Caterpillar Inc (NYSE: CAT) This fall 2025 Earnings Name dated Jan. 29, 2026
Company Contributors:
Alex Kapper — Vice President of Investor Relations
Joseph Creed — Director
Andrew R. Bonfield — Chief Monetary Officer
Analysts:
Mircea Dobre — Analyst
Michael Feniger — Analyst
David Raso — Analyst
Tami Zakaria — Analyst
Charles Albert Dillard — Analyst
Jamie Prepare dinner — Analyst
Jerry Revich — Analyst
Robert Wertheimer — Analyst
Kristen Owen — Analyst
Presentation:
operator
Welcome to the fourth quarter 2025 Caterpillar Earnings Convention name. Please be suggested that at this time’s convention is being recorded. I might now like handy the convention over to your speaker at this time, Alex Capper. Thanks. Please go forward.
Alex Kapper — Vice President of Investor Relations
Thanks, Adra. Good morning everybody and welcome to Caterpillar’s fourth quarter 2025 earnings name. I’m Alex Capper, Vice President of Investor Relations. Becoming a member of me at this time are Joe Creed, CEO Andrew Bonfield, Chief Monetary Officer, Kyle Epley, Senior Vice President of the World Finance Providers Division, and Rob Rengel, Senior Director of ir. Throughout our name, we’ll be discussing the fourth quarter earnings launch we issued earlier at this time. Yow will discover our slides, the information launch and a webcast [email protected] below Occasions and Displays. The content material of this name is protected by US and worldwide copyright regulation. Any rebroadcast, retransmission, replica or distribution of all or a part of this content material with out Caterpillar’s prior written permission is prohibited.
Transferring to slip two. Throughout our name at this time, we’ll make ahead trying statements that are topic to dangers and uncertainties. We’ll additionally make assumptions that would trigger our precise outcomes to be totally different than the data we’re sharing with you on this name. Please seek advice from our current SEC filings and the ahead trying statements reminder and the information launch for particulars on elements that individually or in mixture may trigger our precise outcomes to differ materially from our forecasts. An in depth dialogue of the various elements that we consider might have a fabric impact on our enterprise on an ongoing foundation is contained in our SEC filings.
On at this time’s name, we’ll additionally seek advice from non GAAP numbers for a reconciliation of any non GAAP numbers to the suitable US GAAP numbers. Please see the appendix of the earnings name slide for at this time’s agenda. Joe will start by sharing his views about our outcomes and supply an replace on our efficiency towards reaching our Investor Day targets. Then he’ll share our full 12 months outlook and insights about our finish markets, adopted by an replace on our technique. Lastly, Andrew will present an in depth overview of outcomes and key assumptions. Wanting ahead, we’ll conclude the decision by taking your questions.
Now let’s advance to Slide 3 and switch the decision over to our CEO Joe Creed.
Joseph Creed — Director
All proper, effectively thanks Alex and good morning everybody. Thanks for becoming a member of us at this time. Our centennial 12 months marked a major milestone and we achieved full 12 months gross sales and revenues of $67.6 billion, the very best in Caterpillar’s historical past. In a dynamic setting with internet incremental tariff headwinds of $1.7 billion. We delivered full 12 months adjusted working revenue margin throughout the goal vary at 17.2% and adjusted revenue per share of $19.06. We additionally generated strong MP free money circulation of $9.5 billion in 2025, permitting us to deploy $7.9 billion to shareholders by share repurchases and dividends. In the course of the 12 months, our backlog grew to a file stage of $51 billion, a rise of $21 billion or 71% in comparison with final 12 months.
All time excessive gross sales and revenues together with file backlog are proof of the power in our finish markets and powerful execution by our workforce. Now let me take a minute to stroll you thru our fourth quarter outcomes. Gross sales and revenues had been $19.1 billion, an all time file for a single quarter. The rise of 18% versus the earlier 12 months was higher than we anticipated and displays increased volumes in all three of our main segments whereas value realization was about impartial. Specifically, quantity development was higher than anticipated in energy and vitality as we had been in a position to ship extra product than anticipated at 12 months finish.
Adjusted working Revenue margin was 15.6% and adjusted revenue per share was $5.16. Fourth quarter adjusted working revenue margin and adjusted revenue per share had been higher than we anticipated resulting from stronger than anticipated quantity development in energy and vitality within the quarter. The online incremental value from tariffs was close to the highest finish of our estimated vary. Sturdy ordering exercise throughout all three main segments contributed to the very robust backlog development. Now I’ll evaluate fourth quarter retail statistics for every of our three main segments beginning with Building industries. Building Industries Complete gross sales to customers grew for the fourth consecutive quarter rising 11% which exceeded our expectations.
Will increase in North America had been higher than anticipated resulting from robust development in non residential and residential development. Rental fleet loading and our sellers rental income additionally grew within the quarter. Gross sales to customers declined barely in EAMI and Asia Pacific according to our expectations and we noticed development in Latin America which was higher than anticipated for useful resource industries. Fourth quarter gross sales to customers declined 7% in keeping with our expectations. Mining gross sales to customers had been decrease 12 months over 12 months as clients exercised capital self-discipline in response to weaker coal costs in energy and vitality, our largest and quickest rising phase.
Gross sales to customers grew a sturdy 37% with one other quarter of double digit development throughout all purposes. Energy technology grew 44% pushed by robust demand for big gensets and generators utilized in knowledge heart purposes. Robust gross sales to customers in oil and gasoline had been pushed primarily by generators and turbine associated companies. Industrial grew from comparatively low ranges with the Enhance pushed by gross sales to customers in electrical energy purposes and at last transportation elevated primarily resulting from worldwide locomotive deliveries. Transferring to slip 4 our full 12 months 2025 outcomes confirmed significant progress in the direction of reaching the 2030 targets we outlined at our current investor day.
As I discussed, we delivered file gross sales and revenues of $67.6 billion, leading to 4% 12 months over 12 months development. This improve was led by file gross sales in energy and vitality. Notably, along with file gross sales in energy technology, we additionally achieved file gross sales in oil and gasoline resulting from power in demand for gasoline compression. Regardless of tariff headwinds, full 12 months adjusted working revenue margin of 17.2% was throughout the goal vary for our stage of gross sales and revenues. Full 12 months companies revenues totaled $24 billion in 2025. We continued to attach extra property, rising the fleet to over 1.6 million and made nice progress in different initiatives like situation monitoring, prioritized service occasions, e commerce gross sales and tech enabled machines.
