Caterpillar (CAT) 30 Oct 242024 Q3 Earnings call transcript

Welcome to the Third Quarter 2024 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. Please go ahead.

Thanks, Audra. 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 Vice Director Andrew Global Bonfield, of are Services President-Elect Jim Umpleby, Financial Finance Rob Kyle Chairman of Officer; IR. IR; Epley, Rengel, Alex Senior Division; President and the Chief of Kapper, and Senior CEO;

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

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Moving to Slide X.

make forward-looking which you our we'll our cause to different assumptions actual today, results During to also call. the this are with that statements, sharing call information we're be could risks make subject than on We'll and uncertainties.

factors the news that Please in to filings SEC reminder our actual our many and discussion is refer vary business factors on statements in an basis A we believe material details results detailed on materially the our of on ongoing the have to our individually could for cause filings. SEC forecast. forward-looking our in contained effect may aggregate recent from a that or release

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

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

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

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

our markets. of delivered adjusted quarter line as profit was benefit reflect our per quarter, strong want margin although we share, with thank good top our adjusted team the We which of our global operating for the third out expectations, another were results close end I than we lower the diversity anticipated. profit and As consistent our to

of free We cash also the flow quarter. $X.X in ME&T billion generated third

of over deploy balance the our ME&T dividends to allowed through share repurchases billion the shareholders including Our and sheet, along this us $X $X.X flow, free X billion with year, cash during quarters strong to robust first quarter.

to quarter remain profitable for on full continue our provide sustainability provide the with growth. our in and execution an then our year strategy We expectations. by of update markets, my on will end insights in and update perspectives I'll performance our some an about journey. I'll long-term disciplined about strategy begin followed the our

at the Industries to expectations Resource the Moving below to quarterly were and third Construction Sales Energy year, to in the in results. down & expectations increased line in users XXXX. Adjusted of to versus time quarterly our expectations adjusted $X.XX, in Services due at deliveries timing profit and sales in quarter Transportation. lower-than-expected of of our last last and We line revenues in X% generally was with profit operating earnings call. XX%. margin quarter achieved impact our Industries share with compared per of the the

remains our addition, healthy backlog billion $XX.X very to level. increased at and In a slightly

prior last since although estimate, above and reflect slightly is unchanged our of call to being year, the For our updated adjusted full sales range. margin expectations below top our we profit the expected operating our the earnings remains

profit expectation unchanged. adjusted Also share is for our per

be billion to expectations flow now $X billion. of free for our our and anticipate top will increasing are ME&T of We range cash it the target $XX near

to sales X%. of of lower to XXXX, due quarter XXXX, third $XX.X declined to volume. and third the decreased In X. Slide X% overall users Compared quarter to the billion sales sales revenues to Turning

X%. sales continue users to Construction grow to Industries Industries, which sales & increased machines, XX%, by declined to includes our and expectations. Energy Resource users which below as For was Transportation

a rental fleet large were users pipeline to due absence Sales of were down primarily North of the to and in Industries X% sales America, in to XXXX. down deal users third lower quarter Construction the In year-over-year. loading

Excluding sales Compared lower expectations, to users flat versus about than our were users prior year. these were X rental to fleet the sales loading. expected, items, to impacted by

rental quarter. in Our dealers' continued the grow revenue to

declined in primarily users weakness construction due users Europe. ongoing while Sales America to EAME, in in to activity declined, Latin to in Sales increased. Asia/Pacific

construction In trucks. trucks XX%, were sales a and previously we've well for generally to Resource X Mining third expectations strong in our as aggregates users quarter to line Industries, softness due mainly lower products: and articulated declined with off-highway versus as XXXX. in quarry discussed heavy and

grew conditions engines Power and & users to to Transportation, we for growth and solar increased users sales as applications X%, sales Energy continue generation favorable industrial. market turbines turbine-related remain by and In all except strongly to see reciprocating in both services.

strong gas sales from benefited sales to and turbines services. turbine-related users of and Oil

engines applications, were and and sales users as while for compression, expected. higher servicing. but gas industrial gas in reciprocating sales For lower to increased, declined oil to Transportation users well we

and markets disciplined Our as the profitable for of to the of strategy results of our as continue growth. diversity the end execution reflect long-term well our benefit

of Moving inventory inventory to the and million backlog. In second dealer versus dealer by XXXX. quarter $XXX total, our increased

increased $XXX anticipated. more For inventory slightly dealer million, by machines, had than we

year the Looking current as reduction year-end forecast around planning the in ahead quarter, assumptions a expect And dealer to inventory. machine our inventory to end XXXX. same machine we dealer fourth the level

across factors businesses portfolio. the a products on based wide are across Dealers multiple decisions and range make independent product stocking of

range, is dealer currently While inventory of remain level around the the with machine top inventory. overall end of dealer we comfortable the typical

and generation. Energy as and versus demand increased second engines for backlog strong power As in power for continue I for slightly see as we Transportation & the reciprocating as mentioned, billion. $XX.X quarter to well oil demand to generation turbines strong increased gas solar

cash X. quarter $X.X to and X flow the of billion the in We of third generated first billion ME&T Moving Slide robust free $X.X XXXX. in quarters

