CAT - Earnings call transcript Q1 2022

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Operator

Welcome to the First Quarter 2022 Caterpillar Earnings Conference Call. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Ryan Fiedler. Thank you. Please go ahead.

Ryan Fiedler

Emma. you, Thank and earnings everyone Caterpillar’s quarter first Good welcome XXXX call. of morning, to Ryan Investor I Director Fiedler, am of Relations.

the Epley, Joining me Bonfield, President and Kyle Andrew Senior IR and Chairman Services Manager. of Rob Vice Rengel, today are Chief Jim Financial Umpleby, Global Division; Finance CEO; Officer;

quarter During today, first be issued we discussing will call release earlier our the we earnings today.

that the and we Executive Texas. video Grapevine, recap to under Events Presentations. You Day would XX a remind hosting on can Central DFW in at from to are and at everyone find Caterpillar’s Investor XX:XX Lakes news release the Hilton Center our X like I slides, Time also May Conference investors.caterpillar.com p.m. a.m.

Please check the our services, has this prior website. of on is copyrighted out Caterpillar and investor our without theme portion and written of our any technology approval. use world. we customers it prohibit call helping details Our better sustainability, build a

to Slide Moving X.

today, will are our During statements, risks and which to subject we uncertainties. call make forward-looking

will release in our actual news on you the in to also numbers. call, refer the cause non-GAAP sharing On individually the results SEC statements assumptions are and actual or our we details Please we information different reminder cause today’s with to that aggregate filings to factors forecast. vary for from our could be could materially will this also to results our than call. forward-looking refer recent We on that make

per for of the any quarter in the quarter profit slides. XXXX XXXX. of reported the reconciliation to Today, appropriate see call $X.XX of first with appendix share $X.XX of a For earnings please numbers first of profit compared per GAAP the share the U.S. non-GAAP of numbers, we

in adjusted GAAP including to We profit U.S. share are our per results. addition

restructuring of of share with excluded the for both quarter XXXX Our for quarters adjusted profit first of share for per $X.XX adjusted first costs. Adjusted compared $X.XX profit XXXX. per share quarter the was profit per

the turn Chairman Slide Umpleby. Now, CEO, X Jim let’s call and and our over flip to to

Jim Umpleby

to start their another you Thanks, morning, Thank Good for our Ryan. good thanking everyone. to by us. like quarter. global I’d team for joining contributions

our perspectives quarter growth as quarter my some performance long-term We demonstrated on in continue with results. for end by then first our insight will I I begin will markets. the to execute our our and on provide profitable strategy

urgent to saddened Before events deeply by discussing Foundation, I’d more employees humanitarian continuing and proud and moment of which crisis. generous Gifts resolution. our Caterpillar the occur donated an Ukraine remain peaceful results, in of Ukraine a say like the nearly to program, refugees. we tragic we the contributions for Foundation am have million $X to needs a Ukrainian to long-term Through the than hope take million on Matching both support added for $X I our support for additional their through

front, production comply all manufacturing we On laws and Russian applicable will suspended in our with sanctions. the facilities and operations continue to evolving

line primary margins quarterly to on Moving slightly Overall, top and even the chain our encouraged supply would continuing we XXXX, stronger Sales better similar expected. we were sales of half constraints. products our and our services. have than gains strong second both the price. in favorable the to our for all due by of been demand segments to remain three and And rose without volume results,

quarter. year. end in the demand the user first higher Services The consecutive of strong XXXX to quarter marked remained of quarter prior compared fifth the

including assets on to initiatives, continue make events. connected service service agreements, We customer our e-commerce, prioritized progress and value

dealer better expected. strengthening slightly Moving increased America, segments as revenues by to inventories our of of X, sales we increase XXXX. to Latin demand end-user primarily well in the in than driven half We The EAME. was impact generated all America higher of impact realization. and primary North in Slide and by price XX%, actions and growth sales as in double-digit sales second The accelerate started price the rose and changes

of users first by the Compared XXXX, sales with expected. to X%. rose down about X%, was Asia-Pacific quarter as which we was

for quarter quarry machines, high discuss of years. you China. with line commodity communicating Energy last first versus to the prices. level to user saw increased are XX% to & which prices. the enterprise industry commodity our we high, sales. first of resulted users In year’s X% the quarter. mind, quarter. In Outside increased of typically as residential sales we due Transportation, continue the we prior with due than to construction in and construction continues quarter, supported China’s expectations low saw demand X% grew was Asia-Pacific contributed except Energy higher COVID-XX-related user to quarter about China of trucks. of half sales the been end In at year. quarter will residential was the the users than China, aggregates, and Keep were supported improve. & briefly quarter. Resource of China. by in by users X%. first For of excavator China the Industries declined grew a that user shutdowns. flat In number pace, Strong with sales an greater prices fourth overall construction support sales as show to XX%, a for construction region. Mining positive in versus X%, lower demand Latin the Sales I the of users and and sales an fourth good in strong XXXX, prior End increased at North Resource couple improvement in commodity while prior to by in to globally EAME the America parked growth demand straight Overall, which to decreased strong from end Construction America residential environment in Industries, in the signs Transportation all-time as to in in year a about and expected and to to and the a XXXX, were demand non-residential In sales to China comparable for measured users have increased up weaker difficult double-digits XX-ton growth utilization remained the remained see we strong is users including Industries overall Industries, sales and Construction heavy improvement.