Our digital and expertise initiatives, together with a rising put in base, place us effectively to extend companies revenues in the direction of our aim of $30 billion by 2030. Sturdy MP and E free money circulation allowed US to deploy $7.9 billion to shareholders by $5.2 billion of share repurchases and $2.7 billion of dividends paid. We’re pleased with our continued dividend aristocrat standing, paying increased dividends for 32 consecutive years, and stay dedicated to returning considerably all MP and E free money circulation over time. Andrew will share extra about our money deployment plans for 2026 in a second. Turning to Slide 5, I’ll spotlight the developments we made in the direction of our 2030 targets in our 3 main segments.
In 2025, Building Industries Progress outpaced the worldwide business supported by the success of our merchandising applications. Because of this, full 12 months complete gross sales to customers development was 5%, advancing our progress in the direction of the 2030 aim of rising 1.25 occasions the 2024 baseline. In useful resource industries. Buyer curiosity in our autonomous hauling resolution stays robust and we’re making regular progress in the direction of our 2030 aim to triple the variety of CAT autonomous haul vans in operation in comparison with 2024. We ended the 12 months with 827 autonomous haul vans in operation, up from 690 on the finish of 2024. Adoption is anticipated to speed up given our confirmed resolution, our enlargement into quarries and our means to assist blended fleets.
For instance, final month Caterpillar and SO Observe, our supplier in Brazil, introduced an settlement to supply Vale an autonomy resolution for a blended fleet of greater than 90 vans. Energy and vitality delivered significant progress in the direction of our 2030 aim to greater than double energy technology gross sales in comparison with 2024. In 2025, energy technology gross sales exceeded $10 billion which is 12 months over 12 months development of greater than 30%. We’re additionally on monitor in our multi 12 months effort to double our giant engine capability and greater than double our industrial gasoline turbine capability. As we’ve mentioned, the extra capability will serve a broad vary of purposes and the phasing will happen between now and the top of 2030.
Now on slide 6, I’ll present our 2026 outlook. General, we anticipate full 12 months gross sales and revenues to develop across the high of the 5% to 7% long run compound annual development charge goal. As I discussed earlier, our file backlog of $51 billion supplies robust momentum to begin the 12 months. We’re additionally beginning to get multi 12 months visibility in energy and vitality as we work carefully with our clients to schedule manufacturing facility orders according to their mission timelines. Because of this, roughly 62% of our backlog is anticipated to ship ship within the subsequent 12 months, which is decrease than our historic common.
Robust backlog coupled with wholesome finish markets helps our expectation for quantity development in all three main segments. We additionally anticipate all three segments to profit from optimistic value realization, about 2% of complete gross sales and revenues and continued development in companies revenues. Full 12 months adjusted working revenue margin ought to exceed 2025 ranges however stay close to the underside of the goal vary for our anticipated gross sales and income. Our adjusted working revenue margin expectation displays the continued affect of tariffs in addition to investments we’re making to execute our development technique. I stay assured that we’ll handle the affect of tariffs over time as we purpose to function across the midpoint of our adjusted working revenue margin goal vary.
Capital expenditures are anticipated to be round $3.5 billion, pushed primarily by our capability enlargement plans and at last, MP&E free money circulation is anticipated to be barely decrease than 2025 reflecting the rise in capital expenditures. Now I’ll focus on our outlook for key finish markets beginning with development industries. One other 12 months of gross sales to customers development is anticipated in 2026 supported by elevated order charges and a sturdy backlog. General, the outlook for North America stays optimistic as gross sales to customers develop reasonably versus final 12 months, with development spending remaining wholesome resulting from IIJA funding and different crucial infrastructure applications.
We additionally anticipate accelerated funding in knowledge facilities which is able to additional bolster total development spending. Supplier rental fleet loading and rental income are each projected to extend in comparison with 2025 in EEMI. Financial circumstances in Europe are anticipated to strengthen and development exercise in Africa and The Center east is projected to stay robust in Asia Pacific. Exterior of China, reasonable financial circumstances are anticipated in 2026. We anticipate optimistic momentum in China off of low ranges with full 12 months development within the above 10 ton excavator business. Progress in Latin America is anticipated to proceed at an analogous charge to 2025.
Useful resource industries had optimistic momentum within the fourth quarter with rising backlog supported by wholesome orders throughout a broad vary of merchandise. For 2026, gross sales to customers are anticipated to extend, primarily pushed by rising demand for copper and gold and optimistic dynamics in heavy development in quarry and aggregates. Most key commodities stay above funding thresholds and buyer product utilization is excessive. Whereas the age of the fleet stays elevated with modest will increase in commodity costs projected in 2026. We anticipate rebuild exercise to extend barely in comparison with final 12 months. And eventually, for energy and Power, the 2026 outlook is optimistic.
Sturdy backlog development within the fourth quarter was pushed by continued momentum in each energy technology and oil and gasoline. We anticipate development in energy technology for each CAT reciprocating engines and photo voltaic generators pushed by rising vitality demand to assist knowledge heart buildout associated to cloud computing and generative AI. Moreover, we’re beginning to see orders for prime energy development increased as knowledge heart clients search for various energy options to maintain tempo with their development. For instance, yesterday we introduced an order for two GW of reciprocating generator units for a primary energy utility from American Intelligence and Energy Company.
Turbines can be used to assist the preliminary growth section of the Monarch Compute Campus, which has a complete potential of about 8 gigawatts of energy technology. This represents one in all our largest single orders for full energy options. The worth of the order can be mirrored in our first quarter 2026 backlog and we anticipate to ship the generator beginning in late 2026 by 2027. This thrilling announcement is one in all 4 orders we’ve booked with at the very least 1 gigawatt of Caterpillar tools for knowledge heart prime energy. After reaching file ranges in 2025, oil and gasoline is anticipated to see Reasonable development in 2026.