cash through share than proud to continue and I free repurchases and aristocrat remain our ME&T flow return to billion over We $X to substantially As all year-to-date, time to more dividend through status shareholders repurchases. mentioned, deployed dividends. we of shareholders share and expect dividends

describe fourth positive remain moving for primary lower segments about expectations users X, expect the X our longer-term on In but I'll our Now outlook. Industries, quarter, demand Construction forward. in we sales to Slide the

call, During continued our third in the rental the which and persist fourth into in we now August loading trend fleet quarter, to of quarter. a noted the expect level lower we North earnings America,

we rental lowered our to Although grow. the lower fourth quarter have expectations continues for fleet to sales dealer due to users primarily loading, in rental revenue

to spent healthy, addition, projects the be by government-related funding to infrastructure yet expected In remain from IIJA. are supported

remain In Asia/Pacific, the for soft continue. industry. to relatively a of economic China XX-ton expect excavator we level We outside in demand conditions will at low China, anticipate above

conditions continued healthy continue, partially will weak the by demand Middle in that offset anticipate we in EAME, economic Europe construction In East.

in are and Construction remains Latin continue. America we to modest growth activity healthy, expecting

benefit services initiatives Industries. of impact ongoing In addition, we will expect Construction our positively the

anticipate discuss aggregates, I'll After and to we a continue year. as in construction quarter Resource machine strong heavy last the as well quarry Next, performance versus fourth of and Industries. volume XXXX in in lower mining XXXX

for However, users rate the quarter fourth moderate of the the to versus is to in previous decline expected sales quarters.

to solutions see fleet of The acceptance. rebuild customer services number expect high. remains The remains Customer continue of utilization low. trucks product our elevated, remains the activity. We robust autonomous parked and including see age relatively to higher strong revenues,

discipline. to display Customers capital continue

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

& Energy to Moving Transportation.

center And engines expect remain this data generation expected growth and be robust is by we sales quarter reciprocating to driven strength for to computing demand generative generation, the to full And to power power expect solar turbines. fourth For cloud strong. continues growth and Overall we AI. continue. year in trend both and in related

gas, In oil in in continue total, stronger to overall expect and year versus XXXX we XXXX. a

strong quarter, be in but lower quarter we sales expect gas to the the a of timing used XXXX turbines fourth than to are solar and deliveries. For of due fourth applications, oil expected

oil will Solar at gas. offset generation mostly and in power in increase Solar's decline The

Solar's we expect in the year. total fourth last to So flat quarter be to roughly compared sales

we growth Solar inquiry activity. order oil full as to in and as Solar expect gas. healthy and has a strong continue backlog And well for year

and gas and well to up engine we for reciprocating this gas XXXX, year. softness be full expect the expect ongoing We to due compression to After in a be primarily down slightly sales strong servicing. still year, oil

it equipment lead the times in to soften as have normalized. expect near we term However,

previously current market while mentioned, on leverage applications. our and power servicing we overall generation conditions continue our and capacity. optimizing we had customer can engine As large needs, we Based gas of variety are platforms we large demand applications, to a serve oil well additional across meet engine as to able

a marine to level has low full transportation, applications. in both demand In relatively to growth continued we remain XXXX. Industrial anticipate rail services and at year compared

X. Slide Moving to

announced and we reciprocating parts. to capital output to a an of and capability provide sustainability in strategy I'll February double update aftermarket our Now engine In XXXX, journey. for our XXXX investment on division new engines approximately compared large multiyear

expectations increasing future engine XXXX. on we further multiyear announcing are volume growth, capability an Based of investment compared to today, to output large than our to expand additional XXX% more demand

engines centers, trucks we generation. large oil of data large mentioned, mining and these I including As leverage variety a across gas, and applications, power distributed

on sustainability. Moving to

their and We aspects our the solve help customers industry's management. one to innovative transition: an complex services In products, September, new energy to of invest climate-related of continue solution in unveiled the achieve we mining most technologies energy to help objectives.

diesel Caterpillar efficiency developed can system improving battery is can operational Cat while electric around mining energy It and uptime. Dynamic Energy increased on with are both also batteries while speed trucks DET, Transfer, electric charge they fully that onsite. them or to operating machine working a and grade, transfer large

truck's solution. autonomy the a provide system that Cat energy Command source system a including to of mine elements, holistic comprised electrification powertrain. rail from energy transmit the energy to solution, for series and machine will a and the of a site integrated DET module site's the hauling MineStar a merging transfer in is DET with Cat technologies to integrate Cat power power converts to electrified

enhanced while technology we our miners more highlights We an integrated our efficiency simultaneously world. managing build automation. mine industry-leading from When our will electrification portfolio achieve help a example targets, energy with will help production across technologies believe customers and these sustainable through approach demands. benefit the integration combined, better, sites of how leverage to This

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

and Thank everyone. good morning, you, Jim,

the segments. with and I'll before flow detailed the concluding third summary the begin quarter comments for I'll the then and full and performance balance quarter. our including of of year usual, As cash provide free on then more the fourth discuss with high-level assumptions sheet comments, the a

Beginning on Slide X.

the lower with lower I in impacted being a profit Although our moving had per the and expectations, generally was expected, share profit revenues. highlight and anticipated. by adjusted in line of were with Adjusted revenues parts sales than XX.X%, was operating operating line in adjusted our a profit margin had what despite we we few will sales moment.

