Caterpillar 4Q16 Earnings Call Notes

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James Umpleby

Michael DeWalt

China positive

“Construction in China has been positive, and that’s good. But that said, it’s dependent upon continued economic growth and government support for construction in China as we go into 2017.”

Not seeing big increase in CapEx from mining customers in 2017

“Now, in terms of concerns, and we talked about these in the release, mining customers, our estimates and what we’ve read, we’re not seeing – we’re seeing better sentiment, for sure, but we’re not seeing expectations for a big increase in CapEx in 2017, although it does look like that could occur in 2018. We’ve had weakness in North American construction over the past year. There’s been a lot of used equipment in the market. The slide in oil and gas over the last couple of years has been a negative for our sales.”

Not looking for major declines in US construction but maybe a little softer

“Let me try to address that, Ross. We’re not looking for major declines in North America next year. On balance, Construction looks – our Construction industry segment looks fairly neutral year-to-year. Our view is that the Middle East and North America will be a little softer, and Asia Pacific may be up a little, but we’re not signaling some large continuing decline. I wouldn’t want to give you that impression whatsoever. And we have a range out there. And you never know if economic growth is faster than we think, if tax reform comes sooner, if infrastructure spending comes sooner, maybe we can be towards the high end. So I don’t want to make it sound like we’re super negative on Construction, because that’s not the case.”

Pricing environment not getting any worse

“I think what’s happened is that stabilized. It doesn’t look like it’s getting any worse. I don’t think the pricing environment is any better on an absolute basis, but we don’t see it getting kind of worse from here. We do use our operating and execution model, and you don’t want to be doing silly things. You don’t want to, for example, have big sales discounts on products you don’t make much money on.”