Caterpillar (CAT) Q4 2005 earnings summary

Executive summary

• Record 2005 sales and revenues of $36.339 billion, up 20% YoY; profit reached $2.854 billion and diluted EPS was $4.04, up 40%.

• Strong demand across mining, energy and infrastructure drove results; order backlog was among the largest in history, especially for large machines, engines and turbines.

Financial highlights

• Operating profit rose $1.10 billion, or 41%, YoY, mainly on higher price realization and sales volume, partly offset by higher core costs and retirement benefits.

• Operating cash flow was $3.11 billion consolidated and $2.81 billion for Machinery and Engines, including $912 million of pension contributions.

• Research and development expense was $1.084 billion; year-end employment increased to 85,116 from 76,920 in 2004.

Outlook and guidance

• 2006 sales and revenues projected close to $40 billion; the outlook was supported by a large order backlog and continued market strength.

• 2010 target: $50 billion in sales and revenues, with interim annual EPS growth of 15% to 20%.

• Strategic priorities include faster execution, employee safety, product quality, order-to-delivery capability and profitable growth; targets depend on the projected market environment materializing.