CAT (CAT)

“In Resource Industries, we anticipate a similar margin percentage compared to the prior year due to higher sales volume and favorable price realization, partially offset by higher manufacturing costs, including tariff costs and SG&A and R&D expenses.”

“In Construction Industries, we anticipate a higher margin percentage compared to the prior year, primarily due to favorable price realization and higher sales volume.”

“In Power & Energy, we anticipate a higher margin percentage compared to the prior year on stronger volume and favorable price realization.”

“We expect about 50% of the tariffs to be incurred in Construction Industries and 25% in both Power & Energy and Resource Industries.”

“We anticipate tariff costs of around $600 million, which is similar to what we incurred in the third quarter of 2025.”

“We expect higher adjusted operating profit margin at the enterprise level versus prior year, primarily due to favorable price realization and higher sales volume, partially offset by unfavorable manufacturing cost including depreciation expense and freight, along with higher SG&A and R&D expenses due to the continued investment in strategic investments aligned with our 2030 goals that we rolled out at our last year's Investor Day.”

“We also anticipate favorable price realization, but to a lesser extent than the second quarter.”

“In Resource Industries, we also expect strong sales growth in the third quarter versus the prior year primarily due to higher sales to users and services growth.”

“We expect a slight increase in dealer inventory in the third quarter, but modestly lower than last year.”

“In Construction Industries, we expect strong sales growth in the third quarter versus the prior year mainly due to higher sales volume on strong sales to users and favorable price realization.”

“We anticipate strong sales growth in Power & Energy in the third quarter versus the prior year, driven by continued strength in power generation and in oil and gas, modest growth in industrial applications as it continues to recover and favorable price realization.”

“We expect volume increases and favorable price realization in each of our three primary segments.”

“Based on what we see today for the third quarter, we anticipate another strong quarter of sales growth versus the prior year.”

“We expect dealer rental fleet loading will continue to grow including additional fleet loading for Major Projects in the third quarter.”

“I'm confident that we'll manage the impact of tariffs over time as we aim to operate around the midpoint of our adjusted operating profit margin target range.”

“Our outlook does not include any additional IEEPA tariff recoveries in the second half of the year.”

“Excluding the expected IEEPA tariff recoveries of approximately $400 million reported in the second quarter, we now expect full year 2026 tariff costs of around $2.2 billion or at the low end of the range we previously provided.”

“Due to the increased sales and revenues outlook, full year adjusted operating profit margin will be higher than we expected in April.”

“We plan to end the year higher than last year in anticipation of future end market growth.”

“We also expect a more typical reduction in Construction Industries dealer inventory of over $1 billion in the fourth quarter.”

“We plan to bring about 1.5 gigawatts of capacity back online, and shipments are expected to begin in the fourth quarter.”

“Rail services and locomotive deliveries are both anticipated to grow for the year.”

“We now expect rebuild activity to increase moderately compared to last year.”

“For 2026, sales-to-users are expected to increase, primarily driven by rising demand for copper and gold and positive dynamics in heavy construction and quarry and aggregates.”

“We expect full year growth in Latin America.”

“In China, we anticipate moderate conditions with full year growth in the above 10-ton excavator industry off of low levels of activity.”

“In Asia Pacific outside of China, softer economic conditions are expected.”

“While the Middle East continues to be challenged, we currently anticipate only a limited impact on EAME sales-to-users.”

“In EAME, Europe is expected to remain stable, supported by nonresidential construction, and construction activity in Africa is projected to remain strong.”

“Overall, the outlook for North America remains positive as sales-to-users are anticipated to grow versus last year.”

“For Construction Industries, we continue to expect full year sales-to-users growth, supported by strong order rates.”

“Demand for products in industrial applications is expected to grow moderately in 2026.”

“Solar Turbines oil and gas sales are expected to grow while the backlog remains healthy, as we continue to see solid order and inquiry activity.”

“Reciprocating engine sales are anticipated to increase driven by strong demand in gas compression applications.”

“After a record year for sales in 2025, oil and gas is expected to grow moderately again this year.”

