Caterpillar (CAT) 31 Oct 232023 Q3 Earnings call transcript

Ladies and gentlemen, welcome to the Third Quarter 2023 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, and please go ahead.

Thanks, Abby. welcome Third and Earnings of everyone, Call. morning, to Quarter Caterpillar's XXXX Good Vice Relations. of Ryan President I'm Fiedler, Investor

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

earnings our During quarter we'll earlier issued discussing be we call, today. third the release

You investors.caterpillar.com under at a webcast can recap find our & slides, Presentations. the news release and Events

rebroadcast, retransmission, The without this Any international is copyright or by all protected Caterpillar's permission is content and or content prohibited. U.S. reproduction part of call written this of distribution law. of prior

Moving to Slide X.

different could today, call the release with sharing may on make our for our on reminder actual to that and information risks many basis material this statements on individually uncertainties. you refer to statements forward-looking call. ongoing vary we'll factors that results filings During of in be that which news SEC assumptions on our filings. are in the effect in actual details subject our than make forward-looking the our recent could we're also We'll cause Please a an and is from to believe forecast. we SEC discussion A cause factors contained to our detailed our have materially our business aggregate or results

numbers. to On non-GAAP today's refer we'll call, also

the non-GAAP appendix of reconciliation any to please numbers earnings of the the GAAP call see a For U.S. appropriate numbers, slides.

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

you for Good joining Ryan. us. Thank Thanks, everyone. morning,

events the a take moment in Before acknowledge discussing our to like the East. Middle results, tragic I'd to

of donating needs and Foundation Crescent the for societies the humanitarian by hopeful peaceful quick to million its Red the region of in saddened deeply American is to those resolution. network a the and are Cross The are support of Red and loss life Caterpillar $X We impacted.

delivering to team robust free another double-digit included ME&T I adjusted our top out cash strong we strong thank line and quarter, for This close the margin third growth, global flow. want As quarter. profit operating

to Our for our executing We reflect of profitable most and to invest remain growth. markets results our across and continue for healthy services. focused continue on long-term our products demand strategy end

about I'll with the about some in perspectives end my then our markets. quarter. performance begin insights I'll our provide

Lastly, sustainability I'll an provide update on journey. our

Moving to XX.X%, increased third to strong revenues quarter Sales operating XX% last Adjusted quarterly It results. year-over-year. year. was another significantly in the and margin versus profit quarter. improved up

while in ME&T generated $X.X our with cash than third flow expectations, operating were flow better profit free margin ME&T in and line Sales in We both quarter billion the we were expected. also of adjusted cash generally the quarter. free

Backlog we addition, and a In a the function $XX.X demand of is times. with healthy backlog ended quarter billion. lead of

markets. chain expected. our most products. and I've end in healthy demand of conditions, As have led remains customers in availability to longer mentioned, order wait supply and place a moderation has product to orders, for lead Dealers to can which many times rates improving as Due improved

previously we that their anticipated in for have dealer to the inventories changeover quarter. we anticipation building engines due in Cat addition, a products, which reducing fourth In for dealers discussed, seen in the orders of we reduction to construction excavation and

as a Although revenues historic is remains expected, our it backlog still to levels. decline elevated compared percentage of

XXXX macroeconomic anticipated global earnings call. during While expect results we we last be monitor to conditions, our year closely than we continue better now to our full

quarter X driven with was XX% primary realization expectations. users X. overall in sales which third quarter XX%, segments. favorable the the Slide $XX.X each increased XXXX, of as well growth. Sales increased below price revenues sales of by Compared billion, to primarily to volume and third In increased our Turning XXXX, to as of by our

expected than Energy supply to engines and & Transportation deliveries. some lower and locomotive the due but was turbine of chain sales international timing to users gas for increased large challenges XX%

Industries, rose Construction users and which includes Industries machines, Resource by sales with X%, For to expectations. in line

in sales users residential remained government-related nonresidential benefit demand construction. North America sales as in to In due the also sales projects. American increased X%. users continued Residential Asia users from Pacific, America Nonresidential in to the Construction construction quarter. continuing EAME were slightly to to activity. and for to healthy declined North sales up increased up Sales users in to to and Industries construction infrastructure Latin strength East and in primarily quarter. were users Middle

remaining In heavy Resource to thresholds. commodities supported to and increased also sales infrastructure-related Industries, sales users and users with users mining, for quarry increased, sales Within by In construction investment XX%. projects. above growth increased to aggregates,

to sales applications and quarter. turbine-related increased services. saw users Transportation, to the users higher gas All turbines sales XX%. strong sales & Energy to from In users and Oil by sales benefited in of

fleets Tier including servicing saw remain well users also increased. gas gas generation We applications, to X favorable center data to continue of as users engines strong Power continued repowering strength into gas Industrial also to blending, sales to sales due conditions, sales market transportation such reciprocating growth. oil compression. and dynamic positive and in and

the provide within Industries, by total BCP inventories is Construction North comfortable which America of by with remain dealer the later range. some our increase Transportation. Energy typical million led color level the call. constrained lines, more & the including the increased and In in Dealer inventory, $XXX by in in was Andrew of and Industries quarter, product followed very most Construction in earthmoving. We will

