After coming off “one of the best years in [the company’s] nearly 100-year history," Caterpillar delivered more good news to shareholders in its first-quarter earnings report of 2023.
The company reported sales and revenues of $15.9 billion, a 17% increase compared to the same period last year due to favorable price and volume growth.
Chairman and CEO Jim Umpleby told participants on an April 27 earnings call that the strong start positions Cat for a better year than the company previously anticipated.
“While we continue to closely monitor global macroeconomic conditions, overall demand remains healthy across our products and services,” he said. “Equipment availability increased during the quarter due to improving supply chain conditions. While dealer order rates are lower, they remain at healthy levels. As availability improves, order rates typically normalize as dealers can wait longer to place orders for long lead time items.”
Overall, sales to users increased 13%, with sales in the construction and resource industries segments increasing 5%, while Cat’s energy and transportation segment sales were up 39%. Operating profit margin was 17.2% for the quarter, compared with 13.7% for the first quarter of 2022.
Despite somewhat flat construction sales in North America, Umpleby said, the results were better than expected. “North American sales to users increased as demand remained healthy for both nonresidential and residential, despite some moderation of the growth rate in residential.”
The EMEA region also saw higher construction sales for the quarter led by strong demand in the Middle East. Latin America and Asia Pacific sales declined for the quarter, with Asia’s drop due to further weakening in China. Although uncertain economic conditions persist in Europe, the market is proving to be more resilient than anticipated, the company said.
“I’d like to thank our global team for their strong operational performance while serving healthy demand during the first quarter. We achieved double-digit top-line growth and record adjusted profit per share while generating strong ME&T free cash flow,” said Umpleby. “Our team remains focused on supporting our customers as we execute our strategy for long-term profitable growth.”
Caterpillar avoided a strike during the quarter, ratifying a new six-year contract with unionized workers at plants in Central Illinois and a parts distribution center in York, Pennsylvania on March 13. The new contract included a $6,000 ratification bonus, a 19% increase in pay, 8% worth of lump-sum payments, larger night-shift premiums, and a bump in employer contributions to retirement plans.
Looking ahead, Umpleby sees positive momentum for the North American construction market for the year driven by government investment in infrastructure and a healthy pipeline of construction projects. Despite concerns over the commercial real estate slowdown, Umpleby says the sector only accounts for 1% of industry sales in North America.