Caterpillar CEO Highlights Expanding Market Opportunity Driven By Secular Growth In Cloud Computing, Gen AI

Caterpillar Inc CAT shares hit new all-time highs on Monday on the heels of the company’s strong quarterly results. Following the print, Caterpillar chairman and CEO Jim Umpleby highlighted the opportunities ahead of the heavy equipment manufacturer.

What To Know: Caterpillar revenues were up 3% in the fourth quarter and up 13% for 2023 compared to the prior year. The company blew out earnings estimates and reported an 87% year-over-year increase in operating profits.

Mining equipment sales and higher machinery prices helped boost overall numbers. Spending on heavy machinery remained steady for commercial customers. Dealer inventories also fell for the first time in about a year.

“The bottom line on dealer inventory is we’re squarely in what we consider the appropriate typical range for dealer inventory,” Umpleby said.

Improving supply chain constraints have led to improved availability for Caterpillar products. This has allowed dealers to make different decisions about when to place orders for new machines, he explained.

Infrastructure support from the government has helped boost the company’s near-term outlook. Also, longer-term trends around data centers are helping to support the company’s longer-term vision.

“We do believe that our total addressable market is expanding due to the secular growth trend around data centers, and that growth is there due to cloud computing and generative AI,” Umpleby said.

On a conference call, Caterpillar revealed that it’s making a large multi-year investment to increase manufacturing capacity around large engines.

The Caterpillar CEO told CNBC that those investments will help the company serve the growing demand in power generation around data centers.

Caterpillar remains focused on capitalizing on the longer-term opportunity to provide grid stability via its large reciprocating engines and turbines as more renewables are added to the grid, he said.

“So again, we are very excited about what we see as future growth opportunities moving forward,” Umpleby said.

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CAT Price Action: Caterpillar shares were up 2.45% at $322.82 at the time of writing, according to Benzinga Pro.

Photo: courtesy of Caterpillar.