Caterpillar Earnings Beat Helped by Data Center Power Demand

Caterpillar Inc. got an earnings boost from selling power generation equipment to AI data centers in its fourth quarter, helping drive quarterly results that topped Wall Street’s expectations. The company’s power and energy segment — now Caterpillar’s biggest and fastest-growing segment — posted a 25% profit jump compared to the year-earlier period thanks to higher demand for its power-generating equipment. That helped blunt declining profit from the company’s more traditional businesses of selling heavy-duty machinery to construction and resource industries. Caterpillar posted adjusted earnings of $5.16 in the fourth quarter, beating the $4.69 average estimate of analysts polled by Bloomberg, according to a Thursday statement. The power and energy segment sells generators, diesel and natural gas engines, and industrial gas turbines that produce electricity for buildings, factories and data centers. The business has made Caterpillar a runaway winner as Big Tech looks to spend more on energy-intensive projects to feed the AI boom. Shares of the Irving, Texas-based company rose 4.7% to $673.63 as of 9:42 a.m. in New York. “It was a strong beat,” said Michael O’Rourke, chief market strategist at JonesTrading. “It is likely there is additional optimism after hearing the capex forecast from Meta Platforms, Microsoft and Tesla last night.” Read More: Caterpillar Cements $300 Billion Milestone After AI-Fueled Rally The firm also benefited from a record in order backlogs that amounted to $51 billion, driven by demand across its primary units. The backlog growth was “the standout data point” for the quarter, Oppenheimer analysts led by Kristen Owen said in a note, calling results “a strong finish to the year.” Still, Caterpillar continues to wrestle with unfavorable manufacturing costs, which the company said is largely due to the impact of higher tariffs. Those contributed to a 9% decline in overall operating profit. Caterpillar forecasted $2.6 billion in incremental tariff costs this year, well above the $1.7 billion the company posted all of last year. The company expects full-year adjusted operating profit margin to be near the bottom of its annual target range when including tariff impacts, according to its earnings presentation. Bloomberg's Chris Ciolino joins to discuss on Bloomberg Intelligence. -------- Watch Bloomberg Radio LIVE on YouTube Weekdays 7am-6pm ET WATCH HERE: http://bit.ly/3vTiACF Follow us on X: https://twitter.com/BloombergRadio Subscribe to our Podcasts: Bloomberg Daybreak: http://bit.ly/3DWYoAN Bloomberg Surveillance: http://bit.ly/3OPtReI Bloomberg Intelligence: http://bit.ly/3YrBfOi Balance of Power: http://bit.ly/3OO8eLC Bloomberg Businessweek: http://bit.ly/3IPl60i Listen on Apple CarPlay and Android Auto with the Bloomberg Business app: Apple CarPlay: https://apple.co/486mghI Android Auto: https://bit.ly/49benZy Visit our YouTube channels: Bloomberg Podcasts: https://www.youtube.com/bloombergpodcasts Bloomberg Television: https://www.youtube.com/@markets Bloomberg Originals: https://www.youtube.com/bloomberg Quicktake: https://www.youtube.com/@BloombergQuicktake