Caterpillar beats EPS estimates, shares climb on record annual profits
Heavy equipment maker returned $10.3B to shareholders in 2024 despite quarterly sales decline
Caterpillar shares advanced in Thursday trading after the heavy equipment manufacturer reported quarterly earnings that exceeded Wall Street expectations, capping what the company called a strong 2024 performance despite broader market challenges.
The Deerfield, Illinois-based company reported adjusted profit per share of $5.14 for the fourth quarter, surpassing analyst estimates of $5.06. However, sales and revenues fell 5% to $16.2 billion compared with the prior-year quarter, primarily due to lower dealer inventory levels and reduced equipment sales to end users.
For the full year, Caterpillar achieved record adjusted profit per share of $21.90, while annual sales and revenues declined 3% to $64.8 billion. The performance highlights how the company has managed to boost profitability even as demand for construction and mining equipment moderates from pandemic-era peaks.
"I'm proud of our global team's strong performance in 2024 as they delivered record adjusted profit per share and strong ME&T free cash flow," said Jim Umpleby, Caterpillar's chairman and chief executive officer. The company enters its centennial year in 2025, a milestone Umpleby noted as an opportunity to focus on "serving our customers, executing our strategy and continuing to invest for long-term profitable growth."
Investor enthusiasm was bolstered by Caterpillar's aggressive capital return program. The company deployed $10.3 billion in 2024 for share repurchases and dividends, including $7.7 billion for buybacks and $2.6 billion for dividend payments. In June, the board boosted the quarterly dividend by 8% to $1.41 per share and increased the share repurchase authorization by $20 billion, demonstrating confidence in the company's cash generation capabilities.
Segment performance showed mixed results in the quarter. The Construction Industries division, Caterpillar's largest unit, reported sales of $6.0 billion, down 8% year-over-year. Resource Industries sales declined 9% to $3.0 billion, while Energy & Transportation remained essentially flat at $7.6 billion. Financial Products revenue rose 4% to $1.0 billion.
Operating margins showed resilience across the business. The company posted an operating profit margin of 18.0% for the quarter, slightly lower than the 18.4% recorded in the year-ago period. The Energy & Transportation segment achieved the strongest margin at 19.3%, while Construction Industries maintained a healthy 19.6% margin despite the sales decline.
Caterpillar's results come amid a complex industrial landscape. Construction activity has softened from elevated levels seen in 2022 and 2023 as rising interest rates have cooled certain commercial and residential projects. Mining demand has also moderated, though commodity producers continue to invest in fleet replacements and efficiency upgrades.
The company's performance contrasts with some industrial peers that have faced more pronounced margin pressure. Caterpillar's focus on higher-margin services and aftermarket sales has helped cushion the impact of declining new equipment volumes. The company's dealer network, one of the largest in the industry, provides a recurring revenue stream through parts and service that tends to be less cyclical than equipment sales.
Analysts have been watching Caterpillar's backlog and order patterns closely for signals on future demand. While the company didn't provide specific backlog figures in Thursday's release, the earnings beat and strong cash generation suggest management is maintaining pricing power and operational discipline despite volume declines.
Looking ahead, investors will focus on Caterpillar's guidance for 2025 and commentary on demand trends across its core markets. The company enters its second century with a balance sheet fortified by recent cash flows, positioning it to continue shareholder returns even if market conditions remain challenging.
Caterpillar's stock has been a strong performer over the past two years, benefiting from the global infrastructure build-out and mining boom. Thursday's earnings report suggests the company is navigating the current industry downcycle with greater profitability than in previous downturns, a testament to strategic changes implemented since Umpleby took the helm in 2017.