“We continue to anticipate full year growth in power generation for both Cat reciprocating engines and Solar Turbines driven by increasing energy demand to support data center build-out related to cloud computing and generative AI.”

“We are also increasing our MP&E free cash flow expectations to be in the top half of our annual target range, reflecting our improved outlook.”

“Excluding the favorable impact from our IEEPA tariff recoveries in the second quarter, we expect full year adjusted operating profit margin to be near the bottom of the target range.”

“We expect the full year adjusted operating profit margin to be higher than we expected during our last earnings call, reflecting the improved sales and revenues outlook.”

“Services revenues are also expected to grow at a higher rate for the full year compared to our previous outlook.”

“As a result, we anticipate stronger full year growth across all three primary segments compared to the outlook we gave in April.”

“We are also progressing on our capacity expansion plans, and we expect to increase our throughput in the second half of the year.”

“We are increasing our full year 2026 sales and revenues expectations to mid- to high-teens growth based on the healthy demand we are seeing across all three of our primary segments.”

“In Resource Industries, including and excluding tariff costs, they had a lower margin percentage compared to the prior year due to higher manufacturing costs and SG&A and R&D expenses.”

“In Construction Industries, including tariffs, we anticipate a higher margin percentage compared to the prior year as stronger volume and price particularly offset by higher manufacturing costs, primarily driven by tariffs and SG&A and R&D expense.”

“In Power and Energy, including tariffs, we anticipate a slightly higher margin percentage compared to the prior year on stronger volume and favorable price realization.”

“We expect about 50% of the tariff cost to be incurred in Construction Industries and 25% in both Power and Energy and Resource Industries.”

“We anticipate tariff costs of around $700 million.”

“Despite the ongoing impact of tariffs, we also expect higher margins in the second quarter versus the prior year.”

“Excluding tariff costs, we expect higher margins at the enterprise level, primarily due to price realization and higher volumes.”

“We also anticipate favorable price realization with the primary driver being geographic mix.”

“In Resource Industries, we also expect strong sales growth versus the prior year primarily due to higher sales of users.”

“We anticipate a more typical sequential sales increase in the second quarter as compared to the first.”

“We expect strong sales growth in Construction Industries in the second quarter versus the prior year, mainly due to strong sales to users supported by the backlog and favorable price realization.”

“We anticipate strong sales growth in Power and Energy in the second quarter versus the prior year, driven by continued strength in power generation, and in oil and gas and favorable price realization.”

“We anticipate volume will be driven by a higher growth rate in sales to users compared to the first quarter, with a minimal change in Construction Industries during dealer inventory.”

“We expect volume increases and favorable price realization in each of our 3 primary segments.”

“Based on what we see today, for the second quarter, we anticipate another quarter of strong sales growth versus the prior year.”

“Based on our record backlog and customer forecast, we estimate a positive cash payback on the entire reciprocating engine investment, including what was previously announced by the end of this decade.”

“I'm excited to announce that we are increasing our large reciprocating engine capacity from 2x 2024 levels to nearly 3x 2024 levels.”

“I remain confident that we'll manage the impact of tariffs over time as we aim to operate around the midpoint of our adjusted operating profit margin target range.”

“With the improved sales and revenues outlook, full year adjusted operating profit margin will be higher than we expected in January.”

“We estimate this will give us another 15 gigawatts capacity annually when we're done with this installation.”

“We think they'll get better even this year from what you saw in the first quarter.”

“I think you should see heavy investment in '27, but we'll be investing still in '28 and '29.”

“We now anticipate MP&E CapEx spend to average approximately 4% to 5% of MP&E sales through 2030.”

“While our CapEx forecast for 2026 remains approximately $3.5 billion.”

“We now anticipate MP&E free cash flow will be higher than the $9.5 billion last year, an improvement versus our expectations last quarter, reflecting our improved outlook.”

“Our anticipated global estimated annual effective tax rate remains approximately 23% for '26, excluding discrete items.”

“We continue to expect restructuring costs of approximately $300 million to $350 million in 2026.”

“We expect to ramp up our actions to mitigate our tariff costs in the back half of the year.”

“We now anticipate full year 2026 tariff costs in the range of $2.2 billion to $2.4 billion based on our current volume assumptions.”

