Hopes Run High for $20M Phenix City Development

Caterpillar Raises Dividend, Sets New Financial Targets, Gives Updated Enterprise Strategy at Investor Day

Thu May 02, 2019 - National Edition
Caterpillar


Caterpillar has significantly improved its financial performance over the course of the last two years.
Caterpillar has significantly improved its financial performance over the course of the last two years.

Caterpillar will host a meeting with investors and analysts May 2, detailing the progress made in executing the company's enterprise strategy, its plans for future profitable growth and its intention for more consistent and enhanced return of capital to shareholders.

"Our enterprise strategy for profitable growth is working. We achieved or exceeded the financial targets we communicated during our 2017 Investor Day, which resulted in record profit per share in 2018 and the first quarter of 2019," said Caterpillar Chairman and CEO Jim Umpleby. "We will continue to execute our strategy while investing to double services sales by 2026, an area of significant opportunity for further profitable growth."

Strategy Driving Improved Profitability, New Margin Targets

Caterpillar has significantly improved its financial performance over the course of the last two years. On about $55 billion of sales in 2014, Caterpillar's adjusted operating margin performance was 11 percent. At the 2017 Investor Day, Caterpillar targeted improving adjusted operating margin by 2 percent to 5 percent the next time sales returned to that level. In 2018, Caterpillar sales and revenues were again about $55 billion and its adjusted operating margin of 16 percent was at the top end of the targeted improvement range. The company is now targeting future adjusted operating margins through the cycles of three to six percentage points above historical performance from 2010 to 2016.

Caterpillar attributes much of its improved profitability, as well as its confidence to achieve future targets, to the execution of its enterprise strategy for profitable growth through operational excellence and investing in expanded offerings and services. These investments are guided by the Operating and Execution Model, which helps the company allocate resources to the products and services that generate the greatest returns. With the success of the company's strategy execution, strong cash flow generation and its commitment to maintaining a competitive and flexible cost structure, Caterpillar's balance sheet remains strong. The existing balance sheet capacity will also support inorganic growth opportunities.

Returning Value to Shareholders

Reflecting this improved performance and profitability, the company's board of directors authorized an increase to the quarterly cash dividend of 20 percent to $1.03 per share of common stock, payable August 20, 2019, to shareholders of record at the close of business on July 22, 2019. Caterpillar expects to increase the dividend in each of the following four years by at least a high single-digit percentage. With its remaining free cash flow, the company intends to repurchase shares on a more consistent basis, with the goal of at least offsetting dilution in market downturns.

"Through the execution of our strategy, Caterpillar is now a stronger and more profitable company that can produce higher free cash flow through the cycles," said Umpleby. "We plan to return substantially all ME&T free cash flow to shareholders through dividend increases and more consistent share repurchases to create more long-term value for shareholders."

Emphasis on Services Growth

Caterpillar's executive leadership team will describe its plans to grow services, which offer additional opportunity for profitable growth. Caterpillar intends to double ME&T services sales to about $28 billion by 2026, from a 2016 baseline of about $14 billion.

Caterpillar's services offerings encompass all the ways the company supports customer success after the equipment purchase, including aftermarket parts sales and digitally-enabled solutions. Services aim to maximize asset utilization and minimize downtime for customers, making them more efficient and lowering their owning and operating costs while providing a more consistent revenue stream for Caterpillar and improving profitability through the cycles.

The full investor presentation can be found at www.caterpillar.com/investors.

For more information, visit www.caterpillar.com.