Caterpillar (CAT) Q4 2004 earnings summary

Executive summary

• 2004 sales and revenues reached $30.251B, up 33% YoY; profit was $2.035B, up 85%, with record sales and diluted EPS of $5.75.

• Strong global demand drove record output and a record year-end backlog for larger machines; production of machines and engines rose ~30% YoY while maintaining quality.

• Profit growth benefited from volume and pricing, but steel-related and expediting costs, supply constraints, and delayed price realization weighed on incremental margins.

Financial highlights

• Sales and revenues were $30.251B versus $22.763B in 2003; increases included $6.26B from machinery and engine volume, $512M from price realization, and $515M from currency.

• Profit was $2.035B versus $1.099B; diluted profit per share was $5.75 versus $3.13, with 2004 profit growth also benefiting from the absence of $153M in 2003 non-conformance penalties.

• Sales were $28.336B and Financial Products revenues were $1.915B; 54% of sales were outside the U.S.

• R&D expense rose to $928M from $669M; capital expenditures excluding leased equipment were $926M versus $682M.

Outlook and guidance

• 2005 sales and revenues expected to rise 12–15% YoY and profit per share ~25%; improved pricing, volume, manufacturing efficiencies, and cost focus are expected to support results.

• Material cost pressure expected to persist through H1 2005, with some relief in H2; the second half is expected to be stronger than the first.

• Machinery and engine sales forecast to rise 17% in North America, ~10% in Europe/Africa/Middle East/CIS, ~13% in Latin America, and ~10% in Asia/Pacific; China sales expected to decline.

• Financial Products revenues expected to increase ~16% in 2005, primarily on higher average earning assets.