“Including tariffs, we continue to anticipate that the adjusted operating profit margin will be near the bottom of the target range.”

“Excluding tariff costs, we expect to be in the top half of the adjusted operating profit margin target range.”

“As Joe mentioned, we now anticipate sales and revenues growth in the low double digits for the full year of 2026.”

“Note that for Resource Industries, we anticipate the benefit from price realization to improve as we move through the year.”

“The target for power generation sales has increased to more than 3x sales by 2030 from a 2024 baseline.”

“We now expect the compound annual growth rate for total enterprise sales and revenues to be between 6% and 9% between within '24 to 2030.”

“As a result, MP&E capital expenditures are expected to average between 4% and 5% MP&E sales through 2030.”

“The additional investment will begin as soon as possible but primarily occur from 2027 through 2029.”

“Rail services and locomotive deliveries are both anticipated to grow for the year.”

“We continue to expect rebuild activity to increase slightly compared to last year.”

“For 2026, sales to users are expected to increase, primarily driven by rising demand for copper and gold and positive dynamics in heavy construction and quarry and aggregates.”

“While softening in the Middle East is anticipated, as of now, we expect the impact on EAME sales to users to be limited.”

“Dealer rental fleet loading and rental revenue are both projected to increase compared to 2025.”

“Overall, the outlook for North America remains positive as sales to users are anticipated to grow versus last year.”

“For Construction Industries, we continue to expect full year sales to users growth, supported by strong order rates.”

“Demand for products in industrial applications is projected to grow modestly in 2026.”

“Services revenues in oil and gas are also expected to increase in the year.”

“As a result, we anticipate another year of strong turbine sales.”

“Reciprocating engine sales are expected to increase, driven by strong demand in gas compression applications.”

“Oil and gas expect moderate growth for the year.”

“We anticipate growth in power generation for both reciprocating engines and turbines, driven by increasing energy demand to support data center build-out related to cloud computing and generative AI.”

“We're also increasing our MP&E free cash flow expectations to be higher than 2025, reflecting our improved outlook and strong top line growth.”

“Adjusted operating profit margin is estimated to remain near the bottom of the target range corresponding to the now higher top line expectations.”

“As a result, we anticipate stronger growth across all 3 primary segments compared to the outlook we gave during our last earnings call.”

“We also expect growth in services revenues for the full year.”

“We now anticipate low double-digit growth for full year 2026 sales and revenues.”

“We are closely monitoring the environment, and we are not forecasting material impact to our 2026 outlook at this time.”

“We also hopefully, our expectation is to get incremental units out of this latest capacity announcement as early as 2027.”

“As a reference, we would expect some seasonal margin uplift in the first quarter compared to 2025.”

“As is typical, we expect first-quarter sales in power and energy will be the segment's lowest of the year and sequentially lower than 2025.”

“For perspective on the quarterly sales cadence, we anticipate the lowest sales of the year to occur in the first quarter, which aligns with our normal seasonal pattern.”

“We will continue to take actions to manage our costs in the normal course of business and remain committed to operating within our adjusted operating profit margin target range with the goal of being around the midpoint of the range over time.”

“I remain confident that we'll manage the impact of tariffs over time as we aim to operate around the midpoint of our adjusted operating profit margin target range.”

“We're also on track in our multiyear effort to double our large engine capacity and more than double our industrial gas turbine capacity.”

“But we expect North America to continue to be strong.”

“So, Solar had a record year in 2025. We expect something comparable in 2026.”

“You know, I think we'll see a mix to the larger frames, you know, like the 350 as we're shipping a few more of those in 2026 as well.”

“Our global annual effective tax rate is anticipated to be 23% excluding discrete items, MP and E free cash flow should be slightly lower than 2025 reflecting the high CapEx of around $3.5 billion in 2026.”

“Now concluding our expectations for the year, we expect restructuring costs of roughly $300 million to $350 million.”

“The run rate should improve towards the second half of the year as we take actions to reduce our tariff exposure.”

“Including the impact of tariffs, we expect margin to be near the bottom of the target range.”

