Caterpillar Inc Q4 2024 Earnings Call Summary

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

Question: Stephen Volkmann - Jefferies Financial Group Inc. - Analyst : I guess I'll dive in, if I could, since it's timely. Just, Jim, how are you seeing the data center business now? There's obviously some concern about what that's going to look like longer term. I know you're adding some capacity. Can you just discuss any changes in your view relative to data center demand?

Question: Michael Feniger - Bank of America Securities - Analyst : Just on the -- for dealers, just to see the inventory, I think in 2023, machines built $700 million for the full year; '24, inventory is down $700 million. I know you guys are thinking North American construction end user is down a little bit on '25. So how do you kind of get comfortable with where those dealer inventories are going to stay the same on the machine side? And did anything change post election in terms of the views around -- on the inventories? Because I think there were some comments that the retail sales end users was a little bit better than expected in terms of how it's informing your view on '25.

Question: Robert Wertheimer - Melius Research - Analyst : So my question is on -- you have a large and diverse oil and gas business. And I'm wondering if you could characterize, especially, if you will, on gas compression, kind of where you think you are in the cycle. Obviously, we've had Europe, we've had Russia. We've had lots of different demand shifting around. And there may be other growth areas, et cetera. I just wonder if you could give a little bit of an outlook on oil and gas.

Question: David Raso - Evercore ISI Institutional Equities - Analyst : I'm curious, obviously trying to think about margins for '25 for the segments. And I was a little surprised by price cost being negative, right? The manufacturing cost had been a positive year-over-year. All of a sudden, the comp gets harder, right? That's why the fourth quarter wasn't going to be as easy. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 30, 2025 / 1:30PM, CAT.N - Q4 2024 Caterpillar Inc Earnings Call But to see the cost up, I noticed you called out E&T. But does that imply CI and RI manufacturing costs were still a benefit year-over-year and all the cost is in E&T? And maybe if you can just provide that kind of framework from the fourth quarter to how to think about full year '25 price cost?

Question: Jerry Revich - Goldman Sachs - Analyst : Jim, Andrew, I'm wondering if you could just talk about your solar turbine lead times? And how are you thinking about potentially adding additional roofline capacity for turbine specifically? We're hearing optimism on the Titan 350 from the customer base and assuming what we saw earlier this week is a blip on the radar. I'm just wondering how are you thinking about capacity for that range of products?

Question: Chad Dillard - Bernstein - Analyst : So my question is on the '25 operating profit guide. So you're guiding to the top end of the range for a given level of revenue for the full year. You've been guiding that way, I think, for the last year and actually have been hitting it. So I guess like what would give you -- what do you think would drive you to, I guess, bring that guide back to the midpoint? Is it price cost normalizing? And in that same vein, I guess like how are you thinking about the evolution of price cost through '25? I guess when does that pressure peak and comps get easier?

Question: Jamie Cook - Truist Securities - Analyst : My question relates to E&T. I guess, first, you called out sort of delays in shipments, I think, in the fourth quarter. Can you just give us color on that, how big that was and when that hits in terms of 2025? And then I was also surprised just your top line growth wasn't better in 2024. So how do we think about top line growth in 2025 and the incremental capacity coming online and how that helps your top line? Just any color there on how much your, I guess, top line in E&T was constrained in 2025 because of lack of capacity?

Question: Mircea Dobre - Robert W. Baird & Co. Inc - Analyst : Andrew, just a very quick clarification on your comments for CI. At least as I heard, as I understood it, the relative pressure that we've seen in Q1 might be associated with this segment. So can you give us a sense for how you see this segment revenue and margin progressing sequentially, so relative to what you had in the fourth quarter?

Question: Tami Zakaria - JPMorgan Chase & Co. - Analyst : So the order growth in the fourth quarter, I'm curious how did Construction and Resources orders do sequentially in the quarter versus the third quarter? It seems like E&T was strong, but would love any directional commentary on the other two segments, if you're able to provide?

Question: Tim Thein - Raymond James - Analyst : Maybe, Andrew, just back to the -- you had mentioned within the commentary around CI, the issue of inventory absorption or the headwind from it. As you think about just Cat more broadly, should we -- in an environment where the top line is slightly lower, should we think about that as a headwind more broadly for Cat as a whole in '25, just given where inventory levels are for the company. Is that something we should be factoring in, in terms of that discussion around material costs? Or is it less of a headwind as you kind of think about the margin outlook?

Question: Angel Castillo - Morgan Stanley - Analyst : Just wanted to maybe go into the competitive environment a little bit more as you think about the first quarter, continuing to see some of the flow-through of the merchandise programs that you mentioned. I guess as we evolve into the second half, I get the comps getting easier. I guess maybe what gives you confidence though that the pricing and competitive environment doesn't worsen? And maybe if you could overlay on that, just any views on kind of Trump policies and implications on kind of construction activity in the US and whether -- how you kind of see that impacting demand overall?

Question: Kristen Owen - Oppenheimer & Co. Inc. - Analyst : I wanted to come back to sort of the margin target guidance coming in at the upper half of the range. You did make some adjustments to that margin target when we were at the height of the supply chain dislocation. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 30, 2025 / 1:30PM, CAT.N - Q4 2024 Caterpillar Inc Earnings Call Just given the strong performance since then, the outlook, even inclusive of that negative price impact, I'm wondering how we should think about this range? Is it still valid? Or should we be actually thinking about an upward shift in that range over time?

Question: Steven Fisher - UBS Securities - Analyst : I know it's still very early to really understand exactly all the policies coming out of the administration. But I wanted to ask a little bit about tariffs if it hasn't been asked already. And curious about how you're thinking about contingency plans and strategies for managing tariffs on the products that you import from China into the US. I know generally you have a strategy of producing for local, but I think there's maybe some products coming in from China. Just curious how you think about the contingency plans and strategies for that.

Question: Kyle Menges - Citigroup Inc - Analyst : I was hoping if you could provide a little bit more color on what you're seeing in RI. Just you talked about some order improvement in 4Q. Just how are customer conversations progressing in orders so far in 1Q? And maybe just talk a little bit about some of the pricing actions you're taking in RI. I think you said it would be negative in 1Q. So I would just love to hear some color on those items.