Adjusted over had saw favorable price we we Adjusted profit quarter, margin than to to well as profit basis slightly increased included as operating from geographic which positive better was Relative including our freight, XX.X% a increase costs, manufacturing expectations, year. anticipated. in third lower-than-expected the operating mix. realization, impact margin a XXX last point

$X.X our about Year-to-date, in to X. Moving quarter third of generated returned billion and billion Slide which strong dividends billion and dividends. of first $X.X and we share to flow in proud cash included free shareholders the and ME&T of to quarters status to continue repurchases. through in repurchased time We X $X.X free shareholders, ME&T the to $X.X dividend XXXX. substantially $X.X flow in billion expect cash over return aristocrat all stock We remain billion

Now on our I'll expectations moving describe Slide forward. X,

I we mentioned now previously anticipate expected. be full we better the earlier, year to than As

performance. $X outlook healthy operating full profit customer to flow exceed cash reflects target the range adjusted We ME&T the to profit operating and our and operating range ME&T billion cash we above will increases year. sales. adjusted for expect be free which This demand performance expect our $X operating flow, slightly corresponding for billion our of the now margin the This free margin level the to expectation for targeted positive relative strong

positive Now starting I'll we Industries. In with for North key discuss outlook our overall, to end see America continue markets, momentum. Construction

growth projects. in of in continued expect of North nonresidential due and the America impact construction to government-related infrastructure We construction healthy pipeline a investments

construction expect remain healthy. to we residential has moderated, it Although growth

excluding due Pacific in Construction we expect of spending Asia In prices. infrastructure to China, growth public support Industries commodity in

previous As we have remain in typical weakness it mentioned we continued XX% expect X% enterprise to China calls, anticipate sales. well during of to and earnings our range of below

is be the Middle versus Latin to slightly by continuing in continues will anticipate offset Europe, East. we construction the be weakness about America EAME, strong XXXX demand flat strong expected down partially as activity performance. In region Construction in in

utilization low, parked a customers. lower discipline mining, reflecting Order customer capital at the our see we level Industries, fleet slightly by the high. to remains activity. are this elevated. age remains of trucks remains In high rates continued we quoting expected product number Resource In The of of and than time, continue

providing energy the believe to market profitable and increased demand transition our growth. continue We expanding over long-term commodity will opportunities further for time, total addressable support

In fleet with who trucks of our autonomous the Cat at addition, convert customer their Arizona Cat Command. mine continues MineStar autonomous of is to by haulage grow. XXX large acceptance evidenced this announcement an will copper solutions using morning to Freeport-McMoran, This mining

and quarry We major due also expect healthy construction and in levels remain infrastructure to heavy aggregates to construction projects. nonresidential and

Moving to encouraged Cat strong by engines for Transportation. and gas, gas & remain demand oil In continuing compression. reciprocating Energy and we

future moderation, demand data Cat servicing is power remain As showing remain America demand. last while short-term engine reciprocating growth. we North said expected some we by driven for primarily quarter, optimistic but in strong about center to is generation

power oil from well high-speed Industrial above high anticipate to and turbines strength slightly our to recent remains customers demand is transportation, historical averages. expected in services both marine soften remain New gas in continue equipment but for robust. levels and we fleets. solar and as aging generation In upgrade

market to we conditions, we end As our current to we've continue dealer in our good have on of XXXX. Based backlog, see year strength another and inventory described, expect in most markets.

fourth additional call. will quarter during We provide information our

X. Slide to Moving

emissions. that by We climate-related sustainability continue continuing to advance their achieve services efficiency facilitate and operational helping reduced products, flexibility, We're to our technologies increased customers journey. objectives invest fuel in new our and

the example, number Wheel improves low-carbon customers. much Construction by and by For as In reduces Cat fuel Caterpillar XE as transmission, and as a solutions variable Cat-designed Loader, previous model. features provides emissions to a much XX% compared XX% which intensity XXX efficiency manufactured the of as COX to continuous Industries,

model. Gen GXXXX GXXXX performance field, new to is With to lower offering platform's compared provide Gen the the engine, upon previous and to engine in emissions of lower than latest the build XX% We series units X Cat the the GXXXX X X,XXX designed in also more a robust introduced power powerful increase emissions. evolution the Cat the

highlight our one with commitment to customers here. also demonstrate I'll supporting We've their made several objectives. announcements climate-related joint that

Caterpillar production. a in customers for first-ever we're sustainability September, our Carolina and the lithium to examples while Albemarle support establish sustainable Caterpillar world. efforts available as helping These their emissions introduced reinforce Kings more lithium In X North battery America, aimed and our collaboration Mountain, unique ongoing making also a better, build leadership in North how use to mine

it Andrew. over With to I'll that, turn

good results, concluding and full performance begin including our discuss morning, the before Thank quarter flow with and I'll and our cash you, I'll the third Then for on segments. year. fourth the quarter Jim, balance sheet the of assumptions everyone. with commentary

Slide X. on Beginning

operating sales the operating margin strong than Based corresponding expect the operating for operating profit end of year grew above sales. top in ME&T overall level Adjusted third free target quarter was share we better at the range expectations. profit while line we margin, were expected, the all Our and now flow performance, with strong. that adjusted of will the adjusted profit cash slightly performance and per on be year-to-date our our

will target to billion exceed cash that ME&T billion. the anticipate flow range also $X $X of free We