“On Enterprise adjusted operating profit margin, excluding the impact of tariff costs, we expect to be in the top half of the target range at our anticipated sales level, supported by favorable price realization and volume.”

“As Joe mentioned, we expect favorable price realization to account for a roughly 2% increase in sales for the full year.”

“Our planning assumption is that the $500 million decline in machine dealer inventory in 2025 will be offset by an increase by 2026, a tailwind to 2026 sales.”

“And in transportation, we anticipate full-year growth in rail services and locomotive deliveries.”

“Demand for products in industrial applications is expected to grow moderately in 2026, as we see continued recovery from previous lows.”

“And as a result, we expect another year of strong turbine sales comparable to our record 2025 performance.”

“Reciprocating engine sales are expected to increase driven by strong demand in gas compression applications.”

“We expect to deliver the generator starting in late 2026 through 2027.”

“We anticipate growth in power generation for both CAT reciprocating engines and solar turbines driven by increasing energy demand to support data center build-out related to cloud computing and generative AI.”

“And finally, for power and energy, the 2026 outlook is positive.”

“With modest increases in commodity prices projected in 2026, we expect rebuild activity to increase slightly compared to last year.”

“For 2026, sales to users are expected to increase, primarily driven by rising demand for copper and gold, positive dynamics in heavy construction in quarry and aggregates.”

“Growth in Latin America is expected to continue at a similar rate to 2025.”

“Dealer rental fleet loading and rental revenue are both projected to increase compared to 2025.”

“Another year of sales to users growth is expected in 2026, supported by elevated order rates and a robust backlog.”

“Capital expenditures are expected to be around $3.5 billion, driven primarily by our capacity expansion plans.”

“We also expect all three segments to benefit from positive price realization, about 2% of total sales and revenues, and continued growth in services revenues.”

“As a result, approximately 62% of our backlog is expected to deliver in the next twelve months, which is lower than our historical average.”

“Adoption is expected to accelerate given our proven solution, our expansion into quarries, and our ability to support mixed fleets.”

“We continue to connect more assets, growing the fleet to over 1.6 million and made great progress in other initiatives like condition monitoring, prioritized service events, e-commerce sales, and tech-enabled machines. Our digital and technology initiatives, along with a growing installed base, position us well to increase services revenues towards our goal of $30 billion by 2030.”

“As we finish the year this year, as you point out, I think we'll be in a great shape on dealer inventory.”

“But if you look at our margin targets, that requires a pull-through over 30% across the whole of the range when you look at where they are.”

“Including the net impact from incremental tariffs, we expect to remain near the bottom of our target range for adjusted operating profit margins, and we expect to be above the midpoint of the target range for ME&T free cash flow.”

“We remain optimistic about our underlying business and now anticipate modestly higher sales for the full year, including a strong fourth quarter.”

“We expect about 25% of the fourth quarter net incremental tariff impact will be incurred in Energy & Transportation.”

“Including the net impact from incremental tariffs, we anticipate a slightly lower margin compared to the prior year.”

“In Energy & Transportation, excluding the net impact from incremental tariffs, we anticipate a higher margin versus the prior year, mainly due to a higher sales volume and favorable price realization.”

“We expect about 20% of the fourth quarter net incremental tariff impact will be incurred in Resource Industries.”

“Including the net impact from incremental tariffs, we anticipate a lower margin in Resource Industries versus the prior year.”

“In Resource Industries, excluding the net impact from incremental tariffs, we anticipate a higher margin versus the prior year, mainly due to higher sales volume, partially offset by unfavorable price realization.”

“We expect about 55% of the fourth quarter net incremental tariff impact will be incurred in Construction Industries.”

“Now including the net impact from incremental tariffs, we anticipate a lower margin in Construction Industries versus the prior year.”

“In Construction Industries, excluding the net impact from incremental tariffs, we expect a higher margin compared to the prior year.”

“At this point, we expect tariffs to have a minimal impact to corporate items in the fourth quarter as our current assumptions are based on tariffs announced and expected to be in place on November 1.”

“We anticipate a net cost headwind of about $650 million to $800 million in the fourth quarter.”

