Cat Financial, the equipment financing arm of Caterpillar, reported a 2023 profit of $563 million, up 5% from 2022, spurred by higher average financing rates in the fourth quarter.
Originations were up 7% annually to $12.1 billion, driven by growth in North America, a strong region for the company in 2023.
By the numbers
- Cat Financial’s revenues in Q4 were $981 million, up 15% year over year.
- Q4 profit was $234 million, up 24% YoY.
- At the end of 2023, past dues were 1.79%, down slightly from 1.89% at the end of 2022.
- Net recovery write-offs were $65 million for 2023, up from $46 million in 2022.
- Allowance for credit losses totaled $331 million, or 2.18% of finance receivables, compared with $346 million in allowances at the end of 2022.
North American sales offset dwindling dealer inventory
Overall, construction equipment manufacturer Caterpillar’s (CAT) dealer inventory was down $900 million in Q4, compared with a $700 million increase in Q4 2022.
“Dealer inventory was expected to come down as supply chain challenges ease,” Lawrence De Maria, head of global industrial infrastructure at analyst firm William Blair, told Equipment Finance News today. “While the market is operating well, Caterpillar and its dealers are keeping inventory creep in check to avoid big swings, and it is at normal levels.”
CAT’s retail sales of construction equipment have been on the rise throughout 2023. Since Q1 2023, the company reported double-digit sales increases based on unit sales.
The North American segment reported 11% growth in Q4 sales, totaling $8.8 billion. The strong performance in the North American market buoyed CAT revenue to a record $67.1 billion in 2023, up 13% from 2022.
Increased growth in North America offset a downturn in other segments of CAT’s business.
While equipment, energy and transportation sales were up overall, construction industries, most segments of the machines market, and industrial energy and transportation sales were down in the fourth quarter.
CAT beats fourth-quarter earnings estimates
Caterpillar beat widespread earnings per share expectations, and De Maria noted that William Blair analysts don’t expect any pullbacks in 2024.
According to CAT’s Feb. 5 earnings release, “the increase reflected favorable price realization and higher sales volume, driven by higher sales of equipment to end users, partially offset by the impact from changes in dealer inventories.”
The company’s Q4 2023 revenues were $17.1 billion, up 3% from the Q4 2022. The company’s overall annual adjusted profit per share was $21.20, up from $13.84 the year prior.
Shares of CAT [NASDAQ: CAT] hit a 52-week high today, trading at $321.40 as of market close, up roughly 2% or $11 since market open. The company has a market cap of $164 billion.
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