In of an increase the adjusted XXX XX% billion. prior price by $X.X basis billion prior billion driven summary, profit the by to sales $X.X was $X higher by billion. The as year. versus well margin volume. as increased was XX.X%, profit or primarily or increased increase to realization year The $XX.X XX% sales operating and revenues points versus sales Operating

to compared $X.XX was restructuring share the costs quarter per in $X.XX third prior share $X.XX year. Profit in included the This year. of as this per of

to continue to year. for about per expenses million We quarter last full XX% increased expect year. $X.XX in the profit the to Adjusted share $XXX compared restructuring of by third $X.XX

compared of income was than sheet was in as than $XX related that pension third a -- in year, to the offset. the partial driven currency along million Higher to balance quarter per the million ME&T $XXX of interest $XX decline quarter. of translation favorable by as the expense quarter less increase acted The with investment our lower and approximately XXXX recurring million. impact Other prior by income

discrete tax the items, The tax to full provision for rate rate year. the of quarter. lower-than-expected for added rate in reflected share with in discrete The slightly is excluding the quarter, expect per effective which annual profit along the a taxes about now $X.XX global we XX.X%, items income third

Moving X. on to Slide

increase improved line mentioned, was the to as well realization users in line to top I year-over-year inventory as acted increased primarily due XX%, sales sales versus offset. as year Volume in prior as Overall, the magnitude while with sales expectations. of increase higher volume. a price our slight in the As the changes dealer XX% by the was

However, sales were higher, Resource Transportation Construction in & segment, and by Industries lower anticipated. line Industries sales were than Energy were had we

revenues increased third in quarter. Services the

practice. target our you progress quarter growth our services update our when our report as fourth normal and is with will results we towards We

for slightly was we than realization had the quarter. better expected Price

of effect price year-over-year to However, see as we quarter second the compared we lapped we prior magnitude the price as year the increases. anticipated, did moderate

Volume was slightly below our expectations.

were lower anticipated, users As Energy in mentioned, Transportation. to sales had principally & we than Jim

of our However, about it increase was in offset inventory dealer the being versus the for expectations nearly this quarter. flat by

to building these the was driven America, North dealer we Within the Industries. Construction particularly stronger-than-expected products had constrained in near of in shipments typical inventory increase and X There, remain primarily sales. earthmoving. of bottom in inventory The of products X months end by dealer and America, construction range are North

a dealer remind Transportation over is backed you Energy commissioning the and Because later. X firm inventory and Resource further inventory segments. is in dealer by commissioning in these our & of for inventory some XX% orders. difficult saw customer Energy inventory & a mainly Industries year a Resource pipeline increase in Transportation, function dealer quarter. I I'll We Energy dealer full dealer predict also the function is Industries bit within in us segments expectations discuss for & will little more it of in Transportation inventories of that these with to

to Slide XX. Moving

were Third profit $X.X which the shift benefit billion. in quarter of volume increased mix while favorable profit a quarter. in increased Price billion the by operating included geographic to operating $X.X realization, by sales to XX% from XX% sales slight adjusted and a

increases included expenses investment absorption as and cost XXXX. R&D largest expenses manufacturing acted of headwinds higher inventories operating within manufacturing material higher cost compared as profit freight and and costs. we our higher strategic in a Our to SG&A to corresponding Manufacturing costs. higher offset a the increase R&D Lower included costs quarter partial reduced third spend. unfavorable SG&A and were costs

The points. was margins. basis had XXX This held contributor. was operating profit of costs, to better-than-expected which improved slightly price anticipated largest favorable manufacturing freight of we due than primarily the the by Also, adjusted XX.X% margin better

XX, to discuss XX% On $X third Construction favorable realization. segments. the Slide of to price primarily quarter due sales by the I'll increased billion in Now performance Industries the

volume in Sales to America sales region. price. rose due favorable By by North XX% higher and

volume decreased favorable to sales currency volume, line to In in and partially supported increased dealer which Pacific some North by impacts. EAME, due primarily lower chain region. supply the in our end sales by equipment users. of in X% Asia Sales America lower I Sales primarily America, price. shipments X% by decreased favorable equipment mentioned, to by sales restocking. driven sales due were Sales enabled expectations by lower stronger-than-expected Latin to with to improvements in price mainly for offset users of due end As XX%

freight. versus year. to segment's Third quarter and was of an the prior XX% XX.X% $X.X exceeded profit to for Construction on better price XXX realization. expectations primarily increase by due basis favorable mainly The increase operating lower-than-anticipated of was Industries points volume, last increased price costs, Margin billion. margin The year our versus manufacturing

due lower to increase by of lower The the XX. X% by third patterns. realization, more to higher Volume Slide to were partially than parts sales Resource price favorable volume, which Industries grew sales dealer buying volume. offset Turning billion. reflected equipment users, in changes decreases, offset quarter $X.X aftermarket was primarily by sales to end in

profit partially unfavorable to to increased Industries offset price volume, million due the included the Resource prior freight, product XXX which lower driven better of mix. by sales Margin by versus year The by of costs was for due price. favorable XX% margin mainly and quarter Third of to segment's was impact $XXX was lower-than-anticipated an last realization. year. Profit operating XX.X% than had increase expected primarily basis we manufacturing points versus

