Cat Financial reported increased revenue and new business volume in 2024 while cleaning up its portfolio.
The OEM captive’s jump in revenue came despite parent company Caterpillar seeing a 3.4% year-over-year drop in sales and revenue to $64.8 billion in 2024, according to its earnings release today.
Cat Financial’s past-dues fell 23 basis points to 1.56% at yearend, its lowest level since 2005, and its allowance rate remained at “near historic lows,” Caterpillar Chief Financial Officer Andrew Bonfield said during today’s earnings call.
The lender attributed growth last year to higher average financing rates amounting to $153 million and higher average earning assets of $127 million, although that was partly offset by $34 million in returned or repossessed equipment.
BY THE NUMBERS: Cat Financial reported the following for 2024:
- Revenue totaled $3.5 billion, up 7.4% from 2023;
- New retail business volume rose 9.4% YoY to $13.2 billion;
- Net recovery write-offs of $115 million, up 76.9% YoY;
- Allowance for credit losses totaling $267 million, or 0.91% of finance receivables, down from $331 million, or 1.18% of finance receivables; and
- Total assets increased 3% YoY to $34.1 billion.
NOTEWORTHY: Irving, Texas-based Caterpillar observed “proportionately more of our sales financed through Cat Financial” in 2024, supported by “attractive finance packages,” Bonfield said during the call.
Plus, “conversion rates were above historical averages as customers choose to buy equipment at the end of their lease term,” he said.
Higher financing volume contributed to low dealer inventory, which decreased $1.3 billion in the fourth quarter, compared with a $900 million decline in Q3 2023.
FUTURE LOOK: Caterpillar expects sales and revenue to dip slightly in 2025 due to “lower sales in construction industries and resource industries,” Chief Executive Jim Umpleby said during the earnings call.
“We also expect services revenues to grow in 2025, including growth across all three primary segments,” he said. “We currently expect machine dealer inventory to end 2025 at similar levels to yearend 2024.”
MARKET REACTION: Shares of Caterpillar [NASDAQ: CAT] were down 4.6% from market open to $374.98 as of market close today. The company has a market capitalization of $181 billion.
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