“Including the net impact from incremental tariffs, we anticipate a lower enterprise adjusted operating profit margin in the fourth quarter versus the prior year.”

“Excluding the net impact from incremental tariffs, we expect the fourth quarter enterprise adjusted operating profit margin will be higher versus the prior year.”

“As a result, the sequential sales growth rate between the third and fourth quarters is projected to be slightly lower than last year's level.”

“While we expect sales to increase sequentially in the fourth quarter, the increase will likely be different than the typical seasonal pattern.”

“We also expect higher sales in oil and gas driven by Solar turbines and turbine-related services.”

“In Energy & Transportation in the fourth quarter, we anticipate strong sales growth versus the prior year, driven by continued strength in power generation.”

“Note that we anticipate unfavorable sales to users in the fourth quarter in Resource Industries due to the timing impact that I mentioned a moment ago.”

“In Resource Industries in the fourth quarter, we expect stronger sales versus the prior year, primarily due to higher volume driven by changes in dealer inventory.”

“By segment, in Construction Industries, we expect a strong sales increase in the fourth quarter versus the prior year on volume growth, driven mainly by the dealer inventory tailwind previously mentioned.”

“We expect price to be roughly flat for the enterprise.”

“We expect machine dealer inventory to decline slightly in the quarter compared to a $1.6 billion decrease in the prior year, which should result in a sales tailwind for the fourth quarter.”

“Based on what we see today, we anticipate strong sales growth versus the prior year with higher sales volume across all three primary segments.”

“On taxes, as I mentioned, we now anticipate our 2025 global annual effective tax rate to be 24%, excluding discrete items.”

“We continue to expect restructuring costs of approximately $300 million to $350 million this year.”

“This assumes that the net incremental impact of tariffs will be greater in the fourth quarter than in the third, primarily due to the timing of tariff rate changes.”

“Based on the tariffs announced in 2025 and expected to be in place on November 1, we expect the impact from incremental tariffs for 2025 to be around $1.6 billion to $1.75 billion, net of some mitigating actions and cost controls.”

“Including the net impact from incremental tariffs, we expect full year adjusted operating profit margin to remain near the bottom of the target range.”

“Excluding the net impact from incremental tariffs, the full year adjusted operating profit margin is expected to be in the top half of our margin target range.”

“Against this supportive backdrop, we now expect full year 2025 sales and revenues to increase modestly versus 2024, a slight improvement compared to our expectations last quarter.”

“Based on what we see today, we are optimistic about our top line momentum supported by healthy demand signals, including a robust backlog and growth in sales to users.”

“We continue to anticipate CapEx spend of around $2.5 billion this year.”

“Transportation is expected to remain stable.”

“For reciprocating engines and services, we continue to expect softness in well servicing due to ongoing capital discipline, industry consolidation and efficiency improvements in our customers' operations.”

“In oil and gas, we expect moderate growth in 2025.”

“And finally, in Energy & Transportation, we expect strong growth in full year sales for power generation compared to last year.”

“We anticipate lower sales to users in 2025 compared to last year as customers continue to display capital discipline.”

“With ongoing weaker construction activity in Latin America, we now expect to be about flat for the full year.”

“In EAME, we expect growth for the year, driven by healthy construction activity in Africa and the Middle East and improving economic conditions in Europe.”

“In Asia Pacific, we anticipate full year sales to users to be about flat.”

“Full year dealer rental revenues are also expected to grow, and we anticipate dealer rental fleet loading will increase in the fourth quarter compared to the prior year.”

“We continue to expect full year growth for sales to users.”

“We continue to anticipate full year growth in Construction Industries sales to users despite softness in the global industry.”

“We also expect ME&T free cash flow to be above the midpoint of the $5 billion to $10 billion target range.”

“Including the net impact from incremental tariffs, we expect full year adjusted operating profit margin to be near the bottom of the target range, corresponding to our current expectation for full year sales and revenues.”

“Excluding the net impact of incremental tariffs, full year adjusted operating profit margin is expected to be in the top half of our target margin range.”

“Based on the incremental tariffs announced in 2025 and expected to be in place by November 1, we expect the full year net impact from tariffs to be between $1.6 billion and $1.75 billion.”

