Caterpillar Inc Q2 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Chad Dillard - Bernstein - Analyst : Hi, good morning, everyone. So I was hoping you could unpack a little bit more the price cost dynamics as we look through the second half of the year. Can you just like walk through from like a segment basis and an enterprise, how to think about that? And at least for the second half do you think price cost will be positive?

Question: Jamie Cook - Truist Securities - Analyst : I guess my question pertains to E&T and the E&T margin strength in the quarter. Can you help, I mean, given, again, Jim, the capacity investments you're making in that business, how we think about the E&T margin potential over the long-term relative to Construction and Resource, given you're adding capacity there? And sort of where should we be, Jim, as we're exiting the year? How do we think about the incremental capacity that's coming online just trying to figure out how that helps potentially '25 and '26. Thanks.

Question: Stephen Volkmann - Jefferies - Analyst : Great. Good morning, guys. Thanks for taking the question. Pivoting maybe to Construction Industries. I think you both mentioned lower-than-expected rental fleet loading in the quarter as one of the trends that you called out. And I'm curious if that is -- if you view that as sort of a timing issue and maybe you can give us a sense of where you think the rental fleets are and how much kind of update and refleeting needs to be done there?

Question: Rob Wertheimer - Melius Research - Analyst : Hi. Good morning, everybody. I also wanted to circle around to E&T, where as you see the rise of data centers, I guess, the critical nature of that power backup is rising in importance. An important question is going to be around mix and margin in the E&T segment. Is there any oil and gas, obviously, you're running, it's a great business, it's a high margin, high mix as well. Is there any anticipated mix impact if power gen kind of replaces some of the strength we've seen in oil and gas? And then more broadly, Jim, I think you mentioned kind of solar turbines in power gen. I think you've had historical strength in like combined heat and power and things like that. Is that market for solar turbines expanding visibly already in power gen to more and more applications? And I'll stop there. Thanks.

Question: David Raso - Evercore ISI - Analyst : Hi. Thank you for the time. I was curious, the retail sales of machines, it sounds like you're expecting to be down again in the second half of the year. But anything you're hearing from the dealers to sort of be thoughtful about when you would expect retail machines, retail sales to pick back-up? Is there any indication from the order book or backlog within CI and RI? And with that also where do you expect the dealer inventory to end the year on machines? Thank you.

Question: Michael Feniger - Bank of America - Analyst : Thank you for taking my question. I'm curious when you look at your different segments, if we're entering a lower interest rate environment, a Fed easing cycle, what segments kind of reacting to a lower rate environment first? And just basically following up on that with the construction side REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 06, 2024 / 12:30PM, CAT.N - Q2 2024 Caterpillar Inc Earnings Call with your response to David. Just is the assumption with your comfortability on the inventories, is that assuming that dealer retail sales gets better by the end of the year or is assuming where we are today? Thank you.

Question: Jerry Revich - Goldman Sachs. - Analyst : Hi, Jim, Andrew. I'm wondering if you could just talk about what your prospect list looks like in Resource Industries based on industry and your competitor data. Looks like we've hit an air pocket in terms of orders. And obviously, deliveries have been weaker, and we've seen destock. Based on what you're seeing from your customers, when do you expect bookings to reaccelerate for mining trucks and other equipment?

Question: Tami Zakaria - JP Morgan - Analyst : Hey, good morning. Thank you so much. So my question is more longer term focused rather than this quarter or year. So can you help us frame how to think about Caterpillar's current portfolio of products that play into the data center market aside from backup generators? Are there any other products maybe related to micro grids or anything else to call out where you see an opportunity? And related to that, besides E&T as a segment, do data centers provide opportunities for any products or services within CI or RI as well over the medium to long-term?

Question: Mig Dobre - Baird - Analyst : Thank you. Good morning, everyone. Just a quick follow-up on construction pricing. I guess it sounds like you expect a little bit of erosion here, but maybe we can get some insight in terms of the magnitude. I'm looking back at 2016, that's the last year where I think we saw 2-3 percentage points. Is that kind of a fair expectation to have going forward? And how do you think about used prices in this market and the potential impact that might have as we think about 2025 even? Thank you.

Question: Kyle Menges - Citi. - Analyst : It'd be helpful just to hear a little bit more about the rental fleet loading kind of changing your expectations there for the second half of the year. I am curious just to parse out just what is kind of demand-related like softening demand in the second half versus you trying to manage the rental fleets versus kind of dealers trying to pushing back a little bit about taking fleet. Just would love to hear kind of what's driving that. Thank you.

Question: Steven Fisher - UBS - Analyst : Thanks. Good morning. You mentioned, Jim, the gas compression is starting to soften a little bit. Curious just kind of where you are in the backlog there? Do you expect your sales in gas compression actually be down year-over-year in the second half? And maybe what visibility do you have to rebuilding the backlog there and what it might take? Is it a next round of big LNG projects or how do we think about that? Thank you.

Question: Angel Castillo - Morgan Stanley - Analyst : Hi. Good morning. Thanks for taking my question. Just wanted to maybe unpack the backlog dynamic around CI if you could give us a little bit more color. So kind of a three-part question. One, what were the orders in the second quarter for CI? Two, kind of on the backlog. What's kind of the coverage that you have at this point versus your historical levels, just given that we had a pretty strong demand over a number of years? And then kind of lastly, just can you talk about kind of the price margin mix within that backlog as we kind of have visibility now looking forward versus maybe what was in there before?

Question: Tim Thein - Raymond James. - Analyst : Great. Thank you. Good morning. Jim, maybe a question for you just on another CI related one, just on the balance between market share and pricing and just thinking, obviously, over the long-term, PINS a very important concept for Cat. And just thinking about how you and tied in with that, the ambition to grow services. Just thinking as the market first time and some time now we're dealing with kind of free flowing supply and maybe a little bit more competition and capital directed at North America, just how you balance -- how are you and the dealers balance that, again, motivation to grow PINS while also kind of balancing that price equation. Thank you.

Question: Nicole DeBlase - Deutsche Bank - Analyst : Just a couple of follow-ups on CI. I guess I was kind of surprised by the strength in Latin America this quarter, a big year-on-year growth. Can you just talk a little bit about the drivers there and also what you're seeing in EAME? And is there any signs of life in Europe or are things just kind of bouncing along the bottom there? Thank you.