter of 2023.

Other Profit/Loss and Tax Items

• Other income (expense) in the third quarter of 2023 was income of $195 million, compared with income of $242 million in the third quarter of 2022. The change was primarily driven by unfavorable impacts from foreign currency exchange and pension and other postemployment benefit (OPEB) plan costs, partially offset by higher investment and interest income and favorable impacts from commodity hedges and unrealized gains on marketable securities.
  
  
• The provision for income taxes for the third quarter of 2023 reflected an estimated annual global tax rate of 22.5%, excluding the discrete items discussed below. The comparative tax rate for the third quarter of 2022 and full-year 2022 was approximately 23%.
  
  The company recorded a $34 million benefit in the third quarter of 2023 compared to a $20 million benefit in the third quarter of 2022 due to a decrease from the second-quarter estimated annual tax rate. In the third quarter of 2023, the company also recorded a discrete tax benefit of $22 million for the settlement of stock-based compensation awards with associated tax deductions in excess of cumulative U.S. GAAP compensation expense. In the third quarter of 2022, the company also recorded a discrete benefit of $41 million to reflect changes in estimates related to prior years.

Construction Industries' total sales were $6.999 billion in the third quarter of 2023, an increase of $723 million, or 12%, compared with $6.276 billion in the third quarter of 2022. The increase was primarily due to favorable price realization.

• In North America, sales increased due to higher sales volume and favorable price realization. Higher sales volume was driven by higher sales of equipment to end users and the impact from changes in dealer inventories. Dealer inventory increased more during the third quarter of 2023 than during the third quarter of 2022.
• Sales decreased in Latin America primarily due to lower sales volume, partially offset by favorable price realization. Lower sales volume was driven by the impact from changes in dealer inventories and lower sales of equipment to end users. Dealer inventory increased during the third quarter of 2022, compared with a decrease during the third quarter of 2023.
• In EAME, sales increased mainly due to favorable price realization and favorable currency impacts primarily related to the euro.
• Sales decreased in Asia/Pacific primarily due to lower sales volume. Lower sales volume was driven by lower sales of equipment to end users, partially offset by the impact from changes in dealer inventories. Dealer inventory increased during the third quarter of 2023, compared with a decrease during the third quarter of 2022.

Construction Industries' profit was $1.847 billion in the third quarter of 2023, an increase of $638 million, or 53%, compared with $1.209 billion in the third quarter of 2022. The increase was mainly due to favorable price realization.

Resource Industries' total sales were $3.351 billion in the third quarter of 2023, an increase of $264 million, or 9%, compared with $3.087 billion in the third quarter of 2022. The increase was primarily due to favorable price realization, partially offset by lower sales volume. Sales volume decreased as higher sales of equipment to end users were more than offset by lower aftermarket parts sales volume and the impact from changes in dealer inventories. Dealer inventory increased during the third quarter of 2022, while remaining about flat during the third quarter of 2023.

Resource Industries' profit was $730 million in the third quarter of 2023, an increase of $224 million, or 44%, compared with $506 million in the third quarter of 2022. The increase was mainly due to favorable price realization, partially offset by lower sales volume, including an unfavorable mix of products.

Energy & Transportation's total sales were $6.859 billion in the third quarter of 2023, an increase of $673 million, or 11%, compared with $6.186 billion in the third quarter of 2022. Sales increased across all applications. The increase in sales was primarily due to higher sales volume and favorable price realization.

• Oil and Gas ? Sales increased for turbines and turbine-related services. Sales also increased in reciprocating engines used in well servicing applications.
• Power Generation ? Sales increased in large reciprocating engines, primarily data center applications.
• Industrial ? Sales increased primarily in EAME and Latin America.
• Transportation ? Sales increased in rail services.

Energy & Transportation's profit was $1.181 billion in the third quarter of 2023, an increase of $246 million, or 26%, compared with $935 million in the third quarter of 2022. The increase was mainly due to favorable price realization and higher sales volume, partially offset by higher SG&A/R&D expenses, unfavorable manufacturing costs and currency impacts. The increase in SG&A/R&D expenses was primarily driven by investments aligned with strategic initiatives and higher short-term incentive compensation expense. Unfavorable manufacturing costs reflected lower freight being more than offset by higher material costs, increased period manufacturing costs, the impact of manufacturing inefficiencies and the unfavorable impact from inventory write-downs.