“We continue to expect full year services revenues to be about flat versus 2024.”

“Given the strength of our three -- across our three primary segments, we now expect full year 2025 sales and revenues to be higher than we previously anticipated, resulting in modest growth versus 2024.”

“When taking into account the net impact from incremental tariffs, we expect fourth quarter enterprise adjusted operating profit margin to be lower versus the prior year.”

“Excluding the net impact of incremental tariffs, fourth quarter adjusted operating profit margin is expected to be higher versus the prior year.”

“We also expect the year-over-year impact of price realization to be about flat in the fourth quarter.”

“Sales growth is expected to be driven by higher volumes in all three segments.”

“For the fourth quarter, we anticipate strong sales growth versus the prior year.”

“In E&T, as you know, we're putting capacity in. Demand is really strong. And so we've been able to take pretty regular price increases, and we expect that trend to continue.”

“So that gives us -- obviously, the backlog going up as well gives us good momentum heading into the fourth quarter and into next year.”

“In 2026 and beyond, we would expect a positive benefit to the tax rate versus the previous estimated tax rate for 2025, subject to a consistent mix of profits.”

“I would expect us to continue to see momentum in there. But we are getting pretty extended on some of our products in E&T, and I'd like to try to at least get that stabilized or brought back in if we can.”

“And as we mentioned, dealer rental revenue has been growing despite the fact they hadn't loaded in the first half. So we think that some of that is the timing of load, and we'll start to see that pick up in the second half.”

“We've been through a period of time year-over-year, where that loading has diminished. We expect now to start to see that to come back to a more normalized level as we move into the second half of this year.”

“We do expect a strong fourth quarter for Construction Industries on top of a strong performance of STUs in the third quarter.”

“Net-net, in CI, the impact of the merchandising and volume in the second half, we anticipate to be a positive impact to our business.”

“As you think about pricing towards the back half of this year, we'll lap those price merchandising program. So the headwind will become a little bit less year-over-year as we move towards the end of the year.”

“We expect about 25% of the third quarter tariff impact will be incurred in Energy & Transportation.”

“We expect about 20% of the third quarter tariff impact will be incurred in Resource Industries.”

“We expect about 55% of the third quarter tariff impact will be incurred in Construction Industries.”

“We also expect higher sales in oil and gas driven by Solar Turbines and turbine-related services. Price realization should remain favorable as well.”

“The impact of price is expected to be similar to what we saw in the second quarter versus the prior year.”

“This headwind should continue to diminish in the fourth quarter.”

“We expect our sales merchandising programs will continue yielding results, supporting strong sales to users, but a headwind to our price realization in the quarter with the unfavorable impact, roughly half the size we saw in the second quarter of 2025.”

“we anticipate third quarter sales will grow moderately versus the prior year, with higher volumes across all three primary segments.”

“we do not currently expect this change to have a material impact on our 2025 effective global tax rate, which we have previously estimated to be 23.0% for 2025, excluding discrete items.”

“We now expect restructuring costs of approximately $300 million to $350 million in 2025.”

“we expect ME&T free cash flow will be around the middle of the $5 billion to $10 billion target range, or around $7.5 billion.”

“Due to the timing of recent rate changes, the headwind is likely to be larger in the fourth quarter when compared to the third quarter.”

“This assumes higher net incremental tariff impacts in both the third and fourth quarters compared to the second quarter level.”

“we expect the net impact from incremental tariffs for 2025 will be around $1.3 billion to $1.5 billion, net of some mitigating actions and cost controls.”

“However, we anticipate they will be lower when incorporating the net impact of incremental tariffs.”

“Excluding this tariff impact, our second half margins are expected to be stronger than the prior year.”

“We expect some adverse price realization in the second half versus the prior year, although this will be at a lower level than in the first half.”

“Energy & Transportation sales should grow in the second half as well, driven by the strength of our backlog and robust order activity.”

“we continue to expect machine dealer inventories will be about flat for the full year, which implies some net build in the second half, versus a decrease in the corresponding time period in 2024.”

“we anticipate higher machine volume, including sales to users growth in the second half versus the prior year.”

