Cat Financial Announces 2023 Year-End Results

Rhea-AI Summary

In 2023, Cat Financial reported revenues of $3.25 billion, a 19% increase from 2022. Profit was $563 million, up 5% from the previous year. The provision for income taxes reflected a 25% annual tax rate for 2023, compared with 26% for 2022. Retail new business volume was $12.11 billion, an increase of 7% from 2022. Past dues were 1.79%, compared with 1.89% in 2022. Write-offs, net of recoveries, were $65 million for 2023, compared with $46 million for 2022. Fourth-quarter 2023 revenues were $841 million, an increase of 16% from the fourth quarter of 2022. Fourth-quarter 2023 profit was $166 million, up 41% from the previous year.

Insights

Financial Analyst

The reported increase in revenues for Cat Financial indicates a robust growth trajectory, underpinned by a significant rise in average financing rates. This 19% revenue growth year-over-year is a substantial figure that likely reflects broader economic trends, such as rising interest rates, which can affect the cost of borrowing for both businesses and consumers. The 5% increase in profit, while modest relative to the revenue growth, suggests that the company has managed to translate higher revenues into bottom-line results, despite increased general, operating and administrative expenses.

Investors should note the moderate increase in profit before income taxes and the strategic tax management reflected by the changes in the provision for income taxes. The non-cash benefit from a reduction in the valuation allowance against deferred tax assets and the tax charge for repatriation of earnings indicate nuanced financial engineering that can affect net income. Additionally, the slight reduction in the annual tax rate may have a positive impact on future earnings.

It is also noteworthy that the company has reported a decrease in past dues and a lower allowance for credit losses, which is indicative of a healthy credit environment and effective risk management. However, the increase in net write-offs year-over-year could be a point of concern if it indicates a trend, although it currently remains a small percentage of finance receivables.

Market Research Analyst

The reported data shows that Cat Financial has experienced a considerable increase in retail new business volume, especially in North America, which suggests a strong market demand for financing solutions in this region. A 7% growth in new business volume year-over-year and a 30% surge in the fourth quarter alone could imply an expanding customer base or increased capital expenditure by existing customers. This could signal a positive outlook for the industries Cat Financial serves, such as construction and mining, which often rely on financing for heavy machinery and equipment.

Furthermore, the company's commitment to executing its strategy and providing financial services solutions worldwide, as stated by the President, indicates a focus on long-term growth and global market penetration. This strategic direction could provide resilience against regional economic fluctuations and contribute to sustained growth.

Economist

The financial performance of Cat Financial can be seen as a microcosm of the broader economic environment. The increase in average financing rates is likely a response to a changing monetary policy landscape, where central banks have been adjusting interest rates to manage economic growth and inflation. Such a scenario typically leads to higher revenues for financial institutions, but also poses the risk of impacting customer borrowing behavior and potentially slowing down economic activity.

The company's performance, particularly the increase in new business volume, suggests that the underlying economic conditions remain favorable for capital investment. However, investors should be cautious of macroeconomic shifts that could alter the business landscape, such as changes in commodity prices, trade policies, or significant shifts in monetary policy, which could impact future financial performance.

NASHVILLE, Tenn., Feb. 5, 2024 /PRNewswire/ -- 

Full-Year 2023 vs. Full-Year 2022

Cat Financial reported revenues of $3.25 billion for 2023, an increase of $514 million, or 19%, compared with $2.73 billion for 2022. The increase in revenues was primarily due to a $450 million favorable impact from higher average financing rates. Profit was $563 million for 2023, an increase of $28 million, or 5%, compared with $535 million for 2022.

Profit before income taxes was $760 million for 2023, an increase of $29 million, or 4%, compared with $731 million for 2022. The increase was primarily due to a $56 million increase in net yield on average earning assets and a $32 million favorable impact from a lower provision for credit losses, partially offset by a $57 million increase in general, operating and administrative (GO&A) expenses.

The provision for income taxes reflected an annual tax rate of 25% for 2023 compared with 26% for 2022. The provision for income taxes in 2023 included a non-cash benefit of $22 million from a reduction in the valuation allowance against the deferred tax assets of a non-U.S. subsidiary, and a tax charge of $27 million for the repatriation of earnings and change in the reinvestment position of a non-U.S. subsidiary.

During 2023, retail new business volume was $12.11 billion, an increase of $750 million, or 7%, compared with $11.36 billion for 2022. The increase was primarily driven by higher volume in North America.

At the end of 2023, past dues were 1.79%, compared with 1.89% at the end of 2022. Write-offs, net of recoveries, were $65 million for 2023, compared with $46 million for 2022. As of December 31, 2023, the allowance for credit losses totaled $331 million, or 1.18% of finance receivables, compared with $346 million, or 1.29% of finance receivables at December 31, 2022.

Fourth-Quarter 2023 vs. Fourth-Quarter 2022

Cat Financial reported fourth-quarter 2023 revenues of $841 million, an increase of $117 million, or 16%, compared with $724 million in the fourth quarter of 2022. The increase in revenues was primarily due to an $89 million favorable impact from higher average financing rates and a $31 million favorable impact from higher average earning assets. Fourth-quarter 2023 profit was $166 million, an increase of $48 million, or 41%, compared with $118 million in the fourth quarter of 2022.