Reciprocating engine gross sales are anticipated to extend, pushed by robust demand in gasoline compression purposes. Photo voltaic generators, oil and gasoline backlog stays wholesome with continued stable order and inquiry exercise, and in consequence we anticipate one other 12 months of robust turbine gross sales similar to our file 2025 efficiency. Demand for merchandise and industrial purposes is anticipated to develop reasonably in 2026 as we see continued restoration from earlier lows. And in transportation, we anticipate full 12 months development in rail companies and locomotive deliveries. I’ll shut on slide 7 with an replace on our technique. Since our Investor Day in November, the Govt Workplace, Govt Management Crew and I’ve engaged our workers and sellers across the globe to launch our refreshed Enterprise Technique for Worthwhile Progress.
Our mission assertion Fixing our clients hardest challenges is creating robust alignment round retaining buyer wants on the heart of all the things we do. The technique is centered on three pillars for worthwhile development, business excellence, being the Superior Expertise chief and remodeling how we work, all constructed upon a basis of continued operational excellence. I look ahead to advancing the technique with regional leaders and sellers all through 2026. And eventually, we had been excited to kick off the 12 months with a showcase and keynote at CES 2026 in Las Vegas the place we unveiled the following period of business AI in Autonomy.
This was an vital alternative to exhibit our superior expertise management by highlighting Caterpillar’s important position in creating the invisible layer of the tech stack, the crucial minerals, dependable energy and bodily infrastructure that the digital world depends on to operate. We made thrilling bulletins together with the launch of our new CAT AI Assistant, which is able to enable clients to extra simply purchase, keep, handle and function their tools. We additionally introduced a dedication to an important a part of the invisible layer individuals. Caterpillar pledged $25 million to make sure the long run workforce has the instruments they should make superior expertise doable.
With that, I’ll flip it over to Andrew for an in depth overview of outcomes and key assumptions. Wanting ahead.
Andrew R. Bonfield — Chief Monetary Officer
Thanks Joe and thanks Joe and good morning everybody. As traditional, I’ll start with a abstract of the quarter after which present temporary feedback on the efficiency of the segments. Subsequent, I’ll focus on the stability sheet and free money circulation and conclude with feedback on our excessive stage planning assumptions for 2026 in addition to our expectations for the primary quarter. Starting on Slide 8, gross sales and revenues of $19.1 billion mirrored an 18% improve versus the prior 12 months. As Joe famous, this was an all time quarterly file. Adjusted working revenue was $3.0 billion and our adjusted working revenue margin was 15.6%.
We generated robust MP and E free money circulation of $3.7 billion within the quarter and $9.5 billion for the total 12 months. This was our third consecutive 12 months with greater than $9 billion of MP and E free money circulation. Transferring to Slide 9, I’ll focus on our high line outcomes for the fourth quarter. Gross sales and revenues of $19.1 billion exceeded our expectations, pushed by stronger than anticipated quantity in energy and vitality versus the prior 12 months. Stronger gross sales volumes supported the gross sales improve. Value was about impartial and roughly according to our expectations. Quantity development mirrored a 15% 12 months over 12 months improve in complete gross sales to customers and a good affect from modifications in supplier inventories.
Complete machine supplier stock decreased by about $500 million within the quarter in comparison with a $1.6 billion lower decline final 12 months. The lower within the fourth quarter was bigger than we had anticipated, primarily resulting from stronger than anticipated gross sales to customers in development industries. Providers Revenues elevated within the quarter in comparison with 2024. Transferring to working revenue on slide 10, working revenue within the fourth quarter decreased by 9% whereas adjusted working revenue of $3.0 billion was about flat versus the prior 12 months. As I discussed, adjusted working revenue margin for the fourth quarter was 15.6%, barely stronger than we had anticipated, pushed by quantity being higher than anticipated, partially offset by increased incentive compensation expense versus the prior 12 months.
The 270 foundation factors lower was primarily resulting from increased manufacturing prices pushed by tariffs. Excluding tariffs, our fourth quarter margin was increased than the prior 12 months. For the total 12 months excluding the affect of tariffs applied in 2025, margin was within the high half of the goal vary. Transferring to Slide 11, revenue per share was $5.12 within the quarter. Adjusted revenue per share was higher than we had anticipated at $5.16 excluding restructuring prices of $0.52 and mark to market beneficial properties of $0.48 for the remeasurement of pension and different put up employment profit plans. Once you exclude the affect of mark to market beneficial properties from different earnings and expense, we had a headwind of about $73 million which was primarily pushed by the absence of international change beneficial properties associated to MP and E stability sheet translation that occurred within the prior 12 months.
Excluding discrete gadgets, the supply for earnings taxes within the fourth quarter of 2025 mirrored a world annual efficient tax charge of 20.5 24.1% as in contrast with 22.2% in 2024. This was according to our expectations. Lastly, the 12 months over 12 months affect from the discount within the common variety of shares excellent primarily resulting from share repurchases resulted in a good affect on adjusted revenue per share of roughly $0.14 as in comparison with the fourth quarter 2024 and benefited the total 12 months by about $0.66. Transferring to Slide 12, I’ll now focus on phase outcomes. Building business gross sales elevated by 15% within the fourth quarter to $6.9 billion.
That is roughly according to our expectations because the stronger gross sales to customers had been about offset by a bigger than anticipated lower in supplier stock and barely unfavorable value realization in comparison with the prior 12 months. Larger gross sales quantity mirrored stronger gross sales to finish customers and the optimistic affect from modifications in supplier inventories. Supplier stock decreased much less in the course of the fourth quarter 2025 than in the course of the fourth quarter of 2024. Fourth quarter revenue for Building Industries decreased by 12% versus the prior 12 months to $1.0 billion. The phase’s margin was 14.9%, a lower of 470 foundation factors versus the prior 12 months.
The margin lower was primarily resulting from excessive manufacturing prices pushed by tariffs which had an affect of about 600 foundation factors on margins. The margin was decrease than we had anticipated due primarily to increased incentive compensation and the marginally unfavorable value realisation which offset the affect of stronger quantity. Turning to slip 13 useful resource industries gross sales elevated by 13% within the fourth quarter to $3.4 billion which was according to our expectations. Gross sales quantity was barely extra favorable than we had anticipated, whereas value realization was a barely bigger headwind than we had anticipated in comparison with the prior 12 months.