“we now anticipate slightly higher sales this year with a stronger second half than is typical.”

“We continue to anticipate CapEx spend of around $2.5 billion for the year.”

“Demand for products and industrial applications is expected to improve from previous lows and transportation is expected to remain stable.”

“In oil and gas, we expect moderate growth in 2025.”

“We expect full year growth for power generation as demand remains strong for both prime and backup power applications driven by increasing energy demands to support data center growth, related to cloud computing and generative AI.”

“We currently anticipate lower sales to users in 2025 compared to last year as customers continue to display capital discipline.”

“Despite weaker construction activity in Latin America, we expect sales to users growth for the year.”

“In EAME, we expect moderate sales to users growth for the year driven by healthy construction activity in Africa and the Middle East and improving economic conditions in Europe.”

“In Asia Pacific, we anticipate full year sales to users growth.”

“Full year dealer rental revenues are also expected to grow as dealer rental fleet loading is expected to increase in the second half of the year.”

“Including the net impact from incremental tariffs we expect full year adjusted operating profit margin to be in the bottom half of the target margin range.”

“Full year services revenues are expected to be about flat versus 2024.”

“the net impact of tariffs was around the top end of our estimated range for the quarter and is likely to be a more significant headwind to profitability in the second half of 2025.”

“we're expecting that to halve in the third quarter. We expected that to narrow further in the fourth quarter. There will still be some impact in the fourth quarter, and there will still be some drag through into 2026, subject to any other decisions we take around pricing, which we may take as we move into 2026.”

“I would say in this year, we're pretty full on large engines related to the data center standpoint.”

“Effectively though, we start lapping the impact of merchandising programs, which start to come through stronger in the third quarter. There will still be some impact the third quarter, moderating from where we are currently. And obviously, as we move into the fourth quarter, we'll get year-on-year about the same.”

“For Energy & Transportation, we would be expected to incur an additional headwind of about 25% of the net tariff costs in the second quarter.”

“In addition, Resource Industries will be expected to incur an additional headwind of about 25% of the net tariff quarters -- tariff costs in the second quarter.”

“Now taking tariffs into account, we would expect about 50% of the second quarter net tariff -- enterprise tariff impact of $250 million to $350 million to be incurred in Construction Industries.”

“Moving on, we continue to expect restructuring costs of approximately $150 million to $200 million in 2025, and our anticipated annual effect of global tax rate remains at 23% for 2025 excluding discrete items.”

“In addition, we also do not expect a significant decrease in machine dealer inventory as we saw in the fourth quarter of 2024 and still expect dealers to hold inventories about flat for the full year.”

“As we said in January, we expect the impact of negative price realization to be greater in the first and second quarters of the year. This will moderate as we move into the second half.”

“However, in our alternative scenario, assuming the tariffs in place today remain for the duration of 2025, and without any additional mitigation actions, which is unlikely to happen, we would still expect to remain within the margin target range at the expected levels of sales and revenues.”

“We continue to anticipate higher CapEx spend this year, likely to be around $2.5 billion.”

“Demand for products in industrial applications is expected to remain at a relatively low level, while transportation remains stable.”

“For oil and gas reciprocating engines and services, we expect continuing softness in well servicing due to ongoing capital discipline by our customers, industry consolidation and efficiency improvements in our customers' operations.”

“Demand remains strong in power generation for both Cat reciprocating engines and solar turbines.”

“In the event we see negative economic growth in the second half of the year, we would expect full year 2025 sales and revenues to only be down slightly versus 2024.”

“ME&T free cash flow would also be in the top half of the $5 billion to $10 billion target range.”

“In this scenario, we would also expect adjusted operating profit margins to be in the top half of the target margin range based on the corresponding level of sales and revenues.”

“We continue to expect to return substantially all ME&T free cash flow to shareholders over time through dividends and share repurchases.”

“This scenario could result in full year 2025 sales and revenues to be only down slightly versus 2024.”

“Yes Tim, thanks. I think, as I tried to indicate to David, there are other factors within manufacturing costs which go the other way - absorption will be one of them, slightly going against, obviously, because our intention would be effectively to reduce volume next year, which will impact our rate of absorption and potentially inventory as well.”