Energy sales in increased all third increased up gas XX% Transportation XX%. the Industrial rose XX. by were increased higher Power X%. sales across X%. $X.X & were to transportation by sales quarter billion. Slide generation on by Sales XX%. Oil applications. by sales Now sales by And and

XX% to for year increased quarter $X.X billion. by & Energy profit Third versus the prior Transportation

realization R&D margins. offset growth which volume, that relating price SG&A alternative the our in favorable to and expenses, reflected electrification occur was related strategic segment, mainly A most partially to and expenses fuels impacts. strategic initiatives. The of costs higher and by currency impacts to reported investments SG&A reminder due ramping and R&D and increase higher manufacturing sales unfavorable investments

margin points challenges operating XXX was of basis by for increase versus volume prior impacted segment's anticipated was and delays large lower than XX.X% the engines we an solar chain had Margin sales lower-than-expected of primarily year. to The for delivery supply turbines. due

average due a to regions. The financing Moving million as at provision credit quarter $XXX due had in more revenue by was to in XXXX. Products to primarily unfavorable comparison higher the The million. a all third mainly a as Segment increased higher for X% profit reserve compared decrease Slide to expense XX. by reflects $XXX XX% typical we to provision decreased of year Financial. prior rates across impact to Financial challenging Cat losses releases the

XXXX perform and of of though, year, compared -- to through portfolio low third lowest of continues X-month improvement X points with with and at quarter quarter. Business Of over the well the comparable a were dues the remains past XX write-offs the at provision third decrease levels. quarter strong this in second a note point for expense our a quarter XX period our level is and for years. dues to basis to historic Past basis X.XX%, compared the activity

it seasonal new follows versus compared though And second this volume pattern. quarter, to the year. prior the Retail increased business typical declined the

In used addition, at low inventory for demand levels. strong we continue to used equipment, remains see and

Slide on XX. Now

ME&T cash quarter. with another to through year, the first our third expect target this billion With generated $X this to $X.X of during the been $X year. this year Our $X.X billion quarters exceed flow billion of free has robust we generated billion X

the around working we capital a million quarter. inventory in a small decrease of perspective, From had $XXX

ahead, supply sustained expect levels chain continue we will decrease as our Looking improvement. see we to inventory

CapEx the through third quarter around million. in the quarters, $X.X With we billion about to billion year. was the CapEx $XXX first around $X.X full for in expect continue X

sheet Our remains balance strong.

longer-dated to additional of on billion and liquidity an cash cash. $X.X in yields have ample we billion, that We balance slightly securities liquid $X.X improve with an hold enterprise marketable

I for quarter share full XX, the and the fourth high-level assumptions Slide on some Now year. will

compared remain Price to as anticipate the fourth should During the we sales favorable. prior higher quarter, slightly year.

growth as offset. inventories continue users to changes though should sales support an in We expect dealer good underlying to to act

in year. by million saw whilst quarter fourth increase As of fourth inventories the this dealers we decrease a we a the in of expect $XXX XXXX quarter reminder,

of seen seasonal shipment third Specifically Industries, reduce and their volumes to a we in to we the are fourth as basis. complete changeover products lower expect and building was Instead, to in the within year-over-year compares quarter. be to to we increase XXXX. expected sales inventory dealers sales dealer range. still XXXX This typically to increase in the XXXX, will inventory it users excavators. we than months sales end inventories quarter the at engine the both it anticipate of typical higher Though in principally Construction of construction on X of the sequential dealer increase now year-end from that the expect be Industries do fourth expect Construction at X the not Those we a Cat

average precision would all is more A XXX of there different products given products. hundreds it dealers with in last difficult still where and and/or independent across an products like areas Similar to to to all reminder, dealers dealers and predict Industries, and this Construction is are inventory. over quarter, have

As the overall. very Jim are inventory with level held comfortable has mentioned, we of dealers by

In slightly a we result in as of third the Resource Industries, to quarter as lower anticipate compared improvements availability. sales

expect by driven quarter dealer this for prior we while in year. changes In the Resource expect inventories the year fourth decrease in XXXX, dealer a inventory. an lower versus there was also in We the sales of fourth increase quarter Industries, of

deliveries. the sales and increase compared Transportation expect in Energy fourth to the We third quarter rail solar quarter as turbines higher with in to &

primarily supply in work we through large continue mind impacting chain to keep engines. However, challenges that

to fourth We in recent high compared levels. quarter industrial also during the anticipate sales some moderation

our slightly your XXXX. Based planning on adjusted is I'll based we on level you margin current provided the margin the in corresponding full the chart estimated This year We sales. to assumptions, process. operating for anticipate the be target assist above profit our operating our to comment expectations on target profit for of adjusted Now modeling range margins.

