Caterpillar (CAT) Q4 2007 earnings summary

Executive summary

• FY07 marked a fifth consecutive record for sales and revenues and a fourth consecutive record for profit; sales and revenues reached $44.958B, up 8% YoY, and diluted EPS was $5.37, up 4%.

• Q4 sales and revenues hit a record $12.144B, up 10% YoY; profit was $975M and diluted EPS was $1.50, up 14% YoY.

• Global growth outside North America offset weak U.S. construction and a steep decline in North American on-highway truck engines; North American dealer machine inventories fell $1.1B during 2007.

• FY08 outlook called for another record year, with sales and revenues up 5–10% and profit per share up 5–15% from FY07.

Financial highlights

• FY07 total sales and revenues were $44.958B versus $41.517B in FY06; Machinery and Engines sales were $41.962B, while Financial Products revenues were $2.996B.

• FY07 operating profit was $4.921B, flat YoY; higher price realization and sales volume were offset by $1.232B of higher core operating costs.

• FY07 profit was $3.541B versus $3.537B; basic EPS was $5.55 and diluted EPS $5.37, versus $5.37 and $5.17, respectively, in FY06.

• Q4 operating profit rose 10% YoY to $1.255B; higher price realization and volume were partly offset by $296M of higher core operating costs.

• FY07 operating cash flow was $7.935B versus $5.799B; Machinery and Engines operating cash flow reached a record $5.446B, up 18% YoY.

Outlook and guidance

• FY08 sales and revenues forecast to rise 5–10%; profit per share expected to increase 5–15% from FY07.

• Regional sales outlook: North America flat to up 5%; EAME up 5–10%; Latin America and Asia/Pacific each up 10–15%.

• Guidance assumed ~2% improved price realization and ~1.5% positive currency impact; Financial Products revenues expected to increase ~8%.

• Core operating costs expected to rise 2–2.5%; R&D expense forecast up 15–20%, with Machinery and Engines capital expenditures of ~$2.3B.

• FY08 tax rate expected at ~31.5%, up 1.5 percentage points, largely due to expiration of the U.S. R&D tax credit; currency expected to weigh slightly on operating profit.