Jim outlook range, of the will the expectations As our we margin top unchanged, full to the remain and be year for despite profit slightly above target lower margin continue mentioned, operating end anticipate top the line. adjusted the

for have $X billion increased unchanged we remain time will expectations to $XX versus year, last billion near earnings target per the our flow range. expectations we free of at be our adjusted the cash Also now top for Our the profit ME&T which our anticipate our call. share expectations for of

margin In revenues to quarter, billion operating lower year. points compared profit the decreased XX.X% by year. sales compared basis was of to prior the third XX when The the X% $XX.X of and adjusted prior

costs quarter was Adjusted to last third share in the of $X.XX in versus third profit $X.XX the $X.XX share in the per were to quarter the prior $X.XX year. in $X.XX Restructuring year. the per Profit last quarter was compared year. compared $X.XX quarter in

so as driven impact impact an was expense mostly for translation currency $XXX foreign by adjusted to balance compared a translation. headwind headwind our the quarter. ME&T the do versus currency sheet related acted on per and million forecast share, profit the income We our unfavorable prior Other not to expectations of year, this

-- rate We not which taxes global a discrete provision quarter. benefit, We items, do the favorable XXXX tax of and a recorded anticipate effective annual income Excluding discrete had reflected tax within the which an the third impact both $X.XX in discrete XX.X%. for XXXX items. we quarter in

repurchases the the compared reduction profit was the quarter Finally, had favorable in share impact approximately on of to in This adjusted shares slightly $X.XX resulted to year-over-year we share a from of average expected. the per number third of than outstanding impact as XXXX. better due primarily

changes line in primarily to top lower revenues Slide Sales X, third from result sales impacts discuss to X% the decreased Moving where of our by quarter. dealer I'll users and sales compared impacted the lower volume results to prior for inventories. by a as and year,

total as machines Energy Total the sales a users acted increase partially Transportation. changes decreased in X% XX% in headwind by impact $XXX inventories from offset to a from by The about of & for sales million X% a decrease was as dealer quarter.

machines above had our by we prior a million, Service anticipated. increase For to increased inventory slightly $XXX versus year, only, being as lower. $XXX million smaller but revenues flattish increased about the year slightly in increase than expectations dealer the the prior of

profit Moving due of X% and manufacturing in profit XX. billion, to Adjusted lower costs. partially favorable decreased offset by to impact the X% the to Slide quarter volume, on $X.X sales $X.X by price Operating profit operating by billion. to third realization operating mainly decreased

strong has has XXXX, often has early expectations. exceeded and Since -- strong price realization been our been a

moderation this to price lower than the generally this will in price of Over with and our line previous quarters, to the quarters occur was year. moderate second past in In several that the quarter, highlighted half began third as expectations. realization have we begin

quarter, As margin for line below than volume, Industries & Resource expected. our expectations was the our profit about in in line. operating expectations. margin I and a had XX.X%, was adjusted had mentioned, Financial stronger generally was with Transportation lower Construction slightly on Energy while we segment, quarter slightly was which third Products the Industries By in

of decreased XX. versus primarily sales Slide our $X.X Industries Construction was prior by sales to decrease equipment to users. headwind quarter the year end as expectations. The in driven lower sales. The in the realization. to due inventories third billion, Changes slight dealer to mainly also price On below volume slightly by lower acted X% to decrease sales unfavorable sales was volume and a in

by Latin America increased decreased By region North by region, declined XX%, America by decreased XX%. Asia/Pacific in and sales and Construction Industries Sales XX%, sales by XX%. EAME in sales the

decrease points and Industries versus the for of was XX% decrease Third realization. of year. is sales volume a quarter This $X.X impact XX.X% profit lower mainly of prior to Construction basis profit versus was prior price The margin segment's due a the billion, year. the XXX unfavorable

XX. year. the our was end Slide challenging equipment point users slightly in was year decline billion, by to decreased sales given Industries sales third the lower The to the to Turning $X.X due X primarily volume, XX% expectations. which Resource below the comparison to quarter lower versus mainly by driven to of prior sales prior

XX% year XXX was of volume. mainly Third quarter profit This to XX.X% was the profit versus to points $XXX year. prior for impact Resource of decrease million. Industries lower decreased due the versus the by of sales prior basis margin The a segment's

sales. Now sales expected quarter deliveries. intersegment sales of on we the to including third $X.X in billion, than higher & by prior was lower federal year Transportation increased price Slide driven had due increase the X% XX. slightly timing the The higher by and primarily versus Energy realization to volume,

decreased sales by decreased by By gas sales X%. by by and application, and sales power X%, higher generation XX%. sales were XX%. increased Oil Transportation industrial

the was of XX% year The segment's increased to realization. billion. profit to Energy quarter XXX by versus The increase year. Transportation Third the price prior due an mainly prior versus increase & $X.X was basis of margin favorable XX.X% points for

regions. This North Segment to Slide assets $X by by profit rates was to revenues $XXX Products Financial due earning impact higher losses. driven lower equity due average across XX% credit to and for by to Moving securities a primarily a higher XX. financing provision to and all increased about America X% billion, from favorable increased million. average mainly

in financial customers' versus lows remain XX near basis the health down prior points is dues X.XX% quarter, year. Past historic the Our strong. at

activity was lowest Financial at our healthy. remains on record. Cat Business allowance Our X.XX%, rate