“We do expect some marginally negative impact in the first quarter, as we said, and that would be mostly due to the fact that obviously we are also putting merchandising programs particularly where we think about things like heavy construction, coring and aggregates are the major areas that will be affected there.”

“Overall, just really a timing issue related to dealer inventory mostly and the timing of price. When you take those two things out, effectively sales to users should actually be broadly much the same, first half to second half. There is no demand change we’re expecting as we go through the year.”

“For recip, we expect engine services to be slightly down for the year, really driven by gas compression and well servicing.”

“We are expecting moderate growth in 2025 for oil and gas in total.”

“On material costs, our expectations are that material costs will decline in 2025; however, there are some offsets within manufacturing costs which go the other way.”

“We do not expect to see the margin benefit we typically see in the first quarter of the year as compared to the fourth quarter of the prior year, which is generally in the range of 100 to 200 basis points.”

“We expect there will be improvement in first quarter margins offsetting the volume impact in the first quarter due to stronger volume in the fourth quarter than is typical.”

“We would expect these price impacts to be greater for machines in the first half of the year as the noticeable impact of post-sales merchandising programs started in the third quarter of 2024, making for an easier comparison in the second half.”

“As we expect dealer inventory to be about flat by year end, we should see a tailwind to sales in the fourth quarter as we don’t expect a similar machine dealer inventory change as we have seen in the last two years.”

“In 2025, we anticipate that trend to continue to be more pronounced as sales in the first quarter should account for a lower percentage of full year sales than is typical by about 100 basis points.”

“We anticipate CapEx of about $2.5 billion in 2025 as we continue to make disciplined investments that are right for our business, governed by a focus on growing absolute OPACC dollars.”

“The first quarter of 2025 will be impacted by a $1.4 billion cash outflow related to the payout of last year’s incentive compensation.”

“Higher volumes and favorable price in energy and transportation should drive sales growth, though sales remain constrained until the benefits of the investments we are making in large engines begin to flow through beyond 2025.”

“In resource industries, we anticipate slightly lower sales versus 2024 driven by unfavorable price realization and slightly lower volume.”

“By segment, lower sales in construction industries and resource industries will be partially offset by sales growth in energy and transportation.”

“While the impact of the share buyback should be positive, we expect to have less ME&T free cash flow to deploy in 2025.”

“We expect a slight headwind in other income and expense in 2025 primarily due to lower interest income, mostly due to lower interest rates, as well as the absence of the positive currency benefit from ME&T balance sheet translation that occurred in 2024.”

“On margins, the impact of price together with high depreciation costs due to the investments we are making should result in adjusted operating profit margins being in the top half of the target range with the expected level of sales, rather than being above the top end of the range, as occurred in 2024.”

“Due to the impact of post-sales merchandising programs, price realization should account for about a 1% decrease in sales for the full year.”

“We expect growth for turbines and turbine-related services in oil and gas.”

“We expect reciprocating engines and services to be slightly down in 2025 due to continuing capital discipline by our customers, industry consolidation, and efficiency improvements in our customers’ operations.”

“For oil and gas, after a flat year in 2024, we expect moderate growth in 2025.”

“Through continued focus on improving manufacturing efficiencies, along with initial stages of our investment to increase large engine output capacity, we expect growth in reciprocating engines for power generation in 2025.”

“Moving to energy and transportation, demand is expected to remain strong in power generation, and we expect growth for both Cat reciprocating engines and solar turbines.”

“We also expect lower dealer rental fleet loading compared to 2024, although dealer revenue is expected to grow.”

“In 2025, we expect continued strength in energy and transportation to mostly offset lower sales in construction industries and resource industries.”

“At this point in time, we expect that reduction we see to bring about the inventory overall to about flat year-over-year.”

“We are now increasing our expectations for ME&T free cash flow, which we anticipate to be near the top of our target range for the full year.”

“We continue to expect adjusted operating profit margin to be above the top end of the target range for the full year based on our expected sales levels.”

“In Energy & Transportation, we expect a higher margin versus the prior year, primarily impacted by favorable price realization.”