Your where enterprise year. sales this finish expectation year of margins inform will could total the for

reasons Construction than fourth previously. leverage, anticipate for the quarter. quarter, the Industries the lower We to profit operating mentioned adjusted anticipate I the Specific we lower-than-normal particularly to margin be volume impacting third

the Construction We as total as also mix sales proportion compared third to quarter. operating anticipate negative margins impact a lower be a segment to sales will Industries of

in of realization lap should to from as year though we from have remain continue moderate in favorable the that year. versus margins magnitude cost the positive, trends increases the favorability expect price inflation pricing Price Therefore, outpacing to the fourth prior should manufacturing moderate occurred more quarter. we the last

down a there In are look addition, to couple income the you note. of year, as the for points statement prior

in XXXX operating will due year-over-year expense quarter normal incentive lower of a final short-term fourth was for to This for headwind the First, the than for the outcomes year. margins. the true-up financial be

this partially year significant expense currency offset favorability we expect translation in will the and to not income by we last do quarter However, in operating losses as saw that recur. other fourth of the be

the Industries, Construction we margin In third lower to segment. expect lower compared volume. assuming slightly By quarter,

margins in typical, similar the We by higher Industries, expect volume Transportation, to impacted investments. and an Energy spend deliveries third also & offset manufacturing will In absorption strategic costs along international sequential to anticipate cost is lower with unfavorable we be includes in margins which locomotive relating Resource stronger rail. by mix as of products, with quarter

turning Now XX. Slide to

$X expect Let for above summarize. ME&T to cash share billion which sales year remained previous flow on We first based of range billion with profit We through by robust $X.X to XXX full is operating $XX.XX levels. strong cash Adjusted quarters margin X adjusted ME&T $X exceeds to profit point the year, full flow targeted year. to now increase the generated billion adjusted full record target exceed slightly a our operating for be the for with We expect already the XX.X%. XX%. per profit range year basis our now margin year-to-date. free free the our me expected

your take our We And that, continue questions. to profitable long-term execute with growth. we'll for strategy

Michael question America. first Bank with of comes Your Instructions] Feniger [Operator from

today, backlog orders. easing times, on conditions discussed the impacting based the supply where you Just lead sits

the to discipline levels expect mentioned then capital some these do consolidate higher? move normalizes, You that backlog and at As with customers. you

XXXX? ore, that Just copper, growth curious, Jim, iron in with oil, to where for is support are commodity enough prices

Yes.

XXXX, talked good I January. we more a quarterly we'll our in call. As in do this detail bit in and about year We last another mentioned, expect provide

is, normally are I'd to supply which higher frankly. talked is corresponding than because expect to come to about than our be our down, Our them have should be, lead on improve, backlog a it lead we as impact continue we've what would like higher conditions backlog. times times And

backlog Our should come down.

positive that's So thing. a

a it's at compared of backlog to still based years, over be our elevated where look normally you number it revenue. would If on

again, would feel conditions, market expect a improve good that as backlog come we revenue lead to more percentage So do and down of about that we as we times, normal levels.

Yes.

Let me the just of give you it to In percentage mean, if at some numbers in as is XX%. the a that. today backlog XX%. Currently around trailing to was XX%. I revenues XXXX, add of XX-month XXXX, you was period look it

is of still elevated base higher revenues our proportion historic you now remind a backlog on total well. trends. that also services And So are revenue based as

take will next with from we Tami our question And JPMorgan. Zakaria

backlog, if year continue I seen good your quarter-to-date, trends in you What on like any Staying think XXXX, down? a or be in would orders the orders improvement you call? down in to quarter. were in order Have support mentioned third

Yes. expected in improving some Again, we availability. again, order on, based rates moderation

Again, quite So of surprise most again, we the look to we XXXX is at what we a are conditions. another where us good. that year mean, good us. if feel would we I in market wasn't give serve, markets in

have North to America, still in and it is growth still quite and some we strong Residential, gas in seen growing. Construction with as is more in investments of XXXX. North turbines. healthy continued Industries that, are by has benefit -- just although rate Starting we gas with well. solar for being we made the oil that America, moderate government, benefit Gas compression are the infrastructure Oil remains starting expect although in the

lot center growth Data of well. to So again, a power of things as there's tailwind generation. continues a provide positive

a we'll there's year. lot. lead again, another good would next So believe have year The us that conditions market to

about, just changeover Tami, quarter, we as obviously add a little happening that were there bit engine order again more. the specifically is, Cat which talked for that, in impact you X fourth quarters, a factors the rates. One, number Remind third which quarter. did to the And of in

dealers those for us BCP dealers would when also saw excavator decline. reducing order about quarter, well. rates inventory in saw impact third tend we of we anticipation is decline they which think you orders If their place the orders will in to why some levels in as machines, Similarly,

well. which So are themselves factors the in the as order specific overall, actually moderated overall rates those third quarter

Maybe comment limit haven't a order amount of And the new then about that opened of being new orders number changeover. the the out prior run the spots, we we of another allocation some changeover closed fixed model. because board point BCP for model. deliberately and We machines we when to at just built the we board have the yet to order

that again, rates helps that So changeover. explain BCP order in around the reduction for engine

in we a that for is this of Again, talked as surprising. well expected, rate order that also result again, as again, that inventory. And would excavators. And reflect -- for to none the about lower have would fact CI we expect dealers bring down excavator

question And with Rob we'll take our from Melius Wertheimer Research. next

and on be My going it's margin. basically model question and is business to resources, on model, revenue

announcement you've missed trucks. with while. And I X recall retrofit today although know a so you announced autonomous X. had this I've of an maybe don't on for retrofit I quite mining Freeport And the or deal big,