the projects. due declined Solar expected turbines timing to of as

solar, projects. end power engines to Excluding Despite users center to demand strengthened user Oil data sales by users were quarter were strong. solar. down sales than and across were down sales demand improvement first gas reciprocating overall the offset rental Industrial timing some larger regions. to continued in and strength, generation all of users in due to with more

a base, marine in low primarily benefited applications. Transportation off Lastly, growth from

a will Dealers by million increased the are in moment about inventory. dealer a This spend of independent I on quarter. billion quarter Now, first businesses last in compares to $X.X who first increase year. their $XXX the inventories

higher continue in While range, with color the satisfy dealer the inventories work dealers the of remain to we to user Andrew near closely inventory additional will typical low call. provide demand. end end later dealer about

Regarding challenges ongoing line quarter, with to we the we constraints, what fourth in highlighted which our similar experienced supply expectations. was in

to other experience components. constraints We with and semiconductors certain continue

mitigate implement to team continues to Our help the situation. overall solutions

executed we options. alternative to engineering example, with For provide customers redesigns

across remain Caterpillar the dual supply line also constraints. team’s quarters, been the increased primarily top higher to supply in Operating quarter the in to we higher global components quarter. resources freight Similar challenges. double-digit cost help to and leverage be constraints, absent to ability driven costs proud material sales operating profit would segments, increased supply all stronger. reflected billion growth partially chain chain increased previous and of to fully meet manufacturing X% price specialized conditions to volume higher We was chain and from I deliver at placed the R&D our The positioned sourcing realization well When offset our despite volumes. have and demand SG&A of ease suppliers by which strong and ease, expenses. favorable even expect gain $X.X manufacturing by and costs

we XXXX. than see as first quarter. in labor fourth not While margins lower they significant were which these the profit was some in the inefficiencies, XX.X% first quarter, Operating were the quarter of did were as

difficult inflationary a our the a versus as quarter level we improved fourth comparisons impacts manufacturing half expected. that in remained basis, quarter would be similar of margins the On accelerated expect We at to the back first as of and sequential XXXX XXXX. costs in

a share was $X.XX was free share per cash $X.XX profit in outflow Andrew $X.XX discuss X, year. few the flow profit moments. we deliver versus free $X.XX per $X versus to first the quarter, of Our billion and the quarter per adjusted The of quarter ME&T will target had ME&T of Investor you, first cash in XXXX. is On in Slide of between an To remind Day year. $X last our billion million about $XXX in which

that the within be range to We expect XXXX. year full for

aristocrat and in deployment, We proud capital share dividends to million Regarding our $XXX million of completed repurchases dividend $XXX status. shareholders. we remain returned of

all to expect shareholders cash to our flow to free continue over through repurchases. and dividends We share time substantially return ME&T of

share high I expectations Now, some the full assumptions on level will our for year.

just within Day cash margins for flow profit in ME&T adjusted deliver achieve targets to expect I our as operating Investor mentioned, We and range have XXXX. our free targeted

our chain largest encouraged segments. Transportation. continues strong increase to be challenging and supply increased $X.X demand of billion shutdowns & chain to with Backlog increased order more As continued first backlog supply China. XXXX, environment continue be segments across our as total and we constraints demand previously indicated, the challenges. In the strong we by the due COVID-XX-related in experienced I recent in all to by quarter in The Energy

price for elevated, year. full to increases costs Although these expected the than expect manufacturing are remain offset we cost to more

spending. are policy be which rate growth remain Resource demand. activity to is commodity services In despite growth and we package Construction construction support optimistic due and decisions. in rising construction lower America to also the our in production quarry residential in drive higher is impacted cautiously We and to expected year. the key mining and investments markets XXXX anticipate interest drive equipment interest was Despite utilization Construction discuss heavy could we continue and in EU XXXX market growth will remained region with in late and Act. excavator Investment rest slightly improve. XXXX X, strong construction in anticipate Jobs grow end XXXX. to to The levels. Turning in due above market Slide expected The rates, improve beyond now infrastructure continuing strong to and of this inflation geopolitical investment more that Industries this EAME, to and be continued higher America, prices infrastructure that aggregates, Latin we XX-ton than concerns, and very In Within XXXX expected Industries, will non-residential broader I Asia-Pacific XXXX. In U.S. beyond. believe housing and levels, of will for Infrastructure is supportive by in and by the supported in the North investment expectations to China

large continued Lastly, In gas, to generation quoting and and growth we strength the equipment we orders, be remain oil healthy reciprocated are strength. continue improving year especially products. water autonomous large lead engine orders our asset than while in momentum shipments remained economic to mining XXXX, although for underground Power due due we track-type seeing in applications. rates new encouraged and Solar’s engine disciplined, time last we most increases. services increased expect & Energy XXXX for trucks strong machines. in to with which expect utilization by remain In as data trucks, drills, are expected steady, order center of replacements customers are solar lower Transportation, tractors, In includes to to continued positive solutions,

agriculture the healthy equipment remains international are Industrial expected new to significantly power. to strengthened more with XXXX sales continued in electric remain first orders but In Solar’s muted, are construction, locomotives rail, early and or are momentum shipments quarter North late locomotive American and promising. in XXXX. in improve expected

aging growth fleets. as We high-speed marine also anticipate upgrade customers in

and Now into a of into future. ioneer, haul autonomous the We electric and will XXXX vehicles an be a in lithium quarter on minerals site key Boron will to a for mine with U.S.-based use battery recently reduced contribute help XXXX, to from U.S. Caterpillar This announced and Slide a to first a our first agreement miner. entered sustainable Lithium contribute will X. – projects customers the component is trucks. the for that number of this In electric Nevada more future. Greenfield carbon the to

emissions benefits autonomous Our significant including is while delivers of safety, to material it efficiency, as gas a improved and greenhouse customers, our technology productivity advantage ton competitive lowering per removed.