The gross sales improve was primarily resulting from increased gross sales quantity pushed by the affect from modifications in supplier inventories. Fourth quarter revenue for Useful resource Industries decreased by 24% versus the prior 12 months to $360 million. The phase’s margin of 10.7% was a lower of 510 foundation factors versus the prior 12 months primarily resulting from increased manufacturing prices pushed by tariffs which had an affect of about 490 foundation factors. The margin was decrease than we had anticipated primarily resulting from increased quick time period incentive compensation, increased tariffs and the marginally unfavorable value Realization now on Slide 14 Energy and vitality gross sales elevated by 23% within the fourth quarter to $9.4 billion.
Gross sales exceeded our expectations pushed by a stronger than anticipated quantity, notably in energy technology and oil and gasoline in comparison with the prior 12 months. Gross sales elevated primarily resulting from increased gross sales quantity and favorable value realization. Fourth quarter revenue for Energy and Power elevated by 25% versus prior 12 months to $1.8 billion. The phase’s margin of 19.6% elevated by 30 foundation factors versus the prior 12 months. On the upper quantity, the tariff affect was about 220 foundation factors. The margin was stronger than we had anticipated primarily resulting from favorable quantity. Value was additionally barely extra favorable than we had anticipated.
Transferring to Slide 15 monetary merchandise revenues elevated by 7% versus the prior 12 months to about $1.1 billion primarily resulting from a good affect from increased common incomes property, partially offset by the affect from decrease common financing charges. Phase revenue elevated by 58% to $262 million. This was due partially to a good affect from increased margins at insurance coverage companies resulting from decrease loss ratios, increased common earnings and a decrease provision for credit score losses additionally benefited profitability. Our clients monetary well being stays robust. Previous dues had been 1.37% within the quarter, down 19 foundation factors versus the prior 12 months and our lowest 12 months on 12 months finish.
On file, the allowance charge was 0.86%, the bottom ever reported in any quarter. Enterprise exercise at CAAT Monetary stays wholesome. Retail credit score purposes elevated by 6% and our retail new enterprise quantity grew by 10% versus the prior 12 months. As well as, demand for our used tools stays wholesome on comparatively secure pricing whereas inventories stay at traditionally low ranges. Conversion charges stay above historic averages as extra clients select to purchase tools on the finish of the lease time period Transferring to Slide 16 as I discussed, we proceed to generate robust MP and E free money circulation with $9.5 billion in 2025, which was barely increased than 2024.
Regardless of an $800 million improve in capital expenditures in 2025, we deployed about $7.9 billion, or 84% of our MP and E free money circulation to shareholders. We proceed to anticipate to return considerably all MP and E free money circulation to shareholders over time. This quarter we anticipate to enter into a bigger accelerated share repurchase in comparison with the $3 billion ASR we executed in early 2025. Our stability sheet stays robust with an enterprise money stability of $10.0 billion on the 12 months finish. As well as, we held $1.2 billion in barely longer dated liquid marketable securities to enhance yields on that money.
Now on slide 17 earlier than I start, I’ll remind you that my feedback at this time assume the Rail Division is inside energy and vitality as was the case by 12 months finish 2025. In March of this 12 months we’ll file an 8K recasting our historic durations to replicate the motion of our Rail division to useful resource industries. It will set up an acceptable baseline for evaluating future phase stage efficiency and expectations. If crucial, we may also replace any of our phase particular ahead trying assumptions impacted by this modification. Clearly, there can be no affect on the enterprise extensive assumptions. Now let me begin with our expectations for the total 12 months.
As Joe talked about, we anticipate enterprise gross sales and revenues to develop versus the prior 12 months doubtless across the high finish of our 5% to 7% CAGR goal on increased quantity and favorable value realization. We anticipate gross sales development throughout every of our main segments with energy and vitality delivering the strongest 12 months over 12 months charge of development supported by the strong backlog. Progress on this phase can be paced by the timing of bringing our capability will increase on-line over the following few years. Our planning assumption is that the $500 million decline in machine supplier stock in 2025 can be offset by a rise by the top of 2026, a tailwind to 2026 gross sales.
As Joe talked about, we anticipate favorable value realization to account for a roughly 2% improve in gross sales for the total 12 months. For perspective on the quarterly gross sales cadence, we anticipate the bottom gross sales of the 12 months to happen within the first quarter, which aligns with their regular seasonable sample on enterprise adjusted working revenue margin excluding the affect of tariff prices, we anticipate to be within the high half of the goal vary at our anticipated gross sales stage, supported by favorable value realization and quantity. Particular to quantity development, we anticipated the attributable revenue pull by or incremental margin to replicate our current operational efficiency which has been impacted by tariffs in distinction to prior years.
We’re dedicated to investing for long run worthwhile development which incorporates capability investments which is able to affect depreciation expense and better expertise and digital spend. We consider these investments will assist future absolute OPEC greenback technology, which I’ll remind you, is our definition of profitable. Together with the affect of tariffs, we anticipate margin to be close to the underside of the goal vary. I’ll present some perspective, however let me clarify how we intend to report back to you about tariffs as we transfer ahead. Absolutely the greenback worth new tariffs imposed in 2025 was $1.8 billion. Mitigating actions can are available in two types.
First of people who cut back the direct tariff publicity invoice which is able to embrace actions like sourcing modifications. These cut back the precise greenback worth of tariffs paid and second, there are value management actions and pricing which assist cut back the affect on our profitability. A lot of the actions taken in 2025 associated to value controls which might be particularly attributed to tariff mitigation and these amounted to round $100 million, leading to a internet incremental tariff affect of $1.7 billion. Wanting ahead, it is going to develop into more and more difficult to go out and monitor whether or not value management or value motion is straight tied to tariff mitigation versus being taken within the regular course of enterprise.
Subsequently, going ahead we report an absolute incremental tariff value which is able to solely keep in mind these mitigating actions that cut back absolutely the worth of the tariff publicity. As a reminder, the incremental tariffs we report are measured towards the 2024 baselet 12 months. For the total 12 months, incremental tariff prices are anticipated to be round $2.6 billion, which is $800 million increased than incurred in 2025. If we didn’t take the actions we plan to absorb 2026, this invoice can be round 20% increased. We anticipate incremental tariff prices of round $800 million within the first quarter, a stage much like the fourth quarter of 2025.