XX% new our financing prior was Our are options more customers Caterpillar's highlights to business Financial, volume through by by increased retail supported financed Though financing our we equipment. versus Caterpillar packages volume for to of the the year, lower, attractiveness retail choosing are which being sales offering buy proportionally Cat the customers. sales machine

see the for their at as equipment rates continue demand choose strong at remain to of customers used buy end are and also healthy term. low levels. lease equipment, also to We Conversion inventories

in generated in the repurchases on $X.X deployed Slide billion about share to and cash third and XX. dividends. free quarter ME&T Moving We about -- $X.X billion flow quarter in

sheet with cash balance remains of balance $X.X strong Our enterprise an billion.

hold In longer in on $X.X marketable dated slightly addition, billion to liquid we yields improve cash. securities that

Slide year. on XX, our for Now I'll assumptions high-level share full the

our expectations rental reflect and sales and slightly are the of Construction For lower-than-expected lower at dealer sales the time an for than third expectations have our full in to outlook driven our fleet Industries. earnings updated that year, update last quarter to our call we by loading revenues

anticipate in XXXX. We growth to services continue

expectations As call. full adjusted adjusted I share year mentioned to unchanged earnings profit margin and for earlier, compared last per our our operating remain profit

expect target be to continue top above end range. margin operating We adjusted to the the profit of

In free addition, to which target top to anticipate billion our we the ME&T range. be billion for the now expectations $XX of we are increasing $X for cash year, near our flow

with full approximately we restructuring To around year, $XXX and million. costs assist you for your anticipate of CapEx modeling $X billion of the now

Our expectation global remains for XX.X%. excluding items, effective at the annual discrete rate, tax

the the a Slide comments provide quarter, starting Turning with top to line. XX. on I'll few fourth

strong dealers dealer billion We include the to lower prior of to than in for saw the fourth magnitude the quarter their $X.X the of less in XXXX. decline prepared fourth the need of machine we expected inventory the be comparison. On decrease to dealer quarter year, compared be quarter, while by The expect our balancing XXXX. is the inventories machine and to machine reduce their in slightly inventory, impacted expectation users sales planning revenues fourth will sales versus lower that a assumptions

level is of services the expected the the quarter. to sales impact we year-end as in perspective, ongoing expect to inventory our XXXX. dealer year initiatives end positively Also same machine around For fourth benefit

in lower is price segment to which fourth a by to users, quarter Jim decrease unfavorable anticipate This the sales prior sales in the we Industries. realization. By compared with year, impacted Construction along mentioned,

In XXXX. sales strong by In Energy impacted sales a Resource Industries, versus & supported we sales lower to the we generation. by power year, anticipate lower of users expect fourth prior versus quarter higher Transportation, slightly slightly

is in typical the following lower trend fourth quarter margin third to compared the quarter, Enterprise to seasonable pattern. the expected

However, lower modestly expect a year, despite profit sales. adjusted we prior operating versus the higher margin,

lower and SG&A favorable more SG&A anticipate expenses in benefit lower manufacturing driven offset of will prior year volume. primarily expenses R&D a the are by compensation and lower the expense incentive impact and higher sales Lower R&D short-term of costs We profit the than quarter. versus

Price realization though normalize, from should a machines offset. the is Transportation environment & lower as price pricing to to in expected continues as act Energy trend partial

is Regarding important support which merchandising is impact dealers Financial, from post-sales price support the and that supporting which over effective of occur over through financing to life our recover a we discounts way of the Cat deal. machines, it results This for an expectations programs, our portion customers, includes of time. note to that

me explain. Let

of At reserve programs. current dealer discounting the to customer, when on there times, the dealer these the level which the merchandising the the dealers for invoices invoice lag we the Based from payments for impacts price timing between the anticipated support, reserve. is a of and

from the the price discounting quarters, reserve few to adjust a next level programs expect support. the merchandising the headwind current to Over to machine reflect price we these continue drive of as realization we to impact

margin we costs. Industries, By realization, unfavorable compared partially to year, prior by the offset due the in lower to quarter, manufacturing anticipate primarily fourth favorable segment in price Construction

to as digital, around lower is manufacturing investments anticipate we fourth Resource fuels, and which prioritization and growth partial In mainly to prior strategic AACE, costs and margin and compared act services due the Industries, Favorable should offset. quarter a volume autonomy, electrification. the alternative connectivity in year, lower of

year, Transportation, prior Energy higher we & expect margin In by primarily price a impacted favorable versus the realization.