talking May remains sustainable more will the profitable about strong Our XX, commitment our to to look to as to call we be where execute for Andrew. Day that, and hosting we over on our growth. sustainability. continue innovation Investor long-term will you services, I With at forward strategy turn I technology

Andrew Bonfield

you, quarter realization by as to $XX.X was we Operating will for of by offset profit price higher with quarter few period price X% quarter inventory our will billion. the with Jim cash a increased by $X.X Volume, we revenues, expected. billion higher and volume sales comment partially I before increased including flow and the $X.X and comments of first results, the were into on as manufacturing billion begin segments. had increase costs. growth XX% sheet and build Thank drove or move than of mentioned the on as in which Beginning on slightly good morning better and and recap Slide free everyone. expectations dealer to and X, XXXX. Then concluding I performance sales first our revenues Jim including balance second a the our

was margin price XX.X% we anticipated due adjusted profit slightly stronger-than-expected favorable Our the had to better volumes than and operating realization. of primarily

Adjusted quarter per compared to quarters in restructuring quarter last was to per profit per $X.XX share First year. share $X.XX profit compared profit $X.XX the both the for year. first $X.XX costs. in share excludes was prior Adjusted

you quarter in global guided we than about in the lower slightly rate was XX%, Our January. tax had

However, the favorable compared lower prior tax on tax the to by discrete was benefits basis, rate a year. comparable offset lower

on we Now prior volume sequential realization. as rate on user the top and Slide versus improved X, but basis increased on demand the stronger growth End accelerated year, price anticipated, line a currency rose billion. revenues $X.X Services comparisons, by headwind. China. a while a Price the in Dealer about tougher due quarter. remained strengthened, strong inventory bit especially was to of realization in

dealers Let the Industries retail half sales quarter be provide About in variations saw customers, due was increase the same are orders, timing million The the recognized to to $XXX part backed onsite Resource to year-on-year can the anticipated on end color This of their $X.X year. versus we from nearly what due XXXX firm customer from reported units is we than some by increase about assembly more of me our These inventory. dealer billion had not were increase $XXX double and our came year which shipments last but in that lumpy. for in times. in quarter. million

other the following in The the start their We pattern inventory to anticipate the Construction the timing was due of that shipments increase of in sales Industries late mainly in normal will down half inventories deal to quarter on seasonable quarter. the to dealers second sell strong users.

we Our XXXX from expect expectations a benefit for the full year haven’t not changed remains do restocking in as demand and to dealer significant end-user see strong.

grew in remainder that in increased was positive. X% by decrease XX%, the First double-digit primarily segments. primary Asia-Pacific. in in rose North except all to America with In sales growth and revenues continued increased regions, of XX% Latin by by region while in quarter percentages sales softening EAME, three XX%, due by America the sales Sales Sales Asia-Pacific in were a sales China.

to Slide Moving XX.

operating slightly Price and than autonomy line As X% had favorable and anticipated. remain better by was on costs to primarily expectations but volume. elevated, to as I our Manufacturing continued electrification. realization such increased in cost technologies partly mentioned, SG&A profit price first with and costs investments and increased due services digital, freight in and we headwinds. due material quarter

the point prior Our year. XX.X%, XXX first was a margin versus operating basis quarter decrease adjusted profit

margin As earnings the quarter to quarter. we XXXX said in first the in call, headwinds expected our largest we fourth occur

better the First not volume quarter of XXXX. did compared Favorable for margins higher Margins realization costs, offset were fourth our year quarter than than quarter detail lower more improve we expectations the second compensation. had incentive year. full margins were later. bit price slightly than manufacturing prior but to offset I a partially stronger expected and discuss short-term price by the will on and in higher anticipated did

in sales realization let’s had the XX, Industries. Construction a first to review favorable the billion higher by strong. to XX% highest improved in by primarily America growth residential increased by XX% starting and non-residential XX% improved Slide performance XX% of activity sales price the four sales sales construction demand. as Sales North driven construction strong residential to with demand in increased Moving regions. in demand, quarter three segment remains End-user $X.X Sales America volume. in increased growth and primarily dollars, EAME demand Latin construction supported as due increase, by

sales and higher by had by the prior segment’s the X% The sales Price However, $X.X by stronger XX.X%. increases Asia-Pacific operating profit manufacturing was billion. quarter reduction in basis lagged decreased to points decreased but a quarter. increased very to XX% costs. to in year a had realization due strong the which a manufacturing first quarter we XXX sales in volume ago. China, than realization versus increase segment’s margin costs offsetting than Price drove anticipated in The more year

Industries XX. heavy Resource due sales the in demand, to quarrying increased price. well first Slide inventories construction impact to End-user and The in quarter to by and changes demand improvement Turning XX% mostly the billion. mining. favorable as aggregates $X.X in dealer from increased higher end-user as was

profit versus sales margin quarter in The cost and costs segment’s increases and $XXX by and volume primarily favorable and last Resource by XXX R&D XX.X%. were million. for XX% freight material. to decreased SG&A year to Higher operating expenses. Industries due manufacturing by were price Manufacturing partially to increases First offset higher realization points basis increased

approximately sales engines. gas, sales Now a parts and Transportation Slide by by in improved. reciprocating increased sales up $X XX% with Small on X%. billion oil engine included all This sales & across reciprocating X% to aftermarket Power generation sales including increased XX. Energy applications. increase for

quarter applications, with generation strength sales regions. rose impacted gas XXXX. oil the were all in a lower power across by turbine for sales XX%, first higher-than-usual Industrial Solar and in and by quarter

marine Energy by by aftermarket for reflecting cells million. Profit engine price on Finally, Transportation more manufacturing sales costs, were transportation Higher material. and increased X% & $XXX parts from continued and headwinds by offset applications. realization XX% to both for reciprocating higher than decreased volume freighter

