Caterpillar CEO on tariffs and 4 other things we learned from Q4 results

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A Caterpillar dozer painted in 'Centennial Grey' Cat’s limited edition machines for its centennial year will be painted in ‘Centennial Grey’ (Image courtesy of Caterpillar)

As it enters its centennial year, US construction equipment manufacturer Caterpillar last week revealed that its total sales and revenue in 2024 were US$64.8 billion, down 3% from $67.1 billon in 2023, the best financial year in the company’s history.

In an earnings conference call, Caterpillar executives set out their expectations for the company’s performance over the coming year, and CEO Jim Umpleby explained why the company is bullish on its ability to ride out the impact of any tariffs imposed on imported goods by the US government.

Here are 5 things we learned about Caterpillar’s performance and its expectations for the year ahead:

1) CEO Jim Umpleby bullish on tariffs

Although he was making the comment ahead of the US government’s move this week to press ahead with tariffs on China and suspend proposed hefty tariffs on Canada and Mexico, Cat CEO Jim Umpleby struck a confident tone when asked what contingency plans and strategies the company is developing.

Noting that it would take time to see how the situation plays out and what ultimately gets put into place, he stressed that Cat is nonetheless in a good position given that the bulk of its manufacturing capacity is on home soil.

“We are a global manufacturer but our largest manufacturing presence is in the United States and we are a net exporter outside of the US. That positions us pretty well against many other companies out there,” he said. “We do tend to try to produce in region for region but some products and components move around. As you can imagine, it is something we keep a close eye on and we will deal with it. We have been around 100 years and we have seen many different administrations and different attitudes on these issues but the fact that we have such a large US manufacturing presence positions us pretty well.”

2) Sales and revenue to dip in 2025

Caterpillar said it expects its sales and revenues to be slightly lower in 2025, compared to 2024. In its construction industries division, it anticipates “moderately lower” sales in North America, although construction spend remains healthy, driven by multi-year projects and government-backed infrastructure investments. It also expects lower dealer rental fleet loading compared to 2024, although dealer revenue is expected to grow.

Overall, the company remains positive on the medium- to longer-term outlook for North America. Umpleby said that in Asia-Pacific outside of China, the business expected “soft” economic conditions to continue, while China is also set to remain at low levels for the above 10-ton excavator industry. It also expects a moderate decline in construction activity in Latin America and weak economic conditions in Europe. But in Africa and the Middle East, healthy levels of construction activity are expected.

3) Cat hopes to grow services business further
Caterpillar chairman and CEO Jim Umpleby Caterpillar chairman and CEO Jim Umpleby (Image: Caterpillar)

A bright spot for the company was its services division, where revenue increased 4% in 2024 to $24bn, albeit growth in the fourth quarter of the year was slightly slower than expected. The company has an “aspirational target” to increase annual revenue further to $28 billion.

Umpleby said, “Working with our dealers, we are leveraging over 1.5 million connected reporting assets and digital tools. Our Cat digital tools allow customers to more efficiently improve uptime, manage their fleets, and transact on our e-commerce platforms. For example, this year we launched an internal generative AI solution, designed to optimize the creation of intelligent leads, which we call prioritized service events, or PSEs. This tool significantly reduces the time and effort required for service recommendations, helping customers avoid unplanned downtime by clearly identifying the recommended repair options and timing for customers.”

He also noted that in 2024, the business delivered more than two-thirds of new equipment with a customer value agreement and experienced better-than-expected growth in its e-commerce platforms.

4) Trump’s deregulation plans positive?

Asked for views on policies affecting construction that could be introduced by President Donald Trump, Umpleby suggested that efforts to reduce the regulatory burden on industry would likely benefit Caterpillar. He said, “If the push for deregulation and other kinds of changes from a regulatory perspective helps increase economic growth, particularly in the US, that should be a positive. We’ll have to see how that all plays out but it certainly has the potential to be positive for us.”

5) Cat set for an unusually sluggish Q1

Cat executives explained that they are expecting lower sales in the first quarter of 2025 than in the prior year.

In a typical year, it does see lower sales over that period than in the rest of the year but the trend this year is set to be “more pronounced”. But they explained that this isn’t down to lower underlying demand from users – rather it is to do with the levels of machine inventory dealers have. Better sales levels later in the year are expected to make up for the Q1 decline.

Cat’s CFO Andrew Bonfield explained, “Although dealers did reduce machine inventory significantly in the fourth quarter, they remain around the top end of the range as we enter 2025. This compares with dealer inventories in construction industries being towards the middle of the range at the beginning of 2024. As a result, we expect them to build correspondingly less inventory during the first quarter than the $1.1 billion that they built in the first quarter of 2024. As we expect machine dealer inventory to be about flat by year end, we should see a tailwind for sales in the fourth quarter as we don’t expect similar machine dealer inventory change as we have seen in the last two years.”

He added that underlying sales to users “will be pretty much aligned throughout the whole of the year and will be down slightly for the full year”.

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Andy Brown Editor, Editorial, UK - Wadhurst Tel: +44 (0) 1892 786224 E-mail: [email protected]
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