The run charge ought to enhance in the direction of the second half of the 12 months as we take actions to scale back our tariff publicity. Lastly, please do not forget that tariffs are quantity delicate. We’ll proceed to take actions to handle our prices within the regular course of enterprise and stay dedicated to function inside our adjusted working revenue margin goal vary with the aim of being across the midpoint of the vary over time. Now concluding our expectations for the 12 months, we anticipate restructuring prices of roughly 300 to $350 million. Our international annual efficient tax charge is anticipated to be 23% excluding discrete gadgets MP and E.
Free money circulation must be barely decrease than 2025, reflecting the upper CapEx of round $3.5 billion in 2026. Now turning to Slide 18 to help you together with your modeling, I’ll present colour on the primary quarter. Beginning with the highest line, we might anticipate stronger gross sales and revenues versus the prior 12 months. We anticipate stronger quantity together with gross sales to customers development and a tailwind for machine supplier inventories. We anticipate a extra typical machine supplier stock construct this quarter aligning with a seasonable sample which is a primary quarter construct in extra of $1 billion. This compares to flash ranges within the first quarter of 2025.
We additionally anticipate a good affect from value realization in development industries. Within the first quarter we anticipate robust gross sales development with the rise versus the prior 12 months pushed by quantity and favorable value realization. We anticipate continued gross sales to customers development with our confidence supported by the robust order charges and backlog. As well as, we anticipate a large profit from modifications in supplier supplier inventories given a extra typical seasonable construct within the first quarter. In useful resource industries, we anticipate robust gross sales development versus the prior 12 months pushed by quantity together with wholesome gross sales to customers development and a good affect from modifications in supplier stock.
Value realization must be comparatively flattish although. We anticipate favorability as we transfer by the 12 months. In energy and vitality, we anticipate gross sales development versus the prior 12 months pushed by power in energy technology and oil and gasoline together with favorable value realization. As is typical, we anticipate first quarter gross sales in energy and vitality would be the phase’s lowest of the 12 months and sequentially decrease than the fourth quarter 2025. This expectation aligns the seasonable sample. Now present some colour on our first quarter margin expectations excluding incremental tariff prices. We anticipate the next adjusted working revenue margin share 12 months over 12 months supported by robust quantity and value realization.
Partially offset by increased manufacturing prices and SGA and RD bills tied to our strategic investments. As a reference, we might anticipate some seasonable margin uplift within the first quarter in comparison with the fourth quarter of 2025, together with incremental tariff prices at a stage much like the fourth quarter or round $800 million margin is anticipated to be decrease than versus the prior 12 months. Now on to first quarter margin expectations by phase. In development industries, excluding incremental tariff prices, we anticipate the next margin share in comparison with the prior 12 months on favorable value realization and quantity, partially offset by increased manufacturing prices.
In useful resource industries, excluding incremental tariff prices, we anticipate barely decrease margin share in comparison with the prior 12 months as favorable quantity is greater than offset by unfavorable manufacturing prices and better SGA and R and D bills, together with spend on strategic investments. In autonomy, we do anticipate some unfavorable combine affect as we anticipate proportionally increased gross sales of unique tools in comparison with the prior 12 months. In energy and vitality, excluding incremental tariff prices, we anticipate the next margin share in comparison with the prior 12 months pushed by favorable quantity and value realization partially offset by increased manufacturing prices, notably spend, together with increased depreciation associated to our capability enlargement initiatives.
In the course of the first quarter, we anticipate round 50% of the incremental tariff prices can be in development industries, 20% in useful resource industries and 30% in energy and vitality. All phase margins are anticipated to be decrease than they had been within the first quarter 2025 after taking into consideration incremental tariffs. So turning to slip 19, let me summarise. In a 12 months marked by uncertainty, our workforce delivered file gross sales and revenues, maintained adjusted working revenue margin inside our goal vary, and achieved a wholesome adjusted revenue per share of $19.06. We generated $9.5 billion of MP E free money circulation our third consecutive 12 months of producing over $9 billion.
For 2026, we anticipate gross sales development throughout all three main segments pushed by stronger quantity and value. We additionally anticipate companies income development excluding the affect of incremental tariffs. We anticipate adjusted working revenue margin to be on the high half of our goal vary however close to the underside together with tariffs and we anticipate MP&E free money circulation to be barely decrease than 2025, reflecting barely the upper capital expenditures. We proceed to execute our technique for long run worthwhile development and with that we’ll take your questions.
Questions and Solutions:
operator
Thanks. We’ll now start the query and reply session. You probably have dialed in and wish to ask a query, please press Star one in your phone keypad to lift your hand and be a part of the queue. If you want to withdraw your query, merely press Star. Please word we’re solely permitting one query per analyst. Your first query comes from the road of Nick Dobright with Baird. Your line is now open.
Mircea Dobre
Thanks for taking the query and good morning everybody. The factor that clearly stood out most within the quarter was simply the very spectacular order development and backlog development that you’ve had. And I assume my query associated to this perhaps twofold. First, are you able to remark a little bit bit about what’s occurring in a number of the different segments outdoors of perhaps ENT or energy technology? After which as you type of suppose on a go ahead foundation, if I perceive appropriately, you’ve received roughly $20 billion of backlog that’s not going to be delivered within the close to time period.
And it appears like this determine would possibly additional develop as we take into consideration Q1. So how do you consider these deliveries that now are stretching into 27 and past? And I’m asking by the lens of value prices, ensuring that, you recognize, you might be guaranteeing that you’ve the right margins and the right pricing, given how risky simply the associated fee image and the tariff image has been. Thanks.
Joseph Creed
Yeah, good morning, Meg, that is Joe. Thanks for that query. There’s quite a bit in there. I’ll attempt to get be certain I get to most of them. So we’re actually excited. I’m actually enthusiastic about how we completed the 12 months with our backlog at 51 billion. You already know, that’s 70% increased than 12 months finish prior and 11 billion increased than the place we completed, you recognize, the third quarter. In order you counsel, I’ll speak about it and body it in the way in which of order charges that we noticed within the fourth quarter and so they had been robust in all three segments.