Financial Products' segment revenues were $979 million in the third quarter of 2023, an increase of $160 million, or 20%, compared with $819 million in the third quarter of 2022. The increase was primarily due to higher average financing rates across all regions.

Financial Products' segment profit was $203 million in the third quarter of 2023, a decrease of $17 million, or 8%, compared with $220 million in the third quarter of 2022. The decrease was mainly due to the absence of prior year reserve releases for credit losses at Cat Financial, partially offset by a favorable impact from mark-to-market adjustments on derivative contracts.

At the end of the third quarter of 2023, past dues at Cat Financial were 1.96%, compared with 2.00% at the end of the third quarter of 2022. Write-offs, net of recoveries, were $9 million for the third quarter of 2023, compared with $13 million for the third quarter of 2022. As of September 30, 2023, Cat Financial's allowance for credit losses totaled $340 million, or 1.23% of finance receivables, compared with $320 million, or 1.15% of finance receivables at June 30, 2023. The allowance for credit losses at year-end 2022 was $346 million, or 1.29% of finance receivables.

Corporate Items and Eliminations

Expense for corporate items and eliminations was $368 million in the third quarter of 2023, an increase of $25 million from the third quarter of 2022. Decreased expenses due to timing differences were more than offset by higher corporate costs, unfavorable impacts of segment reporting methodology differences and an unfavorable change in fair value adjustments related to deferred compensation plans.

Notes

i.  Glossary of terms is included on the Caterpillar website at https://investors.caterpillar.com/overview/default.aspx.
ii.  Sales of equipment to end users is demonstrated by the company's Rolling 3 Month Retail Sales Statistics filed in a Form 8-K on Tuesday, Oct. 31, 2023.
iii.  Information on non-GAAP financial measures is included in the appendix on page 12.
iv.  Some amounts within this report are rounded to the millions or billions and may not add.
v.  Caterpillar will conduct a teleconference and live webcast, with a slide presentation, beginning at 7:30 a.m. Central Time on Tuesday, Oct. 31, 2023, to discuss its 2023 third-quarter results. The accompanying slides will be available before the webcast on the Caterpillar website at https://investors.caterpillar.com/events-presentations/default.aspx.

About Caterpillar

With 2022 sales and revenues of $59.4 billion, Caterpillar Inc. is the world's leading manufacturer of construction and mining equipment, off-highway diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives. For nearly 100 years, we've been helping customers build a better, more sustainable world and are committed and contributing to a reduced-carbon future. Our innovative products and services, backed by our global dealer network, provide exceptional value that helps customers succeed. Caterpillar does business on every continent, principally operating through three primary segments ? Construction Industries, Resource Industries and Energy & Transportation ? and providing financing and related services through our Financial Products segment. Visit us at caterpillar.com or join the conversation on our social media channels at caterpillar.com/en/news/social-media.html.

Caterpillar's latest financial results are also available online:

https://investors.caterpillar.com/overview/default.aspx

https://investors.caterpillar.com/financials/quarterly-results/default.aspx (live broadcast/replays of quarterly conference call)

Forward-Looking Statements

Certain statements in this press release relate to future events and expectations and are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as "believe," "estimate," "will be," "will," "would," "expect," "anticipate," "plan," "forecast," "target," "guide," "project," "intend," "could," "should" or other similar words or expressions often identify forward-looking statements. All statements other than statements of historical fact are forward-looking statements, including, without limitation, statements regarding our outlook, projections, forecasts or trend descriptions. These statements do not guarantee future performance and speak only as of the date they are made, and we do not undertake to update our forward-looking statements.