SG&A expenses year increased. addition, last to segment’s and R&D versus XX.X%. XXX decreased operating points by In The basis margin

color bit segment. in Let me take the lower Seasonally, the a Energy a typically are more on rest compared to margins Transportation this moment provide of year to & quarter margins. first

Also, freight chain However, but a more proved the material freight and supply to XXXX different primary impacted costs. have very others. bit that the dynamics XXXX continued the first to segment quarter later costs given compared price discuss marketing as the year than more generally, I’ll due in challenging constraints, this increased increases took including elevated & Energy segments. Transportation of note other

similar the starts as realization segments, other the benefit margins through to However, to we of price to expect through. pull higher improve XXXX

Moving associated million. was X% decreased The accounts Caterpillar’s quarter for another Demand decrease at Cat this provision about Ukraine. to Segment that and the $XXX quarter. Financial Russia $XXX Financial than second for higher X% in Russian-Ukraine for by Financial higher with equipment down, Cat mainly to a XX. of related Note, years. Slide the very mitigate due of enterprise helped to good Products by to Whilst of had used X% was increased credit portfolio. generally to and reserves million. provisions. highest represents losses Revenue profit the impact and first our in strong X profit X% less profit sales quarter, the remained

we’ve well were compared XX the just dues years. and first had quarter, the seen It quarter. quarter up low. points year-over-year That’s in marked XX the basis dealers which continue as perform high Moving points credit quality down to XX Past to basis XX-year X.XX%, a and fourth in to customers our remains performance portfolio. best

typically seasonality. business fourth is typical the decreased this new While volume versus quarter,

which following in New X volume from the to second prior second shutdowns. was years, first pent-up year, benefited demand highest COVID-related our only performance business quarter

in good Regarding risk. position funding interest strategy our we are rate to matched changes, a serves as that mitigate

healthy maintained spreads also new business. We on

of quarter on a XX. $X.X the of about Now We free outflow billion decrease had million, first XXXX. Slide an cash ME&T of versus $XXX

our the weakest the short-term incentives. the We our majority to quarter payment the moment discuss first paid a $X.X generation primarily incentive to compensation difference of is in In the the year-over-year. quarter zero a me year, This year. the perspective, changes. of Let cash during a in to approximately take prior billion from typical accounts first compared due for

billion to build free these impact billion of to In addition, our achieve to expect net full continue impacts, quarter of for quarter cash between billion, first a year. negative $X about to by approximately in which contributed Day capital Investor $X continue production Despite we we flow working the $X $XXX inventory target the million. and

paid the return. shareholder to in during We $XXX dividends first million Moving quarter. around

objective The decrease a about be a $XXX shareholder more was also in in majority outflow cash the consistent billion decrease year-end. the stock compared in $X.X for million our the of the We $X.X billion, million supporting common worth Enterprise free the position. to market cash our to billion on returns repurchased accounted $X.X basis. of cash and $XXX

of amounted our slightly into In quarter. million addition, This on in we cash longer-dated have yield some order to that balances cash. moved in securities the to improve about liquid marketable the $XXX

of the supply profit providing guidance. XX. Now to Slide from light refrain In constraints, chain continue we share current environment, annual on per including

some However, want to the and the do full thoughts on year. quarter second I share

favorable better expect we remained the to first realization. Despite steady, tailwinds. and line continue the volume The Supply price higher challenges price strong demand quarter anticipate and user chain compared than second increase which challenges, top slightly quarter played quarter. end first to resulting we we and these into the top line, had better-than-expected will anticipated out on the from continued

Looking the to books and robust. our order the remain remainder of year, backlog

fully strong We will expect and to chain we challenges able be demand. demand to will impact supply which extent although the meet end-user continued pricing,

the margins, On margins we’d a see I expect through in January, sequentially As we a a with we margins not quarter do expect we restocking from strong first see in do year, typical year. mentioned, dealer not in In as the discussed benefit quarter. significant decreasing XXXX. to fourth normal

year of comparable second increases year. ease half impact price XXXX accelerate. of half the However, to this back year, in actions of the the we the half of manufacturing first in period Comparisons the as compared from as improve expect the let and both to the as cost we the margins well the year prior

expect price manufacturing similar to more cost the quarter, prior increases. price margins as As the actions mentioned, than to second for we continue full year. Specific to we additional manufacturing year offset offset expect Jim costs the should to

cost segment. second margins Looking Industries expect and than at Construction do manufacturing quarter. & headwinds as are improves other quarter in the segments. line lag actions higher and year Margin in in both price to We Energy to still of prior the by the Industries with the Transportation is or Resource prior close first compared the price year as to timing be the as late

not However, expect not was – it was quarter. as as in significant we the second the in be lag quarter first the will

we improvement move the in year. expect second to half engine year volumes in costs second should half margins of efficiencies. contribute expediting the into positively large the an Transportation, in a & also Energy XXXX reduction As of Increases in we the and in turbine and versus

investments to energy that related core However, it’s the to important transition note segment. of majority the our this impact will

incentive year. $X.X assist of restructuring expense be year. the global to we effective costs anticipate XX% short-term modeling, of with compensation currently for for to around $XXX Finally, to approximately tax accrual rate add million and around expect We a billion more full this

better environment. than we End-user well more Turning billion Sales in we remains to performed a and Slide $X.X we were and expected. summary, realized challenging In slightly in margins strong, demand XX. revenues.

of second cash operating targets we to ease ME&T expect Day profit ahead, adjusted Investor with will that, we the Looking achieve year, our and half your free the in margins And of flow. questions. take comparisons and

Operator

Research. first Your question Instructions] of Rob with from comes line [Operator the Melius Wertheimer

now Your line is open.