Fourth-quarter 2023 profit before income taxes was $181 million, an increase of $30 million, or 20%, compared with $151 million in the fourth quarter of 2022. The increase was mainly due to a $21 million favorable impact from a lower provision for credit losses, a $14 million favorable impact from higher average earning assets and a $12 million increase in net yield on average earning assets. These favorable impacts were partially offset by a $20 million increase in GO&A expenses.

During the fourth quarter of 2023, retail new business volume was $3.60 billion, an increase of $839 million, or 30%, compared with $2.76 billion in the fourth quarter of 2022. The increase was primarily driven by higher volume in North America.

"We are very pleased with the strong performance of our business and health of our global portfolio during 2023," said Dave Walton, President of Cat Financial and Senior Vice President with responsibility for the Financial Products Division of Caterpillar Inc. "The global Cat Financial team remains committed to executing our strategy and providing financial services solutions to Caterpillar customers and dealers worldwide."

About Cat Financial

Cat Financial is a subsidiary of Caterpillar, the world's leading manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives. Cat Financial provides a wide range of financing solutions to customers and Cat® dealers for machines, engines, Solar® turbines, genuine Cat parts and services. Headquartered in Nashville, Tennessee, Cat Financial serves customers globally with offices and subsidiaries located throughout North and South America, Asia, Australia, Europe and Africa. Visit cat.com to learn more about Cat Financial.

STATISTICAL HIGHLIGHTS: 

FULL-YEAR 2023 VS. FULL-YEAR 2022 (ENDED DECEMBER 31) (Millions of dollars)
	2023			2022			CHANGE
Revenues	$	3,248		$	2,734		19 %
Profit Before Income Taxes	$	760		$	731		4 %
Profit (excluding profit attributable to noncontrolling interests)	$	563		$	535		5 %
Retail New Business Volume	$	12,105		$	11,355		7 %
Total Assets	$	33,112		$	31,957		4 %
FOURTH-QUARTER 2023 VS. FOURTH-QUARTER 2022 (ENDED DECEMBER 31) (Millions of dollars)
	2023			2022			CHANGE
Revenues	$	841		$	724		16 %
Profit Before Income Taxes	$	181		$	151		20 %
Profit (excluding profit attributable to noncontrolling interests)	$	166		$	118		41 %
Retail New Business Volume	$	3,595		$	2,756		30 %

 

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this press release relate to future events and expectations and are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as "believe," "estimate," "will be," "will," "would," "expect," "anticipate," "plan," "project," "intend," "could," "should" or other similar words or expressions often identify forward-looking statements. All statements other than statements of historical fact are forward-looking statements, including, without limitation, statements regarding our outlook, projections, forecasts or trend descriptions. These statements do not guarantee future performance and speak only as of the date they are made, and we do not undertake to update our forward-looking statements.

Cat Financial's actual results may differ materially from those described or implied in our forward-looking statements based on a number of factors, including, but not limited to: (i) disruptions or volatility in global financial markets limiting our sources of liquidity or the liquidity of our customers, dealers and suppliers ; (ii) failure to maintain our credit ratings and potential resulting increases to our cost of borrowing and adverse effects on our cost of funds, liquidity, competitive position and access to capital markets; (iii) changes in interest rates, currency fluctuations or market liquidity conditions; (iv) an increase in delinquencies, repossessions or net losses of our customers; (v) residual values of leased equipment; (vi) our compliance with financial and other restrictive covenants in debt agreements; (vii) government monetary or fiscal policies; (viii) political and economic risks, commercial instability and events beyond our control in the countries in which we operate; (ix) demand for Caterpillar products; (x) marketing, operational or administrative support received from Caterpillar; (xi) our ability to develop, produce and market quality products that meet our customers' needs; (xii) information technology security threats and computer crime; (xiii) alleged or actual violations of trade or anti-corruption laws and regulations; (xiv) new regulations or changes in financial services regulations; (xv) additional tax expense or exposure; (xvi) changes in accounting guidance; (xvii) catastrophic events, including global pandemics such as the COVID-19 pandemic; and (xviii) other factors described in more detail in Cat Financial's Forms 10-Q, 10-K and other filings with the Securities and Exchange Commission.

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SOURCE Cat Financial

FAQ

What were Cat Financial's revenues for 2023 compared to 2022?

Cat Financial reported revenues of $3.25 billion for 2023, an increase of $514 million, or 19%, compared with $2.73 billion for 2022.

What was Cat Financial's profit for 2023 compared to 2022?

Profit was $563 million for 2023, an increase of $28 million, or 5%, compared with $535 million for 2022.

What was the provision for income taxes in 2023?

The provision for income taxes reflected an annual tax rate of 25% for 2023 compared with 26% for 2022.

What was the retail new business volume for Cat Financial in 2023?

During 2023, retail new business volume was $12.11 billion, an increase of $750 million, or 7%, compared with $11.36 billion for 2022.

What were Cat Financial's fourth-quarter 2023 revenues compared to the fourth quarter of 2022?

Fourth-quarter 2023 revenues were $841 million, an increase of $117 million, or 16%, compared with $724 million in the fourth quarter of 2022.

What was Cat Financial's profit in the fourth quarter of 2023 compared to the fourth quarter of 2022?

Fourth-quarter 2023 profit was $166 million, an increase of $48 million, or 41%, compared with $118 million in the fourth quarter of 2022.