So turning XX. to Slide

summarize. Let me

estimate. top in revenues expected, our our per operating will margin be share and sales our prior full Although we and profit the line with than were year line had now expectations. generally were slightly below profit We adjusted anticipate for adjusted lower

increased a backlog slightly very and remains at healthy Our level.

full adjusted a year profit ago. and margin profit share adjusted per for to Our unchanged operating compared expectations quarter remain

We target year operating top above adjusted of continue end expect based sales for to margin full range the the levels. on expected profit our the to be

for are range our free now the target ME&T flow, our year. for anticipate near to expectations We we full cash the of which be increasing top

and benefit and of in the to team for Our of to execution growth. strategy long-term the profitable executed well our diversity results reflect benefit -- the markets our quarter, of the continue our disciplined end

with questions. And take now your that, we'll

Sachs. [Operator take Jerry question first Goldman We'll at from our Revich Instructions]

Andrew, back. if step could take we wondering I'm a just

we and Your it, share? sustainable? pricing optimal that margin in to remarks relative about this as performance mean are is outperformance year balance folks And take targets. really see level of you spoke market evaluating long-term should you is between to the outstanding we this the headwinds prepared the margins the Or that

the Well, very as of profitable competitive dollars. group we that a Obviously, we're of Jerry, just around the diverse something we a industries growth reminder, primary focused That's OPACC of our in absolute And serve world. course, always being markets on increasing we're serve. focused is various measure on.

a in than it So what's is segment can very just different from be one in perspective. what's happening with competitive happening one segment another market

competitive. remaining we're again, focused on So

do analysts do margins, margin and investors to sense and We we'll continue give be targets, around provide to a where obviously, we'll of that.

where to remain be. driving expect dollars. of we're increase to competitive. our get use again, to ranges you And we We're absolute a OPACC sense driving can So target to margin

We'll at move JPMorgan. Zakaria to next Tami

rate My been question get has now. Resource in the about the I you said down Volumes Industries in think for segment. the is fourth on a better of And you year that expect decline to quarter. segment

XXXX? weak demand more for for term few it stabilize sales could get to near you or segment a or or stay better this for planning Do you are how curious, I'm quarters? expect maybe

for of we drop, there work strong to calls, a your in trucks. through, backlog and comp talked created year that for issue our products: way articulated off-highway we thanks question. trucks that's previous had The we about and full Resource had couple a this Well, And to is year. Industries us really a in as due primarily

-- not talk aspects going energy Having we mining, the for said be obviously, XXXX be to January. about support a transition. certainly, given that, all around on just produced bullish we're to XXXX. the continue guidance We'll to we long-term to that But the commodities in give quite need

mining use produce our Our things copper. customers products like to products, those

So our customers but are we the bullish displaying certainly long discipline, are capital term. about

because We parked relatively is do is of expect of services quite fleet elevated, higher is age relatively utilization revenues The the the products high. our of and the trucks number low.

those positive So all things. are

inquiry the also that we activity of of One and see large around is trucks. things lot a activity order mining

So we're pleased that. with

that's that as for So the reason also one the of optimism is well. things

Morgan Next, move Angel Castillo at we'll to Stanley.

wondering that in customers I expand terms dealers inclinations of and terms orders, the and of how kind versus buy Construction around you're little XXXX macro in segment hearing uncertain. remains little into was your you what you're of heading kind of qualitatively in is more a if a into on that shaking and bit that of bit more from particularly sentiment what for Industries, then hearing out to terms so year could of specifically, kind that

a Well, things. couple of Yes.

note it's mentioned decline quarter-to-quarter the to Firstly, quarter, that in of increase. on our earlier, course, dealers' to continues important lower reasons rental by fleet revenue rental loading the primary based dealers. our as for And the was I

fleets. So it's really into them having an rental issue their loading of lower

had and issue obviously the year, an reoccur, pipeline in we of a third created that that, didn't to which as quarter well. deal last large addition In

which Association, expect as of the at look government-related From XX% infrastructure has funding IIJA been that About a to XX% been August the only positive billion XXXX. it's American only ARTBA, been $XXX spent of healthy. perspective, spent. they noted total of XX% If Road and of has remain in and is from of some committed, facts we Transportation Builders we it

quite well. as that's So healthy

there's activity are our with lot So out support. dealers help working of a infrastructure their to customers that there

well. we good feel about So that as

at We'll Securities. go Jamie to next Truist Cook

to I announcement. said remarks guys calls. think capacity multiple you you sorry, between large adding Jim, during incremental And I'm previous prepared relative flipping the I'm But are engine that your

I can capital is So is, you question there any investment? guess way the frame my

you Caterpillar you what to importantly, are Again, opportunity of more Construction. And then of capacity, sort below increase for that Resource and margins a revenue this imply lot does segment? And but as continue for longer-term capacity the we're what think here? for the adding margins

as higher be So volumes should ramp? margins structurally

the compared for XX increased -- And but capacity haven't with to volume your capital quantified question, incremental in of we Thanks large output increase, XXXX. talk investment investment that that than the capability this amount more we have Jamie. we will engine did about our to that expect we fact XXX%

for data And of of about demand distributed course, for the generator those today And going backup what driving generation. But centers. a engines centers. are sell call what's used applications. we're sets forward also certainly, we across wide data variety is We quite excited the opportunity

an don't centers, is been -- But of load for of and of us because course, backup requirements just course, well for up on the generator create going of that. there's as has grid opportunity data centers, base Data about sets. written much the

