Caterpillar (CAT) Q1 Earnings Top Estimates On Improving Demand

Selling, general and administrative (SG&A) expenses increased 10.5% to around $1.2 billion. Research and development (R&D) expenses went up 5% to $374 million from the prior-year quarter. Both SG&A and R&D expenses in the quarter were up year over year due to higher short-term incentive compensation expense, which was reinstated in 2021.

Adjusted operating profit in the quarter surged 30% year over year to $1.88 billion, reflecting increased volumes and higher profit from Financial Products. These gains were partially offset by higher SG&A and R&D expenses, unfavorable price realization, and rising manufacturing costs. The adjusted operating margin was 15.8% in the reported quarter, up 230 basis points from the prior-year quarter.

Segments Deliver Improved Performances

Machinery and Energy & Transportation (ME&T) sales rose 13% year over year to $11.2 billion in the quarter under review. Construction Industries sales were up 27% year over year to $5.4 billion owing to increased sales volumes reflecting improving end-user demand and the impact of changes in dealer inventories.

Sales at Resource Industries increased 6% year over year to around $2.2 billion on higher sales volume owing to changes in dealer inventories and higher end-user demand for equipment and aftermarket parts.  The favorable currency impact from the Australian dollar, was offset by unfavorable price realization. While the segment noted increased demand in mining, demand in heavy construction and quarry and aggregates were reportedly weak.

Sales of Energy & Transportation segment in the quarter were around $4.5 billion, reflecting growth of 4% from the prior-year quarter. Sales were up in Power Generation and Oil and Gas. However, lower sales in Transportation had a dampening effect.

The ME&T segment reported an operating profit of $1,664 million, which highlighted an increase of 24% year over year. The Energy & Transportation segment’s operating profit went up 11% year over year to $666 million as benefits from higher sales volume and favorable variable manufacturing costs were partially offset by higher SG&A/R&D expenses.

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