Rob Wertheimer

morning, good and everyone. Thanks

Jim Umpleby

Rob. morning, Good

Andrew Bonfield

morning, Good Rob.

Rob Wertheimer

of decade, addressed parts I is don’t like increased the can them how levels backlog helping can or I that to rather the lot give best right the dealers, than us forecast quarters maybe whether you’ve liked your you more. Thank order to fact say some that. drive to around know it If most would you. Or by inventory more implied I quarters Anything of couple sort lot of with I little think bit is too order of user – get a increase, end done have context out? there too of in you you’d demand? you you backlog obviously, much one know a you’ve And a a can work right, I of have it? dealer optimism had. moving to it don’t you if little. that help Does ship really much know ship. quantify the guys

Jim Umpleby

question, Thanks for your Rob.

in E&T of just as do to strengthen was and the solar as working actually backlog a some and & with those them Transportation in Having longer tend We those So to that the gas. oil satisfy of you and largest which recip again, are said quality RI, tend getting have times. have the terms the certainly times. lead demand. for process, for do we’re new help backlog, to And that, continue increase in both orders end-user lead and our dealers have orders longer S&OP and Energy of know, products we we feel about good to

So positive forward. backdrop moving again, just real a

Operator

Suisse. from Your Credit with Jamie question comes of next Cook line the

open. now is line Your

Jamie Cook

Hi, morning quarter. nice good and

Jim Umpleby

Jamie. Thanks,

Jamie Cook

with run to the my that Jim, to you it I’ll business. you used regards it’s towards I and direct question, because guess E&T

and can you for I top puts E&T does guess, side, pricing some So how you’re don’t so, you. I hearing thank any it’s guess, me making of a with know margins, the your will that are the sort I growth margins of to this But oil year, thought. line sort think the help term, And and And understand lighter solar you having to margin investment. an understand I – would then customers? the have on the impact gas investments how and the on if was E&T as takes year? little through trajectory about from of with What pressure create way we there is exit come you longer us can of I help investment over the – than

Jim Umpleby

gas discipline. bet. Oil display capital customers do continue You to and

for the improvement and encouraged in solar. are we orders However, recip both by

price longer an opportunity your in have the mentioned will gas, in Energy flow Also, assets, continue times. around are took price pump we volume we to leading As previously did increases as And and and that I Transportation as oil as refurbishment Higher and will machines. frac of as of around products and you we throughout tend help. terms it’s margins, mentioned lead effect question margins & can increased for that that to to solar as and in engines take move utilization those later year. action help well. also Then improved earlier, oil prices those iron imagine, than we’ve actions

Jamie Cook

headwind So no structural to margins.

Jim Umpleby

doing certainly, and we’re of around investments things the in we’re alternative making drivetrains. there sustainability some Again,

So investments. of other side we’re is, it But volume again, and making those of improving price. the course,

Jamie Cook

thank Okay, you.

Andrew Bonfield

would Energy I Jamie, the to as margins in of second improve expect indicated, for the other the segment’s year half & just in same And the we Transportation.

Jamie Cook

Okay, thanks.

Operator

next Your Dobre question Mig the with of line comes Baird. from

line now is open. Your

Mig Dobre

Thank Andrew. the Appreciate for you guess for question I maybe a question. it.

to your comments. of kind Looking clarify some of

In terms that of momentum. continues you to price this realization, pretty were build I clear guess

the different, to a previous versus costs curious that given about You are the the back in comps costs E&P. sequentially, but bit all happening of half second talked manufacturing variable how have changed been thinking quarter that’s you’re the little input I’m bit a little as assumptions obviously, and recognizing about year, world.

how we about think should So framework? that

Andrew Bonfield

Yes.

level increases in think, a Obviously, this million $XXX was million quarter a manufacturing. recall, So and about little increase We we price better and at if of probably in in the about had we about costs. I million. similar quarter. Cost would around the same thought quarter as $XXX you’ll manufacturing fourth quarter, in bit fourth first be $XXX the we been have price was

this the have then to sort get to we that higher continue input is and increases of We the QX, least anticipated increases originally manufacturing of of because, expect be into QX, back that would likely continuing QX also year. previous that of will at the at Yes, in occurred because than the level moderate QX QX January had QX, and as in grow. costs we – the those cost we for impact obviously, indicated costs slightly it are lapping

price actions. extra we However, have taken

more will price more than we’re So for than that cost offset still that’s increases the manufacturing why comfortable year.

at XXXX. probably for would I that remainder as we So out will the go the it look be of way

Operator

Your with next Volkmann of from the question Steve comes line Jefferies.

now Your is open. line

Steve Volkmann

prices everybody. think a there. of I’m when commodity talk times speaking curious prices CI were Can more Industries, of about going mentioned of detail. kind of forward? commodity morning, prepared little in a I comments, helping support much you and Good was your just by for Thanks. driven couple of And you about you think demand that how you Jim, unfolds how is Construction sort

Jim Umpleby

as world. RI talked mentioned governments Yes, just believe around residential, talk being a the CI made commodity Steve, by being Again, CI. to improving I prices we bit. supportive to of But infrastructure about about various opposed I non-residential investments

commodity all of are RI as E&T and CI. oil investment are The course, So, tailwinds those in well with for of prices certainly supportive prices.

