Caterpillar Inc. earnings

Management highlights

- Joe noted the team delivered a strong start to the year with resilient end markets and disciplined execution. - Announced another opportunity to provide ProPower for prime power generation. - Launched Cat Compact for small contractors. - Completed acquisition of RPM Global. - Andrew provided detailed overview of results including segment performance. - Kyle shared key assumptions looking forward

Guidance

- Anticipate low double-digit growth for full-year 2026 sales and revenues. - Full-year adjusted operating profit margin will be higher than expected in January. - MP&E free cash flow expected to be higher than 2025. - Second quarter expected to have strong sales growth with volume increases and favorable price realization. - Tariff costs anticipated around $700 million in second quarter. - Full-year 2026 tariff costs expected in range of $2.2 to $2.4 billion. - Restructuring costs expected around $300 to $350 million in 2026. - MP&E capex spend to average 4% to 5% of MP&E sales through 2030

Segment performance

Sales and revenues were $17.4 billion, up 22%. Adjusted profit per share was $5.54, up 30%. Backlog grew to $63 billion. Power and energy: Sales of $7.0 billion, up 22%, profit increased 13% to $1.5 billion, margin 20.6% (down 170 basis points). Construction industry: Sales increased 38% to $7.2 billion, profit up 50% to $1.5 billion, margin 21.4% (up 160 basis points). Resource industries: Sales up 4% to $3.8 billion, profit down 39% to $378 million, margin 10.0% (down 700 basis points). Financial products: Revenues up 9% to $1.1 billion, profit up 14% to $245 million

Risks & headwinds

- Geopolitical events and elevated energy prices pose uncertainty. - Tariffs remain a headwind with fluid situation. - Impact of timing of customer deliveries on sales to users in various regions

Analyst Q&A

• Q: On large engine capacity expansion, driver and timing.

  A: Driven mainly by power generation due to data center CapEx. Timing: Start soon, heavy investment in 2027, still investing in 2028 and 2029.

• Q: On Prime Power large resips and architecture developments.

  A: Seeing use of resips plus turbines in series, six agreements with at least one gigawatt, but exact gigawatt number not specified.

• Q: On long-term targets change.

  A: Increase due to significant CapEx in data center industry, growth across all segments.

• Q: On margin opportunity unchanged.

  A: Progressive margin targets, tariffs and accelerated depreciation cause headwinds.

• Q: On capacity addition vs gas turbine.

  A: Large part of capacity increase is backup power for data centers, backup demand expected to continue.

• Q: On 2030 50 gigawatt number update.

  A: Can't equate directly, but estimate additional 15 gigawatts annually.

• Q: On margins variability and market share.

  A: Margins not expected to narrow, market share opportunities exist.

• Q: On helping suppliers ramp power chain capacity and RI backlog drivers.

  A: Working with supply base for ramp, RI backlog driven by mining (copper, gold) and North America construction.

• Q: On mining margins.

  A: Mining margin expected to improve as segment grows and operating leverage is achieved