or out of think an sort majority as contracts see do through you if And autonomous support direct about large share wondering you margin the forward? update run saving can customers think market But for like give question then mining how deliver How really, is you tenders us about costs. operations, going value and think autonomous guys? you do you'd of there. you indirect I'm you And deals that, to a ago, year a that. I on

business and development. market margin share, of kind So

the You able we're our are because about solution. XX-hour to bet. and the very best we period. customers do to our we allow And We past move in trucks that solution commodity faster, Rob, the bullish we produce the a had industry believe talked our about in have more autonomous fact in

that really the We not us announced value we're was in the our them more more continue And value. Certainly, to make to helps. that's and about just competition, one autonomous Again, capabilities to more in that providing cost receiving value, add more orders successful. customers resulting invest striving add it's always morning. continue to it's to this like

about trucks quite talked mining Quotation capital have That's is the discipline. displaying We fact activity not high, of customers number that parked our now low. in is surprising. and are

So one mining, do good that forward. particularly Industries, about with again, autonomous moving energy we transition, the our in if Resource combines solution, about thinks feel

our Raso And question David from we'll Evercore. next take with

the say guidance, the I a providing can that must framework you range is I through. truck the fourth know a you but implying worked for margins. I EPS quarter of it's drive fourth margin mean, on The question quarter, historically within

I'm little the heard margins trying and third think get E&T I below But the -- just I better and similar. sense slightly in then So quarter, say RI to CI of a you when fourth that rough a that your thinking think gave what guide. whatever sales of -- idea you quarter range have of you're for the you I sales we yes, are, given mean,

the to only trying XXX RI a up. and at bps But they'll like or it fair CI just I'm on it's be make that XXX appear year-over-year sequentially. statement? seem of get slight that a least sense Is almost down margins

just the for want granularity, sure range. understand. apologize a to we wide but wide, I So make it's I just

Yes, David, you. thank

it from obviously, so about if slightly think to got sequential basis was year-over-year. and So you different also a

to try both. on we color So give bit of little a

CI margins sequential a RI decline. basis, and obviously expect we to do both On

exacerbates for there's level the impact both by volume is that above -- probably particularly to normally, think impacted of in the dealer inventory. CI, What you If of for expectation those. be a normal seasonality, seasonality

So will on than slightly normal bigger impact CI. have that a

flat expect On compared to them third E&T, as we said, I broadly quarter. be to the

which international that product business. that quarter-over-quarter top rail of deliveries, driving that's of -- mix low-margin that. so and are sequential, to Then on of Some due timing is

we you year-over-year, moment and of to if then the a both corporate E&T in CI be look will offset incentive as that RI I margin comp will ago. true-up of some And What talked a obviously, yes, that increase items slightly year-over-year. expect and result do improvement show about

losses which for impacted big charge Because basis, be year, expense. fourth and favorability PPS have translation in if a onetime income you some On that the remember, did quarter. will other last a we offsetting currency

the sort So but helpful. more hopefully, you Hopefully, color gives margin that can from you overall, guide perspective. trying a of get we that's that's little a way to bit

take question UBS. will Fisher from with next Steven We our

next ramp Or And what if do versus kind are So moderating just key year-over-year, think you just your forward. can focus mean, but the from of a clearly, bit. there? is I about a said, the on going cost what opportunities the strategy savings is cost you part this how just for the price sort think to year. a at case cost margins you terrific strong here? narrower it's of in do I'm driver you that's biggest growth environment pricing Pricing extent moment a curious the as lower year? up manage a plan, base such to really of

we that Well, mentioned, thank we you, Steven. And price last that increase increases based pricing as to just we the expect on -- moderate do lapping year. had

structural create fact performed cost. efficient. reduce Back countries, incremental lower-cost looking We're there being still ways having done challenges having there. continually cost the become ways but of we lower-cost to a at for mentioned looking some things countries, I focused more A in more some -- also we cost engineering inefficiencies lot We're has in some due shortages. office now lower on to based that structure. and supply surprises improved, that on to chain have

an I make We really finding to reduce costs. opportunity there's is us going moving So operations believe that ways ways more life to also try structural structural costs. forward always to manufacturing to way find do forward, operate still to efficiently and of reduce in a for our

take question next Thein Citigroup. we Tim And from our with will

terms Maybe outlook thinking of in kind dynamic. interested about I'm into and competitive there pricing from a just the continuing of 'XX. thread that just on

your look you seeing, at the from market thoughts focused pricing? just is especially a at 'XX near seeing lot If historically, dollar-yen of that what your in where into relationship in CI, maybe competitive terms talk and with in global decade-high you're it about interplays levels, are looking dynamics and what -- dealers how just competitors and a with

there. is the dynamics One, lot strength the A of Yes. of of course, market.

you conditions. infrastructure continued we good So market market certainly, in about the America about growth feel think we North residential. in strength spending reasons described, if And the the of and for