Steve Volkmann

Okay, thank you.

Operator

comes Your the David Raso Evercore. of next question from line with

Your line is now open.

David Raso

morning. good Hi,

energy, it rebirth let’s a ago Given maybe X seems have of X it. that call months old people of like months, was a sort theme the last would expected

what some you energy change any on and gas more book picking even in But the change, obviously, curious on customers? the You mind. to side. coal Any are more comes mentioned oil side at last X the I’m give mining months? in tone little activity Can particular maybe about recip color and the the hearing the of up order you broadly, in a turbine us tone? And on old least. on a and bit

Jim Umpleby

moderate mining, time we’ve Well, thanks expecting for increase years, and couple it’s about of over your a in played David. really question, been as for been how out. talking we’ve that’s And

discipline. we’re for seeing utilization increases. as trucks. continue seeing are levels Parked at new to display investments we’re remain orders trucks capital customers in But fact, low Our

prices or fact, have of we’re demand we’ve up over for how prices exactly coal, having seeing the last places, coal there, seen been natural remains be increased other to be this so the last are year terms seen If could year. again, on and prolonged coal. certainly, Europe out. gas, restrictions improved coal in In for that, But said plays there in

I been And well. put across range of commodities, commodities so and investment the bucket of as that in coal a in have sector supportive wide

Operator

comes Your with the next JPMorgan. of from question line Zakaria Tami

line open. now Your is

Tami Zakaria

Hi, good morning.

Jim Umpleby

morning. Good

Tami Zakaria

targets? in growth the quarter? business? Can Day What’s was that on the you the of services What what and year? total Investor size And versus rest expecting services dollar us update in your in your now the XQ you services the segment of the segment are for

Jim Umpleby

You services year. pleased revenues annual released in bet. we’re quarter. once growth the Well, services and the with a We sales

will do so we XXXX. progress Having make said And year that with initiatives. various in for continue January full that, we our to

between at XXXX. XXXX driving way services doubling the that things of pleased We’re towards still and and sales going, target we’re are

Tami Zakaria

Got it. Thanks.

Operator

the question Chad Bernstein. Your comes next Dillard of from with line

open. line now is Your

Chad Dillard

good Hi, morning, guys.

Jim Umpleby

Chad. Hi,

Chad Dillard

this could on just Cat product want And improving Maybe up and just you prior and versus the that recip or – to have gas wallet fold. like that years. is even talk set interesting can So are just just standpoint how you the any set was have comments cycle now orders extra about much for didn’t capture side. a competition? now I to hoping like versus that about before I apart And solar you upcoming you productivity-enhancing your from oil CapEx you back your just about technology go can talk how we under share you you would that

Jim Umpleby

thanks do good feel we your position. about question, for competitive and Well, our

leadership in market. forward. with quickly they way have they pleased the – very starting we they moving a solar, are have are the strong positioned And Just at strong

On of a the side, recipe made number we changes.

their our imagine, does is customers America, focus particularly by to which a there of we footprint line, strong customers you And carbon as a As our they real you we have reduce a to North really work us were, in oil in increased complete a – strong believe can gas the know, product as made do and and position we and gas that. oil as acquisition production competitive more from in now put

way So being feel by we gas are for purchased oil the customers our about again, good with engines gas our and we we now. E-fracking, e-frac. positioned portfolio there have

there. to engine, XX% to our which of substitute So, them on things fuel DGB again, buying up a variety diesel whole Customers going allows are with natural gas.

quite So well positioned. again, we believe we are

Operator

next Deutsche line Your DeBlase with the Bank. of comes question from Nicole

line is Your open. now

Nicole DeBlase

morning Yes. Thanks. Good guys.

Jim Umpleby

Nicole. Good morning

Nicole DeBlase

to why the increase, in kind seasonality? reason Q-on-Q the with that’s little is and and the you maybe normal I were elaborate up in XQ there guess, the you outlook increase a to bit. what’s business. guess look XQ of reflect Just said of magnitude and XQ sales consistent guys at that think any I about if would typical not

Andrew Bonfield

would there inventories the one a the $XXX small million put the obviously, factor in of I would a CI which late that very mean out very extra be impact. otherwise seasonal by I – is raise, it’s that quarter, is normal small factor, and only not

So, that of will reported impact QX. bit in a revenues their little

Aside from that, we expect normal seasonality.

is product. strong to demand the for more actually if would – to be supply products into have our would you able As know, we channel, biggest challenge market. sell able is The the to We more. we put being very

that there. factor key would the be really So,

Operator

Your with next Ross question from of comes America. of the Gilardi line Bank

Your line is open. now

Ross Gilardi

Thanks Hi, morning. good guys.

