• Revenue: $14.2 billion, a 10% decrease versus the prior year.
• Adjusted Operating Profit Margin: 18.3%, above expectations.
• Adjusted Profit Per Share: $4.25.
• Backlog Growth: Increased by $5 billion, a record for organic backlog growth in a quarter.
• Machine Sales to Users: Declined by 1%, better than expected.
• Energy & Transportation Sales to Users: Increased by 13%, driven by power generation.
• Dealer Inventory: Increased by approximately $100 million.
• ME&T Free Cash Flow: $200 million, a decline due to lower profit.
• Shareholder Returns: $4.3 billion deployed through share repurchases and dividends.
• Construction Industries Sales: Decreased by 19% to $5.2 billion.
• Resource Industries Sales: Decreased by 10% to $2.9 billion.
• Energy & Transportation Sales: Decreased by 2% to $6.6 billion.
• Financial Products Revenues: Increased by 2% to over $1 billion.

• Warning! GuruFocus has detected 7 Warning Signs with BUE:TXAR.

Release Date: April 30, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Caterpillar Inc (NYSE:CAT) achieved a record organic backlog growth of $5 billion in the first quarter, driven by strong order rates across all segments, particularly in Energy & Transportation.
• The company returned over $4 billion to shareholders through share repurchases and dividends, demonstrating a strong commitment to shareholder value.
• Machine sales to users were stronger than expected, particularly in Construction Industries, contributing to flat dealer inventory levels and better-than-anticipated sales performance.
• Energy & Transportation sales to users increased by 13%, with significant growth in power generation driven by demand for reciprocating engines for data centers.
• Caterpillar Inc (NYSE:CAT) maintained a strong balance sheet with ample liquidity, supporting its ability to navigate dynamic market conditions and invest in growth opportunities.

Negative Points

• Sales and revenues for the first quarter were down 10% compared to the previous year, primarily due to lower sales volume and unfavorable price realization.
• The company faces a significant cost headwind from tariffs, estimated to be $250 million to $350 million for the second quarter, impacting operating profit margins.
• Resource Industries experienced a 10% decline in sales, driven by lower sales volume and unfavorable price realization, despite better-than-expected sales to users.
• Financial Products segment profit decreased by 27% due to the absence of a favorable insurance settlement from the prior year and higher provisions for credit losses.
• Caterpillar Inc (NYSE:CAT) anticipates lower enterprise adjusted operating profit margins in the second quarter compared to the prior year, primarily due to lower price realization and tariff impacts.

Q & A Highlights

Q: Can you elaborate on the cost headwind of $250 million to $350 million identified for Q2 and potential mitigation strategies? A: Joseph Creed, Chief Operating Officer, explained that short-term actions include cost reductions and slowing inbound shipments. Longer-term strategies, like moving sourcing, require more clarity on tariffs. Pricing adjustments will be considered based on market conditions and competitive positioning. Donald Umpleby, CEO, added that the situation is dynamic, and they are cautiously optimistic about potential trade deals reducing tariff impacts.

Q: How are customers and dealers feeling about the construction market, given the mixed signals like minimal dealer inventory build and negative pricing? A: Joseph Creed noted that merchandising programs have led to better-than-expected sales to users, causing minimal dealer inventory build. There is cautious optimism among customers and dealers, aligning with the company's sales and order trends.

Q: Regarding the tariff impact of $250 million to $350 million, should this be annualized for the rest of the year? A: Andrew Bonfield, CFO, clarified that not all tariffs impact the full quarter, and mitigation actions are expected to offset some impacts. The situation is fluid, and potential trade deals could reduce tariff costs, especially those from China.

Q: Could pricing in Construction Industries (CI) and Resource Industries (RI) be flat to positive in the second half as merchandising programs are lapped? A: Joseph Creed stated that the competitive environment varies by region. The company is pleased with current merchandising programs and will monitor the situation for potential pricing adjustments. Andrew Bonfield added that no price increases are assumed in the alternative scenario, but adjustments will be made based on clarity and competitive dynamics.

Q: Are you price-protecting the backlog, and what are the mitigation factors for tariffs, such as moving orders from China to Brazil? A: Joseph Creed explained that while some contractual arrangements exist, there is generally flexibility on pricing in the backlog. There is no evidence of widespread pre-buying. Mitigation actions, like moving orders, are considered, but the situation remains fluid.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.