Source: Motley Fool transcript (published Apr 30, 2026) + Caterpillar Q1 2026 press release.
Alex Kapper (VP IR): Thank you, Adria. Good morning, everyone, and welcome to Caterpillar's First Quarter of 2026 Earnings Call. I'm Alex Kapper, Vice President of Investor Relations. Joining me today are Joe Creed, Chairman and CEO; Andrew Bonfield, Chief Financial Officer; Kyle Epley, Senior Vice President of the Global Finance Services Division and incoming CFO; and Rob Rengel, Senior Director of IR.
For today's agenda, Joe will begin by sharing perspectives about our results and strategic initiatives across our segments. Then he'll discuss our full-year outlook and insights about our end markets, followed by a stat update. Andrew will provide a detailed overview of results, and Kyle will share key assumptions looking forward.
Joseph Creed (CEO): Our team delivered a strong start to the year driven by resilient end markets and disciplined execution in a dynamic operating environment. Sales and revenues were $17.4 billion, up 22%, and we delivered adjusted profit per share of $5.54, an increase of 30% versus last year. Backlog grew to a record level of $63 billion, an increase of $28 billion, or 79%, compared to the first quarter last year. All three primary segments contributed to both the year-over-year and sequential backlog growth. Also, total first-quarter orders were an all-time record, providing a solid foundation and positive momentum.
Our strong balance sheet and MP&E free cash flow allowed us to deploy $5.7 billion to shareholders through share repurchases and dividends in the quarter. Adjusted operating profit margin was 18%. First-quarter adjusted operating profit margin and adjusted profit per share were better than we anticipated, mainly due to favorable manufacturing costs, including lower-than-anticipated tariff costs. Costs related to tariffs introduced since the beginning of 2025 were approximately $600 million in the quarter.
Sales to users grew in all three of our primary segments. In Power and Energy, sales to users grew a robust 32%, with power generation growing 48%, driven by strong demand for large gensets and turbines used in data center applications with an increasing mix towards prime power. Construction Industries total sales to users grew for the fifth consecutive quarter, up 7%. Resource Industries first-quarter sales to users increased 6%.
Yesterday, we announced another exciting opportunity to provide Pro Power up to 2.1 gigawatts of large gas generator sets for prime power generation in support of data center, oil and gas and industrial applications. This represents the sixth agreement with at least 1 gigawatt of Caterpillar equipment for prime power applications.
While there is increased uncertainty due to geopolitical events and elevated energy prices, our end markets have been resilient. We now anticipate low double-digit growth for full-year 2026 sales and revenues. Notably, we're tracking ahead of our large reciprocating engine capacity expansion plans for the year. Order rates are very strong across a wide range of products, driving backlog growth in all three primary segments.
Since we first announced our initial capacity expansion plans in January of 2024, our large reciprocating engine backlog has grown by more than 3.5x. Customers are committing to longer-term orders, with some orders well into 2028. We are increasing our large reciprocating engine capacity from 2x 2024 levels to nearly 3x 2024 levels. The additional investment will begin as soon as possible but primarily occur from 2027 through 2029. MP&E capital expenditures are expected to average between 4% and 5% of MP&E sales through 2030.
We now expect the compound annual growth rate for total enterprise sales and revenues to be between 6% and 9% between 2024 and 2030. The target for power generation sales has increased to more than 3x sales by 2030 from a 2024 baseline.
Earlier this month, we announced that Kyle Epley will succeed Andrew Bonfield as CFO effective tomorrow. It's been a privilege to work with Andrew.
Andrew Bonfield (CFO): Sales and revenues were $17.4 billion, up 22% to prior year, which was in line with our expectations. Adjusted operating profit was $3.1 billion, and our adjusted operating profit margin was 18.0%, both stronger than we had anticipated. For Power and Energy, sales of $7.0 billion increased 22% versus the prior year, with segment profit of $1.5 billion and a 20.6% margin. Construction Industries sales increased 38% to $7.2 billion, with segment profit of $1.5 billion, a 50% increase, and a 21.4% margin. Resource Industries sales increased 4% to $3.8 billion, with segment profit of $378 million and a 10.0% margin.
Financial Products revenues increased 9% versus the prior year to $1.1 billion. MP&E free cash flow was nearly $600 million in the first quarter, higher than we had expected. CapEx spend was about $700 million. We deployed $5.7 billion to shareholders in the first quarter, including a $4.5 billion accelerated share repurchase that may last for up to 9 months.
Kyle Epley (incoming CFO): For the second quarter, we anticipate another quarter of strong sales growth versus the prior year, with volume increases and favorable price realization in each of our three primary segments. For the full year, we now anticipate sales and revenues growth in the low double digits. Excluding tariff costs, we expect to be in the top half of the adjusted operating profit margin target range. Including tariffs, we continue to anticipate that the adjusted operating profit margin will be near the bottom of the target range. We now anticipate full-year 2026 tariff costs in the range of $2.2 billion to $2.4 billion, compared to the $2.6 billion estimate we provided last quarter. We now anticipate MP&E free cash flow will be higher than the $9.5 billion last year.