Caterpillar (CAT) Q4 2019 earnings summary

Executive summary

• FY19 sales and revenues fell 2% to $53.8B, mainly on lower sales volume as dealer inventory changes outweighed higher end-user demand; operating profit was nearly flat at $8.29B.

• FY19 diluted EPS rose to $10.74 from $10.26; adjusted EPS was $11.06 versus $11.22. Q4 revenue declined 8% YoY to $13.14B, while diluted EPS increased to $1.97 from $1.78.

• Operational discipline supported a 15.4% FY19 operating margin, strong cash generation and $6.2B returned to shareholders.

Financial highlights

• FY19 profit was $6.093B versus $6.147B in 2018; the decline primarily reflected higher tax expense as operating profit remained about flat.

• FY19 operating profit was $8.290B versus $8.293B; favorable price realization and lower SG&A/R&D were offset by higher manufacturing costs, lower volume and unfavorable currency.

• FY19 adjusted profit was $8.280B and adjusted EPS $11.06, excluding $468M of pension/OPEB mark-to-market losses and the U.S. tax reform impact; 2018 adjusted EPS was $11.22.

• FY19 enterprise operating cash flow was $6.91B versus $6.56B; ME&T operating cash flow was $4.87B versus $6.35B.

• Q4 operating profit was $1.85B, down 2% YoY; lower volume was mostly offset by lower SG&A/R&D and higher Financial Products profit.

Outlook and guidance

• Dealer machine and engine inventories are expected to decline $1.0B–$1.5B during 2020.

• For 2020, short-term incentive compensation expense is expected to be ~$800M versus ~$700M in 2019; lower manufacturing costs are also expected.

• 2020 ME&T capital expenditures are expected to be ~$1.2B; pension and OPEB contributions are expected to be ~$280M.

• 2020 restructuring costs are expected at ~$300M–$400M; prior restructuring actions are expected to lower operating costs by ~$200M versus 2019.

• Excluding mark-to-market gains and losses, net periodic benefit cost is expected to decrease $332M in 2020 versus 2019.