Caterpillar Weighs in on China Trade War Concerns

The CEO of Caterpillar, Jim Umpleby, sat down with “Mad Money” host Jim Cramer this week and discussed the trade war with China.

Umpleby remarked, “We’ve navigated trade tensions in our 94-year history, this is not new for us.”

He added, “We’re very comfortable still meeting our forecast dealing with those challenges so again it’s a part of what we do.”

“The Caterpillar team improved operating margin from 11% in 2014 to 16% in 2018 in just 4 years,” he also said.
According to the CEO, business “continues to be strong” despite an ongoing trade dispute between the U.S. and China with tariffs levied on both sides.

“We saw a big increase there in 2017, 2018, and it’s continuing in 2019 so far,” said Umpleby. “We’re very comfortable still meeting our forecast dealing with those challenges, so, again, it’s a part of what we do. We’ve seen this before, we’ve been through it, we’ll manage our way through this situation.”

Umpleby revealed that company management has focused on improving operating margins and building its services business, he said.

According to the CEO, Caterpillar has bested its 2014 margins in 2018 and produced $55 billion worth of sales each year.

“The Caterpillar team improved operating margin from 11% in 2014 to 16% in 2018 in just 4 years,” he said. “Last year we achieved record earnings per share at that $55 billion sales level that was 17% below what we had in 2012 at $66 billion [sales].”

The company wants to double the $14 billion in service revenue it produced in 2016 in the next ten years.
“We’re going for 1 million connected assets by the end of the year,” he said. “And services is … everything that we do with a customer after we sell a new piece of equipment, and we’re working closely with our dealers to find more ways to add customer value through services.”

Disclaimer: We have no position in Caterpillar Inc. (NYSE: CAT) and have not been compensated for this article.