on have sets our the sets generator creates think both we we and grid. reciprocating data our distributed power gas applications And distributed over fact centers us the which are requirements years, plants fact relative turbine opportunity increasing traditional last few have the the for in that that we renewables the just base the what fact given the there's in load in across been more that that to underinvestment intermittent call been grid, nature, so grid, now and power added for an generator

turbines of gas burn can gen our a And variety fuel, and wide hydrogen blends. sets natural biofuels, gas,

to that opportunity about manifest that excited itself. is quite we're So starting long-term

in just just Energy margin because And quarter-to-quarter nice to volume saw question margins, your increased increase because of about and fact Transportation the of that certainly, a you mix and & and going higher, Transportation but should increase quantify business that we opportunity. But margins opportunity point. the this & to have at going not be it's certainly, in forward, to Energy again, an I'm

take We'll David Evercore ISI. Raso from question at next our

for looking, sense for Let's The breadcrumbs stand more it CI, right, guess, I XXXX. shipped of the 'XX. give itself of two no Can the deterioration discounting you now? pieces. further about more us maybe My question, pricing. right get a assume just orders those into Yes, drag, where we some everybody, as CI show comment lag will as of in

quarter, what discounting most be at up? is quarter 'XX that, in from acute out But this Is now period it's right now? discounts, for? how orders incremental what that acute Essentially, those should next we're drag booking shows long year the second are right that most the these the third

now, kind you in side, it. positive the to improvement? any to just of let's think of in E&T, order go trucks, I throughput throughput engines, large E&T which said at give as your right it capability us some investments regular to 'XX, up show additions the 'XX there versus of quantify sense 'XX on that least then is And particular know about the of way just in But can capacity mining but want a also large think Any didn't to magnitude? you

your Yes. for Thanks question, David.

that to large over So about a we is engine X-year our the increase one things investment initial capacity announced talked would of the when we period. increase

-- haven't we X-year by again, out it's year, a And laid year it so and increase. it's

and of able XXXX, be your Andrew I'm a give margins. So going question additional your answer answer I'm I'll for to sense let question not to about to afraid output

Yes.

of the we reserve. is build on to impact that the works, historic way one is David, on a have. quirks XX-month those So it is done the of up accrual pricing, this basis The accounting sometimes

So could impact several potentially, for actually this quarters. us

catch -- in increase, then on have you you have that's the up a merchandising amount done that over inventory the period. is over XX-month programs and that's time, It to effectively as

quarters, see little price. And be quantify hit merchandising on little levels it now. but obviously, are headwind will more of programs for to normal it to bit generally, we when guidance So We'll we starting a more that probably January. get you creates several for a next the the bit a in XXXX

we'll Feniger at Michael America. Bank Next, go to of

love side. bit. on oil were a I get would to up sales just Obviously, retail and sense gas the little a

the of of of you're maybe differentiation the areas. services what the and recip about talked You some well compression, gas versus in side other terms seeing

Solar is Do has stuck business? the in a gas a if oil positive we Just when see in the kind range. into we higher Obviously, the need of that been look nat price? XXXX, LNG price more we for permitting Gulf,

So just and thinking in up being gas very curious with how and oil 'XX. we're strong

of What 'XX that made business? on the comments for QX. think kind kind we of You for do breadcrumbs some about

the XXXX, resist and mentioned weak. fourth So total some compression for well color be up the Gas expect a the industry. Cat be we oil for in around the guidance giving of year, just you to bit Certainly, gas, for but recip that we but quarter. a give bit again, I'll fact continues softening to I'll for servicing the

in well. a turbines international is solar projects both and of as a but lot booking also compression, lot oil the activity, business for strong, of On quite gas, for activity, quotation gas

described business medium, exports remains us. if again permitting again, are LNG and again, that would seen, Solar starts term, I've for a process then So quite think again, obviously, -- certainly positive start robust, be recip. long I It to that be would if

Co. & Owen from Kristen question move Oppenheimer our to at We'll next

particularly come to wanted in the dynamics, CI I back Jim, competitive North America. to

X higher range. the out called of you the end now, of the but issue a You've in inventory a couple are quarters row at fleeting

disappointment you landscape can a China just seeing, given us how you're of seeing competition anything in the on competitive continued understand international wondering, much activity? and in help Just incremental Just shift there? maybe yen the the depreciation you're

the continually certainly, competitive, remaining and situation changes. we're Well, on competitive very focused

year -- So the competitive been the this every that, job, in I've and always situation before I -- changes. could

confident ability quite in to continue compete. are we But to our

to an -- as invest allowing an and operate We experienced to to through operator. allow an more their a continue experienced operator operators technology, less to taking machines as more like them to operate in technologies allow example, effectively new example

in digital capabilities. to continue our invest We

their continue as well. in invest capabilities Our dealers to

quite to confident continue in we're be to and successful. compete ability our So

are there things right, a -- been changes tailwind situation, competitive you're a bit currency has for that, The period but over currency that relatively create weak for as a and of those time, competitor, a as And currencies change. change time occur. can of yen the

capabilities providing is to that invest our on capabilities, the value customers by like things focused really rest. long-term digital in our and to continuing we're what again, service all But technology,

