Cat Financial originations jump 7% amid data center boom

The financing arm of manufacturing giant Caterpillar reaped the benefits of strong equipment sales in the third quarter, with demand taking off for power generators and other energy products. 

Cat Financial posted higher revenue in Q3 while past dues fell 27 basis points year over year to 1.47%, “the lowest third quarter in over 25 years,” Chief Financial Officer Andrew Bonfield said during Caterpillar’s earnings call today. 

“Business activity at Cat Financial remains healthy,” he said. “In addition, used equipment levels remain low and conversion rates remain above historical averages as customers choose to buy equipment at the end of their lease term.” 

Cat Financial’s revenue increase was primarily attributed to higher average earning assets of $56 million, partially offset by lower average financing rates of $15 million, according to its earnings release today. 

BY THE NUMBERS: Cat Financial reported in Q3: 

• Revenue rose 4.3% YoY to $926 million; 
• New retail business volume, or originations, totaled $3.6 billion, up 6.9% YoY; 
• Profit declined 2.2% YoY to $134 million; 
• Net recovery write-offs increased 48.1% YoY to $40 million; 
• Allowance for credit losses was $283 million, or 0.89% of finance receivables, compared with $255 million, or 0.87% of finance receivables, in Q3 of 2024; and 
• Total assets rose 7.5% YoY to $36.9 billion. 

Irving, Texas-based Caterpillar, meanwhile, reported the following in Q3: 

• Total sales and revenue jumped 9.3% YoY to $17.6 billion; 
• North American sales and revenue climbed 13.3% YoY to $9.7 billion; 
• Total construction industry sales and revenue rose 6.5% YoY to $6.8 billion; 
• North American construction sales and revenue increased 7.8% to $3.9 billion;  
• Total energy and transportation sales and revenue jumped 16.8% YoY to $8.4 billion; 
• North American energy and transportation sales and revenue soared 25.9% YoY to $4 billion; 
• Total resource industry sales and revenue rose 2% YoY to $3.1 billion; and 
• North American resource industry sales ticked up 1% YoY to $1.2 billion. 

BIGGER PICTURE: Caterpillar’s energy and transportation business, which includes power generators, turbines, engines and other energy solutions, has emerged as its largest and fastest-growing segment as it capitalizes on the data center construction boom. 

Sales of power generation solutions surged 33% YoY in Q3 “primarily due to demand for reciprocating engines for data center applications,” Chief Executive Joseph Creed said during the call. 

“In energy and transportation, we expect strong growth in full-year sales for power generation compared to last year,” he said.  

“Demand remains robust, driven by data center growth related to cloud computing and generative AI.” 

— Joseph Creed, CEO, Caterpillar

The company is working closely with its largest data center customers, receiving “regular feedback on their long-term demand expectations,” Creed said. Strong demand from oil and gas companies is also benefiting the energy and transportation segment, he said. 

FUTURE LOOK: Caterpillar expects full-year sales and revenue to “increase modestly” from 2024, Bonfield said. The company’s outlook marks a change from the beginning of the year, when it projected decreased sales and revenue.  

Moreover, the company anticipates a net impact from incremental tariffs to land between $650 million and $800 million in Q4, culminating in a net impact of $1.6 billion to $1.75 billion in 2025. 

MARKET REACTION: Shares of Caterpillar [NYSE: CAT] were up 11.6% from market open to $585.49 as of market close today. It has a market capitalization of $274.3 billion.  

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