We we on whole in make one on other variety big look a competitors, always and of the based of variety had There's factors decision. at decisions we we whole the based decisions. market make at seeing in input we've cost, our one Competition, market, we Certainly, we a will. no make what we're time. at always decisions any look pricing competition, factors. We at look

our more to And an we been for years, on to course, now. But stop think have customers remaining No looking last we've to about environment. to adding technology, value things focused always of the our make prices. shortage raise couple pricing more the likes efficient. cost value. that add inflationary labor competitive, in we're customers, of one and always in But you We're

the be quickly. of into less putting more we're Industries effective allows products more operators technology that to Construction Some our experienced

add And so of those help our value kinds customers. all to things

well services And of help we're to in capabilities increase our investing unplanned productivity. capabilities course, downtime, our digital as downtime, and reduce

it's it. So and will about ability recognize But But confident a competitive effectively. been out always that there, into to certainly, be. feel compete we world all continue has to always we our goes

will question Bank. next we Nicole from our Deutsche take with DeBlase And

a volume aftermarket on decline parts noticed guys Just there. you of in called that demand, a out as parts decline resource the in driver

on or If about you any bit could little E&T? construction a that. And talk then color demand in parts

partly the dollar volume thank decline did Resource patterns. necessarily doesn't Nicole, the due It dealer mean you. absolute Within the to volume declined, buying decline. was Yes, value but Industries,

was resources. that within factor a so And

remarks, our we're give normal, as factor in you to But given grow drive overall, continue my comfortable per aftermarket Overall, we'll know, and revenues you volumes. still to I with as by update very XXXX. the revenue said for rate double are still good very parts in us, growth the services services as billion a of And $XX January. to

And were in the quarter. dealer up to customers sales

Yes.

Dillard we next will with from take our Chad Bernstein. question And

a bigger-picture More question. of

could to So approach rental. update an I on was your us hoping give you

pocket, your sales see And provide through you your could if if of an expand extent looking to And we fleet can channel any are do today this offset? you any you to do today? what how then share, So come think air footprint near-term expansion channel? through dealers much in this

rental do we as rental leading so division in see a business. Vice a we're or our the year that rental. with Senior growth working help to President with increase division We Yes, last experienced and opportunity, new to improve a set our up dealers senior --

The fact, rental industry in growing. is,

our strategy them more sustainably rental. to grow allow And with working refreshing in rental to growth our so we've been dealers revenue and

we So it's good do an think opportunity. on. to It's a -- it's focused be us for again, one

question we Oppenheimer. And will take with Kristen from next our Owen

cost was I about in commentary favorable bit was this a the I the wondering more forward. comparison that to the on of provide if manufacturing this quarter, easiest a increase think just the is how more mean, you year, in environment. could little -- cost and going

much So cost just maybe about of seeing orders still trying in think related to of increase to timing the how inflation chain. supply manufacturing we're versus was some the

Yes.

less in other growing We rapidly. seeing businesses. the a growing it's still Material areas areas bit -- are and across are some mixed still costs

that that's So cost from sort part manufacturing the an bigger perspective. of of overall

built Resource helping year of particularly are cost benefits where had particularly like, like us, for freight done in which example, we inventory this things have lower by quarter, But this we overall, things for some us in us. and that absorption inventory last we reductions include offset levels historically manufacturing are year. factors Industries, and Other inflation seeing impacted partly

by Really does segment. depend segment, by

remind from as parts of serve far the a in of one a COVID to business in then that a business as different ability to variety different as as market. are offset phase as increases well business, we means a growth well. through uniform just impact. our those markets. We therefore, that, things one the price only are Markets some we are post as of to result everybody, that the to coming That of of So some of serve not cost different way

will from Mig next And question take our Dobre we with Baird.

which ask billion way a little framing you They surrounding expectations. were wanted to seems different bit built than a be dealer the X.X year-to-date, inventories. I to question

dealer lastly, your are expectations? initial So exiting to still I indeed first, guess inventory going of into do going are a there be soft, And curious, infer you that continues dealer a erode? to Why if destock to incoming to a I'm of does relative your variance we it XXXX? obviously, expect is orders bit backlog bit a mode, and to continue how stand

Yes.

one number underneath of explain inventory, and a tried XXX large -- independent for So in Mig, the last that number we dealers products a couple of quarter. comments. it. One, We to underpinning you which give dealer very we with

So it is very complex.

and lot of Over RI RI firm a is CI the for function to inventory. those and for slightly and from E&T are XX% sitting a not dealer orders. XX% about They're commissioning. orders of model a Secondly, come E&T. in different on somebody really customer increase of in represent them. buy waiting That's

more depends less So -- it's time. it on difficult the there, effectively, it's to commissioning because predict

nature predict they the business moved are more that of and difficult And because -- also obviously, of to through. how the it's

on of part example, as site, is coming For large truck that. and dealer and reassembled disassembled the the mining then a which from revenue recognition

why It almost very predict. more much a part with predict we effectively difficult it's certainty. the business. much can't is That's different So of that to

and we're moment, to the That them range. range end months the to said with good Dealers at inventory. We always We think regards that excavator thing. have, top slightly that. we've will inventory, X bring X as move between probably down. CI, With within they're At is that obviously, that's normal of of agree reduce, want inventories range. will They a in. within we

a range, want we at the said, actually earthmoving, and products, and dealers with America, could those largest are as for markets with of Within, which the are we've in also more. to low little end bit hold North BCP the particularly

the not. some in decline fourth quarter. we expect It's do Will there be next to net-net, first overall, a going an the So impact Probably possibly. year? impact, have in quarter

big see season, normally first of quite our getting build But dealer inventory are in be as parts we a -- may business. as not ready the ahead selling normal. the summer of some overall, seasonality there you, so year remind it for Just quarter of