Jim Umpleby

Ross. Hi

Ross Gilardi

with on sales this rental Rental just time, So it Jim, going an been structural accelerating on seems long And what it’s you you night. QX, we the United rental mean in an the for with right that’s dealers now. anything to working better but position with your channel are this? if like Cat overall see live that negative anything, for in Rentals awful plus supply we in get it from these do to significantly X% revenue worse that, QX X% a quarter. at issues? rental last reacceleration dealer equipment QX? quite or plus number before your lag again versus companies, to and your improved over potentially Thanks. chain gets better, Does decelerated the go but particularly right it growth, world there national put last to construction, And now if retail up accelerating it change I continues all for growth growth North American is bit sales ownership look a to for

Jim Umpleby

Well, thanks your for question.

of for And has strong demand it sales said in business. I America, North higher terms rental challenges as Caterpillar the mentioned from earlier, in is prevented that, strong. Having chain in us supply Firstly, CI even quite a having quarter.

have so said there. real North and If across dealers we on. Having you our is business a new strong something is improving we focused relatively capabilities are dealers add our are that, rental working on very Cat the America, And supply a up issue chain. leader, it

product, fact, the have and because have to in more between So fleet to and the decisions if rental fleets, product we our units dealers putting demand is we in customers make selling could had, everywhere. in more rental strong

as to growing the of part opposed function a really, rental this more to product ability to structural. And is our anything of a in. moment It’s so one discussing. produce is well due chain Certainly, the been is, constraints supply business, it’s believe which supply but issue at we are we ongoing we participate the we big positioned to that have again, very challenges, The have important. chain

Andrew Bonfield

to very comparable in has will a actually very in QX. on not we are on QX, disproportionately, positives and obviously, Ross, the deceleration. see and impact, see cause was And then, & momentum, a disproportionate Energy was did a again last factors And in question quarter there Overall, versus China then, you of we though, year, it solar comps out obviously, your expect was E&T. strong around machines, do period. in I were need which the Obviously, the a that how in a that impact to looking QX couple at know Transportation. pans

Operator

from Stanley. Yakavonis comes the question Morgan next Your of with line Courtney

is now Your open. line

Courtney Yakavonis

good morning question. for the Hi, Thanks guys.

Jim Umpleby

morning Good Courtney.

Courtney Yakavonis

little out you I and the Obviously, and was than much in aggregates quarter. we we a hoping slide quarry if dig can expecting were bit deck, mining. better construction of this more. into sales ahead resources were heavy But called

finally, happening? in since XQ as And part this of of in mentioned confirm you – applying that this quarter to is we the much that is that flow-through that’s also also mix or that the come? just that we are the versus So, just be resources, side, just just lower bit is really wanted OE would we chain OE issues than mining a a have supply reflective up of the these that occurred inventories saw, the little wanted And that well. story a still on comment to on reflection then seeing, sales is or was is will aftermarket dealer incremental that that to expected. And of segment also build understand numbers these

Jim Umpleby

we sales. about been and increases conditions, see have couple to improving Well, last it’s years demand. And with predicting much improving of user again, the continue we out and remain playing positive as mining improving orders market in

about in zero services, is levels. and good certainly seeing both and as emissions that well. demand Commodity of low parts increasing a lot new our at up. Utilization prices and feel for interest Parked investment, remain – trucks CapEx of we we remain are in been machines. has So, supportive

with doing Machine So, we increase. of have we announcements age are seen average a there, to customers. things that lot continues

are so fleets. those services to expected from And parts in aged rebuilt benefit aftermarket

we again, So out had anticipated. playing much as mining is

Andrew Bonfield

just we they strongly. growth the quarter, slightly heavy I and but ag see very still obviously, quarry in were construction versus and mining, up did faster in mean Yes. both

QX. reassembled As $XXX reflected regards the obviously, be the being of the to units which inventory, retail stats, units million will the there – are in are being sold by XXX approximately dealers before the the that in out customer. retail dealer Those

second the help quarter. retail RI overall stats the will that So, for in

Operator

Weber of Wells Your the next question line from Fargo. comes with Seth

Your is line now open.

Seth Weber

environment. Hey just I a the ask trying to am is question dynamic on how understand good morning. pricing. I really wanted just to pricing

about the better I was through the quarter. here talked about more E&T in mean up up first pricing In the pricing have is getting here. aggregate think you in year X% could segment, – I pricing third much to showed you real am in that – to you change second trying understand put first through pricing you flexibility time that the and here I X% just the how quarter? quarter? the than be have

Jim Umpleby

into we expect from take appropriate. do, in we to again, the a perspective pricing first. half terms a going first but competitive do versus impact we we half in offset do a half. always the action. yes, The on obviously year do versus believe flexibility way what’s impact manufacturing Yes. marketplace XXXX, of taken the we as and we the characterized what’s to the flexibility second the more the actions certainly, situation. have we that more cost pricing an monitor expect from have continually that’s the of more And have it well. of second need increases in account larger We taken here, the pricing of And will to if have have we what in than But to happening price We cost we

Operator

Your Fisher comes UBS. the next from line Steven with of question

Your open. line now is

Steven Fisher

Thanks. morning. Good

XXXX. seems it compensation like raised for incentive you have So, expectation your

of kind I year-over-year. be think flat will that

Wondering comp to I that incentive expected a inventory now can what be bit QX, on are your in expecting was expected if than previously, that are give that expectations. you us was things But I you guess that it sales a for but is in in said just positive kind think must something be color prior tailwind. build. payout the than of a contributing biggest better were the you seasonal improvement this I to it of year? sounds know like maybe better

the So, balance what you – are you. for are there Thank than expected things better that running year? other the of now operational

Andrew Bonfield

Yes.

profit, our operating know, OPEC, are revenues, you variety use as and compensation out schemes not there services there. metrics just other measures, non-financial that obviously, of So, a are incentive

little on said, we a was not first better actually better bit from quarter just little the also for the revenue perspective, expected than bit performance a a margins. we but As

change. And compensation so through some feeding of into that where of is reflective that incentive that’s

Operator

the Thein Citigroup. Tim from line comes question with next Your of

Your is line open. now

Tim Thein

morning. Good Thanks.