It’s not simply energy and vitality. CI had one in all its greatest quarters from an order standpoint ever, supported by each a rising business that we predict confidence within the business in 26 from US and our sellers, and power in our stews. We’ve continued to outperform the business and we hope to attempt to try this once more right here in 2026, I’d say for CI as effectively. Simply have in mind we’re additionally returning to a extra regular seasonal sample. So the promoting season coming within the spring and us preparing for that. We entered 2025 at a a lot slower tempo and so we’re getting again to extra regular seasonal patterns in CI.
RI had an ideal order run charge within the quarter. It’s among the finest quarters since 2021 that we’ve seen and that’s supported by Energy in heavy development in North America in addition to some good mining orders, notably in South America associated to copper mining. After which clearly energy and vitality had a extremely robust order consumption quarter as effectively. Energy technology continued to be robust. We’re seeing extra offers, a little bit extra combine into prime energy just like the one which we introduced yesterday, which clearly wasn’t on this backlog. Determine it’ll are available in. Within the first quarter we’ve had, you recognize, 4 now prime energy orders of better than a gigawatt and we’ve had a handful of different sizable orders that had been lower than a gigawatt.
The opposite factor there’s we’re seeing robust orders in oil and gasoline, notably for gasoline compression. So, you recognize, the extra energy that’s wanted on the market, we’re going to maneuver lots of gasoline. We now have to feed generators and engines to proceed to supply that energy. So we had a extremely, actually robust quarter from an order standpoint. And once more, it was power throughout the board. In the case of visibility farther out, I feel that’s factor for us. One of many issues that we’re attempting to do, notably most of that’s in energy and vitality, is figure carefully with our clients to schedule their orders in our manufacturing facility to ship once they want them of their mission timing.
And what that enables us to do is be certain we’re not sending issues forward of time and we will fulfill extra clients and ensure each order will get to the shopper once they want it. Clearly, as you counsel, you recognize, we’re taking orders farther out for these sort of orders. We now have body agreements for lots of shoppers. These may have inflationary indices tied in there for pricing. And for non body agreements, we often have escalators in the event that they’re out previous the traditional 12 month sort interval. So once more, actually, actually proud of the order efficiency that we had within the fourth quarter and the outlook that we’ve got forward of us.
operator
We’ll go subsequent to Michael Feniger at Financial institution of America.
Michael Feniger
Sure, thanks for taking my query. Simply, you recognize, the 50 gigawatt of energy by 2030, that quantity you guys offered Investor day. Are you able to simply give us a way. The place that form of finishes finish at 26 and 27? And the genesis of the query is there’s all the time worries that with everybody elevating capability, if knowledge heart slows, can we get into an overcapacity sort of market? How a lot of this 50 gigawatt goes into different markets outdoors of knowledge facilities? Power, gasoline, compression, downstream whenever you’re reserving these orders? I do know Mick talked about pricing, however how are you additionally fascinated by phrases and circumstances, service agreements, prime strikes to backup. Simply how are you guys considering of additionally getting ready your self for. For down the street? As you recognize, as you’ve seen growth and bust up to now.
Joseph Creed
Thanks everybody. Yeah, thanks Mike. So in the case of the capability improve, we clearly work all of our industries form of work with our clients and work out what the forecast is. So there may be places and takes, forecasts transfer round. However we’ve type of gauged the capability we want primarily based on what we see in all industries. We’re going to ensure, like I mentioned, we’re going to maneuver lots of pure gasoline within the subsequent few years. So we’re going to ensure we maintain our oil and gasoline clients in addition to energy technology.
And I feel rightfully, as you level out in there, you recognize, a number of the issues which might be additionally in that capability, it’s not all simply assembling completed product. Proper? There’s provide base and there’s parts machining and part capability for us to ensure we will develop companies. So once we take prime energy or gasoline compression purposes that run repeatedly, these will hit overhaul cycles and people are nice companies enterprise for us. And we want to ensure we’ve got capability in place to try this as effectively. So all that’s considered, you recognize, we’ve got, we’re on schedule.
We had been in a position to ship a little bit bit extra at 12 months finish in our giant engine facility than we anticipated, which is a superb factor. We’d like to have the ability to maintain that all through 2026. And we anticipate an enormous chunk of capability. The primary actual massive step as much as come in the direction of the top of this 12 months, heading into 2027. After which the turbine funding began a little bit later. It’ll begin to come on a little bit bit after that. So we proceed to remain near our clients. I imply we discuss to hyperscalers and enormous knowledge heart clients weekly and ensure we keep according to their plans.
And like I mentioned, we’re beginning to take orders farther out and I feel that’s factor.
operator
We’ll go to our subsequent query from David rasso@evercore isi hello, thanks for the time.
David Raso
I’m attempting to reconcile the gross sales information for 26. Proper. The roughly 7%. If you happen to take a look at the backlog that ships the following 12 months on a 12 months over 12 months foundation, it’s up about 44%. The orders for backlog that ships within the subsequent 12 months are up 36%. And your view of retail being up in 26. Simply attempting to know why such A low gross sales development given the order momentum, the scale of the backlog and also you see retail up in 26. And when you indulge me, only a clarification, perhaps I missed it. The tariff affect, the 800 million, does that embrace anticipated pricing for 26 netting towards a gross quantity or is it earlier than any pricing actions? Thanks.
Joseph Creed
Yeah, David, so first let me reply the second a part of your query. That’s it doesn’t keep in mind any pricing actions. The two% pricing motion we talked about is totally separate. So that is simply the incremental value that we greenback value that we are going to truly incur or pay for tariffs in 2026. After which whenever you discuss concerning the backlog and the gross sales information, the one factor I’d simply level out to you and Joe talked about it was final 12 months, when you bear in mind, we truly did specifically in development, there was a really low, there was no, just about no improve in supplier stock within the first quarter, which was uncommon.
So one of many elements that you must keep in mind whenever you’re taking a look at backlog is the truth that clearly SEI’s backlog is stronger. However a part of that’s for the and machines for the billion greenback plus improve in supplier stock that we anticipate within the first quarter, which is a distinction versus the prior 12 months. In order that’s one issue total. Simply remind you that in energy and vitality we’re capability constrained. Clearly we’re basing our estimates primarily based on the capability we’ve got at this time. As Joe talked about, we’re clearly attempting and we’ve managed to construct deliver a little bit bit earlier on-line however clearly that’s not sure at this stage.