Caterpillar's actual results may differ materially from those described or implied in our forward-looking statements based on a number of factors, including, but not limited to: (i) global and regional economic conditions and economic conditions in the industries we serve; (ii) commodity price changes, material price increases, fluctuations in demand for our products or significant shortages of material; (iii) government monetary or fiscal policies; (iv) political and economic risks, commercial instability and events beyond our control in the countries in which we operate; (v) international trade policies and their impact on demand for our products and our competitive position, including the imposition of new tariffs or changes in existing tariff rates; (vi) our ability to develop, produce and market quality products that meet our customers' needs; (vii) the impact of the highly competitive environment in which we operate on our sales and pricing; (viii) information technology security threats and computer crime; (ix) inventory management decisions and sourcing practices of our dealers and our OEM customers; (x) a failure to realize, or a delay in realizing, all of the anticipated benefits of our acquisitions, joint ventures or divestitures; (xi) union disputes or other employee relations issues; (xii) adverse effects of unexpected events; (xiii) disruptions or volatility in global financial markets limiting our sources of liquidity or the liquidity of our customers, dealers and suppliers; (xiv) failure to maintain our credit ratings and potential resulting increases to our cost of borrowing and adverse effects on our cost of funds, liquidity, competitive position and access to capital markets; (xv) our Financial Products segment's risks associated with the financial services industry; (xvi) changes in interest rates or market liquidity conditions; (xvii) an increase in delinquencies, repossessions or net losses of Cat Financial's customers; (xviii) currency fluctuations; (xix) our or Cat Financial's compliance with financial and other restrictive covenants in debt agreements; (xx) increased pension plan funding obligations; (xxi) alleged or actual violations of trade or anti-corruption laws and regulations; (xxii) additional tax expense or exposure, including the impact of U.S. tax reform; (xxiii) significant legal proceedings, claims, lawsuits or government investigations; (xxiv) new regulations or changes in financial services regulations; (xxv) compliance with environmental laws and regulations; (xxvi) catastrophic events, including global pandemics such as the COVID-19 pandemic; and (xxvii) other factors described in more detail in Caterpillar's Forms 10-Q, 10-K and other filings with the Securities and Exchange Commission.

APPENDIX

NON-GAAP FINANCIAL MEASURES

The following definitions are provided for the non-GAAP financial measures. These non-GAAP financial measures have no standardized meaning prescribed by U.S. GAAP and therefore are unlikely to be comparable to the calculation of similar measures for other companies. Management does not intend these items to be considered in isolation or as a substitute for the related GAAP measures.

The company believes it is important to separately quantify the profit impact of one significant item in order for the company's results to be meaningful to readers. This item consists of (i) restructuring costs. The company does not consider this item indicative of earnings from ongoing business activities and believes the non-GAAP measure provides investors with useful perspective on underlying business results and trends and aids with assessing the company's period-over-period results. The company intends to discuss adjusted profit per share for the fourth quarter and full-year 2023, excluding mark-to-market gains or losses for remeasurement of pension and other postemployment benefit plans along with any other discrete items.

Reconciliations of adjusted results to the most directly comparable GAAP measure are as follows:

Supplemental Consolidating Data

The company is providing supplemental consolidating data for the purpose of additional analysis. The data has been grouped as follows:

Consolidated ? Caterpillar Inc. and its subsidiaries.

Machinery, Energy & Transportation (ME&T) ? The company defines ME&T as it is presented in the supplemental data as Caterpillar Inc. and its subsidiaries, excluding Financial Products. ME&T's information relates to the design, manufacturing and marketing of its products.

Financial Products ? The company defines Financial Products as it is presented in the supplemental data as its finance and insurance subsidiaries, primarily Caterpillar Financial Services Corporation (Cat Financial) and Caterpillar Insurance Holdings Inc. (Insurance Services). Financial Products' information relates to the financing to customers and dealers for the purchase and lease of Caterpillar and other equipment.

Consolidating Adjustments ? Eliminations of transactions between ME&T and Financial Products.

The nature of the ME&T and Financial Products businesses is different, especially with regard to the financial position and cash flow items. Caterpillar management utilizes this presentation internally to highlight these differences. The company believes this presentation will assist readers in understanding its business.

Pages 13 to 23 reconcile ME&T and Financial Products to Caterpillar Inc. consolidated financial information.

 

 

 

 

 

 

 

 

 

 

 

 

SOURCE Caterpillar Inc.

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