just higher And a thing. range? on is make is your of end complex things about just to dealer the the I One remember of inventory comment can comment inventory a the

world. dealers around have We XXX the

segments. X business have We

We have products. lots of different

reducing. inventory not holding more actually a always would There are thing necessarily actually some dealers a where competitive product good lines actual be perspective, from

them not it's it down. burning necessarily without So

probably about we're little with as segments for a process need we work business where, reduction, to obviously quarter. bit times, competitive why and at they We think more that's that well. inventory through would where hold But actually the fourth also them to dealer do like a reasons anticipating in some dealers there are

to UBS. Fisher We'll go next Steven at

on XX% the to mentioned actually power process in power but expansion, QX. capacity gen about XX% X-year the you accelerated from gen year-over-year growth Jim,

that at the some with drove So you -- acceleration? can of capacity projects talk being about products, what on bigger

oil quarter-to-quarter some maybe power capacity to into to that comps some around? going you expect And and based of that growth function And we of forward gen? engines is fluctuations a gas your how gen and extent are shifting rate in able shift power on of of should sort what in

your Yes, just to be -- thanks question. for

and Just we as oil or application, set just be to and not clear. that oil generation, clear, count a generator gas, an we gas to when be oil and to power for gas customer ship an

and So capacity, of back the power forth, those to and increase. the and we mentioned Certainly, excess in do there the on a for of our ability can to gas shift demand generation I and needs If for prepared depending remarks, of from is as we customers. the have reasons reallocate. oil engines gas my and not have variety course, oil we

there. So that's

on course, again, And of been, reciprocating that business capacity. power we've Solar and working generation, is increase in also also and well. facilities it to as an engine had our power Solar generation impact increasing, that

because of But come our working investment the of throughput more later major getting increasing the demand we're out will up. the big goes as on capital and making. as Yes, we're impact existing well facilities

next Kyle Citigroup. from of Menges our question take We'll

was could little you a more. inventories if I bit discuss hoping

you year? XQ, machine to pretty in heading into inventories good in about reduction So next make feel enough guys this dealer planned is inventories that

used And then cause it tick like would XXXX? also is they are but be seeing bit? there issue helpful a for low any just up levels, an could to inventories little hear your And thoughts at on become that you concern in sounds used used remain inventories. It

Yes.

mention all, used. on of me let first So

little used history. slightly. a is on levels Obviously, say, levels perspective. pricing remain still actually based we up Financial at inventory bit actually low has ticked Cat pricing become As But okay lower. They pretty had from a

from at this used So inventory all concern point no an perspective. at overall around

inventory, call sales process. understand our regards we what With planning needs by product their process. That's through our requirements operations go we to We are. by closely to expectations, what their and down our work dealer, with dealers what are, dealer ordering S&OP obviously, really what their

to way we're manage the us of right reduction see in this that what efficiently. time, production the we and be part we to about to year-over-year. about flat to the inventory overall this at That's helping At dealers point expect from factories based of stage. That level on hearing bring seems

go manage see I are But any reduce a that obviously, we in point accordingly. that's manage significantly through But work that production more. in and a to need reason will XXXX. be don't time ready prepared discussion at this there and and to obviously, would them process

ago, a to regards actually are as -- dealers the product inventory. where hold moment I some With more could really point lines there made

about as got with to comfortable the the careful at expectations it very, looking So very it's year-end. very But for we're and be level overall, total holistic.

Bernstein. next go We'll to Chad Dillard at

CI. the just pricing about comments revisit I wanted in So to

do pricing when actually just first, the understand, So you pressure? wanted max to expect

secondly, have the you're you then SG&A about ledger, easing cost and on sounds think other the if R&D like we It coming costs. fuel side, of side And down. the

of improved So pricing be -- think the cost. you'll through improved to whether pressure to with offset just some trying some able that

Yes.

all, So to let me just, the first overall. of back come

margins quarter, volume. the despite at flat about overall our look actually you lower If were gross margins gross for

been find So we offsets. to able have

a Some positive obviously with of E&T. price within is that

that And of some lower costs. manufacturing is

always of So a having the benefit of of there broad -- businesses. portfolio are part and that's

that to are working perspective. input looking at obviously, are appropriately. We commodity able costs procurement manage from we a Obviously, and,

a I be necessarily that because often contractor lower We prices, we never may don't at always do. you buy of than always there's buy remind which spot. lag. We spot the contracting prices. even that It's

bit little takes that which So for fall in, factors feed all things a time of those of through. are to

merchandising With regards in to already, pressure, programs through the CI. are flowing the we within put to pricing P&L the place immediately

We'll -- little you impact So when give January. The was have, which update we which just a that's reserve we impacts balance a talking the to point get really next the immediate. the over that is will impact quarters. bit was on about on that I impact, lag sheet more several

Next, to James. we'll at Tim go Raymond Thein

orders a the in kind or maybe which just strong curious could presume more I terms if the data Jim, give you were key on I color of I'm significantly, maybe the part in and you're pretty was or some And as highlight going I behind to X just that. driver hoping of what's the guess, backlog that. quarter of -- centers

given -- the bigger terms to or And about like in tightness you the center secure how out. looking is those timing that, a in capacity data ultimately we how -- your delivery some further customers deliveries think in think shift -- of are I should of of the presume there capacity?