So clearly if we’re in a position to deliver one thing on there can be some upside within the second half of the 12 months.
operator
We’ll go subsequent to Tammy Zakaria at JP Morgan.
Tami Zakaria
Hello, good morning. Thanks a lot. So the AIP announcement final night time, may you give some colour on what the battery vitality storage system alternative might be for an order of that magnitude along with recip engines, may or not it’s half and half, 25, 75, 75, 25 or any colour on the income combine with engines and DES can be useful. And associated to that, do you’ve gotten sufficient capability for greatest merchandise? Ought to there be extra offers like this?
Joseph Creed
Good morning Tammy. Most of that order goes to be you recognize, in mills and pure gasoline mills, you recognize such as you noticed as a part of the joule. It’s an entire system, identical much like Juul. So once we do have batteries in there it’s a, it’s a small portion of the general complete. So most of it’s Gasoline generator units. And so far as capability goes, that’s all a part of our capability planning. So we really feel like we will proceed to maintain up with the expansion in prime energy and hopefully proceed to see extra combine shift that method as a result of as we mentioned that will assist from a companies standpoint and we’ll have to take a look at parts farther out as a result of would clearly even imply extra upside to companies, you recognize, within the form of three to 5 years after supply of these gensets.
So thrilling alternatives for certain.
operator
Our subsequent query comes from Chad Dillard at Bernstein.
Charles Albert Dillard
Hey, good morning guys. A pair questions for you on Prime Energy. So for that utility, what’s the long run position of backup diesel mills versus Bess? You already know, whenever you’re speaking to the shoppers like how are they fascinated by how that evolves over the following a number of years? After which additionally with regard to your capability ramp and energy gen, do you suppose you may hold the income momentum rising in 26 versus 25? I feel it goes up in 30%. Or ought to we be anchoring extra in the direction of that 20% gig that you just’ve laid out for energy Gen?
Joseph Creed
Sure, a few questions there.
I feel the final one first. As Andrew said, it’s not a requirement concern for us. It’s actually going to be can we deliver on provide quicker? Form of what we’ve got in that income information now could be what we’ve got excessive confidence in. If all the things turns up heads, bear in mind it’s not simply us. We now have to deliver our provide base together with us. We’re going to get out as a lot product as we will and clearly that would supply a little bit little bit of upside if we will proceed to outpace our present plans for bringing the capability on-line. In the case of these Prime Energy purposes, most of what we’re seeing up to now remains to be having backup energy and so they’re additionally with gensets, not with batteries.
Actually, in these they’re utilizing our quick begin gasoline gensets for backup energy versus diesel once they do a few the large orders we’ve seen for gasoline prime energy. So proper now we’re not seeing, you recognize, 100% battery backup. It’s largely mills.
operator
We’ll transfer subsequent to Jamie Prepare dinner at Belief Securities.
Jamie Prepare dinner
Hello, good morning and congratulations. Sorry Joe, one other query on backlog. Simply given the power, was there something type of one time in that backlog development quantity or pull ahead maybe, you recognize, an announcement that you just weren’t in a position to press launch. You already know, me understanding the AIP that goes into subsequent quarter, however simply questioning if there’s a pull ahead in your understanding there’ll be Lumpiness, quarter to quarter. However do you continue to see an expectation the place you may develop your backlog double digit as we exit 2026 for the total 12 months after which simply once more the expansion you’re seeing, is there any method, do you suppose you’re outgrowing the marketplace for no matter motive? Aggressive positioning, product supplier? I’m simply questioning when you’re getting a better share of the market relative to your friends.
Thanks.
Joseph Creed
Yeah, thanks, Jamie. And good morning. You already know, so far as orders within the quarter, in your first query, I feel nothing of great word the place we had one thing that we couldn’t announce. I might, you recognize, there are a pair issues outdoors of energy and vitality. We talked about CI and the seasonality. I might additionally say, you recognize, the robust orders in Rihanna, once more, these are ri. Could be a lumpy enterprise and people orders are available in, in massive orders and it’s not, you recognize, regular. So we’re glad to see the orders that got here in. You already know, I don’t know which you could depend on repeat each quarter of that as we exit.
We’ll see the place we exit this 12 months. Proper. We wish to ship lots of product and, you recognize, I admire you requested this query final time as effectively. The backlog is a nuanced quantity. We’d like it to go up as a result of we’re including capability and different issues. But when I can sluggish that development within the backlog as a result of I can considerably get extra product out whereas orders are nonetheless rising, that’s clearly factor as effectively. So we’re targeted on profitable as a lot of the enterprise as we will. We outpace the business in CI. I feel we’re undoubtedly a market chief in energy and vitality for what we offer in that house, simply from a scale standpoint.
So. And we’ve got the widest providing under 38 megawatts between generators and engines and burn lots of gas. So we really feel actually good in our aggressive place. From a lead time standpoint, they’re prolonged, however nonetheless, you recognize, we’re ready. We’re one of many quickest options on the market for knowledge facilities who’re attempting to rise up and operating shortly. So we’ll see how the 12 months performs out. However we’ve got nice momentum and hopefully I’m planning on and anticipate the momentum to proceed all through this 12 months.
operator
Our subsequent query comes from Jerry Rivich at Wells Fargo.
Jerry Revich
Sure, Hello. Good morning, everybody. I’m questioning, Joe, when you may simply speak about, for the turbine enterprise, you had spoken about potential for it for use in some peaker vegetation, plant purposes by utilities. Any replace on how these conversations are monitoring once we would possibly See these use circumstances. After which, you recognize, within the ready remarks, you people spoke about comparable shipments in 26 versus 25 for generators. However you’re ramping up actually important deliveries in Titan 350s, I assumed in 26 versus 25. So I simply wish to be certain I’m not lacking any outdoors shipments within the fourth quarter or every other transferring items there.
Thanks.