backlog dealer is orders. of for is With completely function regards backlog a Remember, different. to CI, the backlog,

much more function firm orders it's and -- RI, a underpinning it's E&T, of of customer those. function a For

get as don't about -- as need better in think are they much inventory availability machines, as advance. to how Within they we to holding, they're so dealers, for much able order

through of you production to So know, done, we're process of better doing one buying of caused result avoid dealer inventory trying which we swings moderate trying S&OP we've patents. of to job a the our is the as swings overorders. a some And as things think

expect expecting to users Overall, of as strong, in just sets forward. us quarter We're end XXXX move up this sales you, our still to still finally, the demand that to we year. into remind remain fourth grow we to and

with question we take Shlisky And from our Mike Davidson. D.A. next will

you actually I affected real have of ask their a touched On maybe on little How inventory? desire rates, pull or carry ability kind but wanted quick. dealership interest to the interest about higher rates inventory interest color. interest it, rates to high and and more rates

And interest secondly, -- user is how maybe equipment? buy appetite they to any rates end any have affected

Yes.

for you lived that last on say rates, the the know are though just decade. me interest So I probably rates, many of first higher we've interest through it who of all, there X% of remind norm us let being today, even as remember lower

function earthmoving of and bit BCP hold on are. hold less really what it's Are future holding demand of of though, of rather to of of than sales current dealers their comfortable expectations levels that's for and products reflection particularly we'd But inventory, a users excavators. interest their as said, inventory little more of actually at to Overall, based I rates. a hold and a expectations like

bit I can equipment that that actually little on. a to think they they're less sell assuming the sensitive

customers us Financial. our Cat impact is in it As are actually far within Caterpillar where concerned, as does

the We we are because financing have in wholesale machines fund seen within Cat in market. the Financial we new slight a share of reduction

rates customers far as interest buying So -- need have machines generally, been they as we're banks. have concerned. They so they against But either paying been sensitive slightly to less in work, is to competitive cash. have

the very look, to in are -- levels, you on, interest keep our robust and impacted by not the if shape are customers we very provision focus past overall, do and And thing appear be a it's one being higher and dues and like, we yet. close write-offs, rates

yet So seen on that tend impact any that business. there's nothing of that indicate to today we've

next Jerry our Goldman with take question from will Revich We Sachs.

a if wondering us times could mining you have? know far for broad of range get visibility but you equipment. about lead talk how it's a I'm sense I stand where you Jim, in can just products,

And we've about if the had really quantify been really to you of comments you're versus we've willing rate quantify made bookings the bookings pipeline just within good rate pipeline strong earlier to any the context relative to the the year-to-date, run way at?

Yes.

we we So down, hard in are about mentioned. lead times where good have that been feel working I to do We bring process. as

it in a And challenge gotten the challenges around the engines. area progress better about we so we we made had lead but availability, is terms most Probably some times. over the we've last in where around has of couple areas. of feel that's still good do mining, years, But are large in

quoting the is of there far as And as a Jerry, Yes. activity, on. going activity, lot

of on As to pushing button slight of more firm have be There seen. we delay have slight orders order slightly, to in this rates. we we've as anticipated the one coming some seem committing that would disappointment actually into was said,

more we Abby, time question. have one for

of Jefferies. line with the from come will question Steve final Volkmann Today's

think on rental Do to also what terms back you Jim, Cat I could. wanted the rental, of the want they characterize that I'm would And if more age rental can size? in just comment go I to curious, Cat dealer fleets And would be in you fleet? just equipment? you

Yes.

year had. it gotten happening that things challenges is the of last of supply so because the because quite that been some had fleet of some that's has of the there old upgrading we've over or been One

reluctant size having of And of dealers in want And so total. execute. successful, amount rental to of help that size working that rental. characterize But the to means have our business business. the profitable I'm they We them for to with we inventory them grow rental are a right again, the that

should have machines again, dealers, here result And has grow. rental, we going there it bigger some quite -- with rental again, the fleet improved newer that they as goal time, there's again, to aged. rental been again, it -- but a can bit we into room as is grow growing that fleet the not by It's And they larger is, the over had, to still gotten bit, which have because have is profitable, aged. fleets. but goal fleets. businesses as size to be should a So our expectation rental -- to efficient our in turns. want want higher The will But

our was we always you your thank That for joining and Well, you. All question. last appreciate all, Thanks, questions. right. us,

by our another team close for I'd just great quarter. to like thanking

margin to anticipated will even And we due higher reflects and As healthy and free year adjusted cash quarter, we in better our believe I ME&T includes that last profit operating the our mentioned full than our flow. and continuing strong that do for call, XXXX had strong third now be customer expectations performance. that demand results operating earlier, during previously

invest growth. you And we're and continuing long-term January. to to strategy in execute And for forward profitable our we updating look again

Jim, Thanks, online post website available and also replay us morning. joined of Andrew later it's call Great. Relations this A We'll available. our a on our be who today. everyone as Investor soon as will transcript

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

or you out is If number have me. please The phone Rob XXX-XXXX. (XXX) reach to any questions, general

conclude it turn over the we'll Abby to Now call. to

We call. you for concludes participation. today's and thank Thank this you. Ladies gentlemen, your

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