delivery orders. ultimate orders? any a maybe just should the the -- terms around we anyway, cadence change in think So then the question those the And about driver of of of

Thanks question. for your Yes.

decrease backlog down increase anticipation about quarter. the Energy was & And previously machines So more for inventory that the in in machine robust, reduction that Transportation quite for course, the surprising than went that it's machines. backlog in backlog a fourth and of of dealer offset the we in not talked

oil and So by recip. being turbines for also being solar for a course, lot, and gas the Transportation power generation both robust of driven & driven and by backlog recip, Energy increase orders in

that's really what's So it. behind

typically, is for XX to And typically. times so solar months lead certainly, X

XX, we months recip the but XX customers the power For outside demands of orders hard our do there, for recip. and generation, and working power out to we're on meet going generation have

at move Baird. Next, Dobre Mig to we'll

how are question, just gen, the fact Tim's also are way deliverable versus next quantify follow power what part is And dynamics to competitive XX times the percentage months? backlog your the And of they on Yes. I'm up curious, a is here competitors are what that business? in to in given of the the that lead maybe in there

on lead times than that. Is you if others? share you maybe gain out there times thoughts than faster there lead somebody you? improve some better else Appreciate with Can your

way XX Generally, That's it is total. to within be overall, months. a bet. a of backlog the think number sold our we for about is You expected general about XX%

of large that. As more the are some bit I mentioned, a than out engine orders

-- to again, that Certainly, more parts. can power is to increase market, produce why investment engines. the engines, and And engines if given obviously and our capability That's we recip just it's can for on decided incremental it an sell again, we make that the engines case. more in certainly we generation, we see strength

the very again, encouraging. business is quite very, It's strong. So

Next, we'll go to Daiwa. Jairam Nathan at

little be. lot wanted over the just bit. about would if to freshness There's how go there, just remind helpful not position China. stimulus, I of the us a could you of talk But a it some of -- of in products your position your market sure

certainly. Yes,

years, time, and about been market the -- continues to sales the the of last couple that be being weak. -- continued and we as discussed X% It's certainly than XX% to So a less roughly quite China period previously, itself of for long our consolidated and revenues. talked XX% of we

is again below that it so this year. X% And

a So small it's piece our of sales. total relatively enterprise

our dealers. And quite integrated have reminder Certainly, market that again, and we've us and supply as is is China we in the this well And market have facilities, a primarily XX-ton. is, in in above -- we significant presence for depressed. fact, local -- leadership suppliers, in manufacturing terms but chain excavators of and a

early we and for any have certainly -- people about the have not. so stimulus. too that, seen of impact to it's asked And us have We

of Wertheimer final today's Research. Melius line comes from Rob And with question the

turbines kind quarter, capacity solar the expansion, So in recip up, today's side and demand at to and opportunities you're last expanding you of seeing the touched gen. call, follow of you cetera. wanted in some power I And mentioned et on strong

power you turbines, I call, wonder business power this they segment think range. trends On in the I about But the above probably in opportunity might Vernoba's their just derivative little some had if your still talk and gen you're a strong seeing which solar. bit are for

then Does opportunity you to is too? grow a in seeing? What means? data the turbines? big it have opportunity would is room center? Just data in the that centers? -- enough What gated the does you're Does it overview. there, you've about Do behind expanded you're you mean mean general recips. thinking And capacity that expanding Or

Yes. Thanks, Rob.

factors. power So a we're generation it's certainly, units -- business by in turbines. of for whole we and are seeing It's in driven -- solar increase and an trailerized being selling variety now,

One things the rental fleets primarily of that what doing we're the selling themselves satisfy is they fleets, grid demand into electricity are to across positioning believe North and some help rental America. will where in be increased

And rented sometimes, to be will those utility. units

data Sometimes, a those will to be for of a center, rented that. but there's whole variety uses

increase in Solar. power So generation we in seeing are an

to certainly production. out continue of have They Solar is their not to the ability capacity. increase

a we are the be jet gas that It's one is called largest XXX. our allow past of that to compete Titan in past that for a to solar you large have larger us area some for compete the in turbine turbine in the turbines. been enough. will because didn't might aware process And really newer, of we in things just we And the compete that of the not was have introducing -- able

by encouraged customer in product. we starting the shipped, terms days quite with and customers we're quite product. about but of our just so new early And about new It's discussions excited of that get those that interest having we're to are amount

very for something that's So us. again, exciting that's

delivering questions. Okay. again, want global thank again, thanking adjusted I to profit while adjusted I us, by, With generating to profit your our and robust for and cash margin share appreciate thank team for per certainly ME&T joining and, just operating flow. want that, strong free just everyone

profitable end discussed diversity markets long-term And for the Again, our of our the to reflect time. growth. strategy results of your as continue today, execution you the as our thank we benefit of well as for

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

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

The any to to please Alex, conclude. now to reach the we'll questions, have number is general And call you Relations XXX-XXXX. or Rob (XXX) Investor If turn me. out Audra back phone

our Thank That you does for conclude joining. call.

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