Joseph Creed
Yeah, I imply we’re, we’re seeing most, you recognize, the 351st items have gone out and we’re attempting to ramp 350. So it’s comparatively new product that’s going on the market. So, you recognize, photo voltaic had a file 12 months in 2025. We anticipate one thing comparable in 2026. We introduced the capability improve for photo voltaic, however once more we simply introduced that center of final 12 months, late final 12 months. In order that’s not going to actually have a major affect into 2026 outcomes. I feel we’ll see a combination to the bigger frames just like the 350 as we’re delivery a couple of extra of these in 2026 as effectively.
After which we proceed to work all of the offers that we will for energy. And we’re seeing historically photo voltaic’s enterprise been very heavy, weighted in the direction of oil and gasoline. That enterprise remains to be actually robust, however now we’re beginning to see extra of the combination shift into energy gen as effectively. So we’re anxious to get that capability program transferring alongside and we’ll present updates as we transfer all through it. We’d like to get extra product out, however proper now that’s what we’ve got line of sight to in 2020.
operator
Our subsequent query comes from Rob Wertheimer at Melius Analysis.
Robert Wertheimer
Thanks.
Joseph Creed
Good morning. Rob.
Robert Wertheimer
So the mission scope on the Monarch Information heart appears to be like fascinating and I ponder when you may give us a mini schooling. I feel that they’re going to make use of the waste warmth from the CAT engines to supply cooling to energy chillers. You already know, there’s been an argument that mixed cycle and conjunction, you recognize, mixed cycle generators with steam turbine connected or increased effectivity. I don’t fairly know how one can evaluate the effectivity with this, however clearly utilizing the waste warmth is nice. And at Juul, I feel there was backup diesel with prime recips and gasoline. On this case, I feel you’re.
Are you simply over type of overbuilding the gasoline recipes and there’s no diesel concerned. And final query, simply, you recognize, do you get lots of inquiries on this type of factor or is there’s a strong, you recognize, form of quoting in and exercise pipeline behind it? Thanks.
Joseph Creed
Rob. I would like My engineers or Jason to speak to you on the technical specs of it. However you recognize, as you’re taking a look at clients who’re wanting velocity to market, bringing your individual energy is certainly one of many ways in which they’ll do this and we will assist them. And I feel when you make that call to go to gasoline prime energy and form of have your individual mini energy plant there with the gensets, we’ve been in a position to sit with them and say okay, let’s make it as environment friendly as doable. So clearly if we will use the warmth to assist with the cooling and use that vitality on website, it makes the entire mission extra environment friendly and the competitiveness of it a lot better from a monetary standpoint.
So we proceed to work with all of our clients on that and I feel we’ll proceed to make headways. You already know, we additionally, you recognize, announce partnerships with Vertiv. We’re looking for methods to make these options as value efficient and environment friendly as doable for our clients and we’re having lots of these discussions. Juul I feel within the early days if I’m not mistaken was diesel backup however then switched to truly gasoline fired quick begin backup energy as effectively. So all pure gasoline and I feel you recognize, the newest one is pure gasoline as effectively.
So you recognize that’s one of many nice issues about our portfolio. You already know we as much as 38 megawatts, we’ve got all kinds of various options and we will configure it nevertheless is greatest for that buyer website, what sort of gas availability they’ve and the scale and what they’re attempting to do to make it probably the most environment friendly. So you recognize we’ve got a workforce that basically sits with clients and has turbine specialists and recip specialists on it. You already know we’ve got lots of micro grid expertise and primarily that’s what these are. So we’re working with clients to place the perfect resolution ahead and I feel it’s going to be thrilling.
We now have increasingly discussions round it day by day.
Alex Kapper
Audra, we’ve got time for yet another query.
operator
Thanks. At the moment’s closing query comes from the road of Kristin Owen with Oppenheimer.
Kristen Owen
Good morning. Thanks a lot for taking the query. I’m going to ask a uncommon query on development industries and simply assist us unpack a number of the demand drivers that you just’re seeing there. How a lot of that is simply only a return to a normalized substitute stage? How a lot of that is truly supported by knowledge heart exercise and the way a lot ought to we anticipate is embedded in your market share development for 2026? Thanks.
Joseph Creed
So I’ll make some feedback. Andrew, you may chime in right here however you recognize we anticipate North America to proceed to be robust. Clearly, you recognize the info heart construct out is not only good for for energy and vitality. That drives lots of development exercise as effectively. There are a variety of different development initiatives transferring alongside and as we mentioned in our ready remarks, we proceed to see that power right here in North America. IIJA spending nonetheless persevering with to go on. The Center east specifically continues to be actually robust after which we anticipate China has been actually low and we’ll hopefully see some positivity there in above 10 ton excavators coming off low ranges as we enter into this 12 months from a aggressive standpoint, we made nice progress and had been in a position to outperform the business final 12 months with the power of our merchandising applications.
We now have thrilling issues to proceed to roll out. We proceed to work on our rental technique with our sellers. We’ll have some issues to share at Conexpo as effectively in the case of our, you recognize, BCP tools within the smaller a part of the CI lineup which has a ton of momentum within the business. So we really feel fairly good about our means in CI. It’s a few of that order power is getting again to that extra regular seasonal sample. However we’ve got nice confidence across the business and the place it’s heading. So with that I wish to thanks all for becoming a member of us at this time and we admire your questions.
An curiosity in Caterpillar. I’m actually pleased with our workforce. We had distinctive efficiency in 2025 as they delivered file gross sales and revenues, adjusted working revenue margin that was inside our vary and strong MP and E free money circulation. These outcomes exhibit the power of our finish markets and our workforce’s disciplined execution. So with a file backlog, we enter the brand new 12 months with robust momentum and a continued give attention to delivering long run worth for our clients and our shareholders. Now I’ll flip it again to Alex.
Alex Kapper
Thanks Joe, Andrew and everybody who joined us at this time. A replay of our name can be obtainable on-line later this morning. We’ll additionally put up a transcript on our investor relations web site as quickly because it’s obtainable. You’ll additionally discover a fourth quarter outcomes video with our CFO and an SEC submitting with our gross sales to customers knowledge. Click on on buyers.caterpillar.com after which click on on Financials to view these supplies. You probably have any questions, please attain out to me or Rob Rengel. The Investor Relations Journal. Cellphone quantity is 309-675-4549. Now let’s flip it again to Audra.
operator
To conclude our name that concludes our name. Thanks for becoming a member of. You could all disconnect. Sa.
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