some balance that that to the incremental we margins? is continued color But complexity inventories, the So, wanted of certainly dealer chain just good inventories. Thank you. year. what in as the should to which just not on am Andrew, of how ask to just terms the to further, have that have just we that’s of grow increase the the implications curious am a about interested impact. here. lot have absorption potential in the projected of go Cat especially think But through will I I extent implications how I supply And And and ultimately, having obviously, that about

Andrew Bonfield

Yes.

to is you to result with sure of obviously, probably with supply mean up it’s what shortage while very switching individual because – off that is I in is end waiting Tim, the as of where a you arrive for better So are the off. chain on not challenges situation not supply been components thing we the make sensible best don’t we a a switching clear have are something else

have. little We So, we the that XXXX deliberate a stores that did at upturn. fact the production has out that would expected the that Obviously, well, a we more demand We is normally of reflecting have end continued. built as an action that we know bit than inventory and was there.

challenges supply all out So, will burn be through when chain we pretty that as are work there. to to are the quickly we off we know able able and other

we probably year. And in we on of capital can more some expectation through cash is, aim through obviously, that move of QX we year. and obviously, work as down momentum obviously, full beyond. neutral into go builds start working Our then go positive we that to the be for is the And into the saw ‘XX as inventory remainder to

Operator

Your Elkott next Cowen. with Matt question comes from

Your is now line open.

Matt Elkott

market. Good morning. locomotive it non-existent for switch and up little years of guys last couple the North If new the has a bit I ask build Clearly, may you largely the about here. market in America been

think hydrogen want Thank upgrade which And is like on cleaner revenue on to look the As years think you. make electric, hold new go diesel? even any on I do X you helpful. they up would X or we market, or guys whether mind forward off battery, years, next their railroads for services a updates the continue builds you the be to they until to might

Jim Umpleby

Yes. Thank you.

well. question business locomotive market We a depressed. about American do is that certainly, mentioned, you freight is it. is North the As no There have services doing

as the over very can international what – anyone mean would build there question, year we cases hope for I have railroads Hard what’s We years. happening. call next for do to well. can to couple the it’s predict the difficult answer your this on of competing

still there parked is So, locomotives.

everyone the as constraints On the some other well. knows going freight the in hand, of U.S. on with what’s

So, it we plays all out. see will how have to

that interest with on probably locomotives that, are applications. used have term you have we agreement seeing well. read our an in pleased as electric hydrogen-based are for switching battery longer and we We in to that And are about solution work locomotive

market railroads America North freight for quite that would the concur I certainly very So depressed. difficult in is but currently, again, predict locomotives the to do, what

Operator

of next with the BMO. question Your John from Joyner line comes

now is Your open. line

John Joyner

Hi, good morning.

Jim Umpleby

John. morning Good

John Joyner

a not is today’s environment. question this Maybe fair in

have help I give maybe some year that EPS for of a of you at guidance, additional that do EPS getting for But given year to times, provided projections, So, and be possibly full appreciate you assumptions wide offering can, what the to full you goalposts eventually anticipate year. estimates? internal the range investors the some back avoid

Andrew Bonfield

mean we range Yes. at is the think I estimates I that’s know, environment why uncertainty. the moment to I mean your to the predicting people are is narrow because of the in reason unfortunately, in for what part as likely our as wide challenge are are you going well because within probably be estimates of enough is the outcome the a wide do.

account. to take So, you have into those

due to when reinstated thing we So, just that’s had is part There and have things as and we guidance. haven’t I the one question stage. why I question that whether a But and come pricing – stats in included is is at reason of it written think will back not stabilize stats. the in retail external this somebody environment a asked but about in just retail course

retail stats retail in Pricing are be to dollar stats. neutralized. not Just is neutralized, clear, the price

basis. So, a that is a volume pure number on comparable

Ryan Fiedler

have question. we one Operator, time for more

Operator

Your final of Jerry with question Goldman from today Revich line Sachs. the comes

is now line open. Your

Jerry Revich

good Hi, Yes. everyone. morning

Jim Umpleby

Good morning Jerry.

Jerry Revich

in you prior fair if I about Thanks. resources. versus the revenue Jim, wondering about mining could think the and it’s just times am XX%, on level stand XX% cycle us trucks as at cycle where in I business lead to update highs. today a levels spoken last comparable large recovery below steady for is you backlogs if have well. the am wondering

Jim Umpleby

say, increased out of the certainly, we mentioned terms we and orders. expected brought in mining We as way is I playing earlier,

near working are And times are lead are close anywhere peak meet that. a much as number during extended quite prior ago, lead with are years the customers requirements. we and to very I working Our we think not as our hard as their they were to of time but

Ryan Fiedler

sorry. ahead, am Go I

Operator

turn call to over I Q&A. Jim. the That back concludes today’s

Ryan Fiedler

Andrew online you. morning. joined Thank you, today. call our Thank available will who replay be of us A and Great. everyone later this Jim,

website also as on available. post a Investor our it soon will as Relations We is transcript

our those You the will SEC an and click quarter with CFO on materials. also data. first our with Click sales to investors.caterpillar.com filing use on Financials view results then find and video to

reach please me. Rob or questions, any have you out If to

your number can me The We rest of Rob phone at reach XXX-XXX-XXXX. you fiedler_ryan@cat.com. You the Investor Relations is hope at rengel_rob@cat.com and general day. enjoy

to let’s back our Now call. it turn conclude Emma to

Operator

attending Thank call. today’s you for conference

You disconnect. may now

Caterpillar (CAT) 28 Apr 222022 Q1 Earnings call transcript