Caterpillar Inc. (NYSE:CAT)

The analysis of the annual current and deferred income tax expense data reveals several notable trends over the period from 2020 to 2024.

Current tax provision

There is a clear upward trend in the current tax provision from 2020 through 2023, increasing from $1,080 million in 2020 to a peak of $3,373 million in 2023. However, in 2024, the current tax provision slightly decreases to $3,250 million, which is still significantly higher compared to earlier years. This pattern indicates a substantial increase in current taxable income or tax liabilities over this five-year span, with a marginal reduction in the most recent year.

Deferred tax benefit

The deferred tax benefit consistently shows negative values each year, indicating a tax expense rather than a benefit from deferred taxes. The magnitude of this negative value has generally intensified over the period, starting at -$74 million in 2020 and reaching -$621 million in 2024. While the deferred tax benefit shows some fluctuations, the overall pattern suggests increasing deferred tax expenses, which may reflect changes in temporary differences, tax rates, or adjustments in deferred tax assets and liabilities.

Provision for income taxes

The total provision for income taxes, which combines current tax provision and deferred tax components, exhibits growth across the analyzed timeline. Starting at $1,006 million in 2020, it rises steadily to $2,781 million in 2023 before dipping slightly to $2,629 million in 2024. This aligns with the trends observed in the current tax provision and deferred tax benefit. The increase indicates higher overall tax charges, while the recent decline might be due to reduced current tax charges or adjustments in deferred taxes.

In summary, the data indicate a general increase in tax expenses over the five years, primarily driven by the rising current tax provisions and growing deferred tax expenses. The slight decline in both current tax provision and total income tax provision in 2024 may signal changes in taxable income or tax planning outcomes, warranting further investigation to understand underlying causes.

The analysis of the effective tax rate and its components over the five-year period reveals several notable trends and variations. The U.S. statutory tax rate remained constant at 21% throughout the observed period, serving as a stable baseline for comparisons.

Non-U.S. subsidiaries taxed at rates different from the U.S. rate

This component exhibited a downward trend from 7.1% in 2020 to 1.0% in 2023, before a slight increase to 1.4% in 2024. The consistent decrease suggests a diminishing impact of tax rate differentials from international operations, possibly reflecting changes in the geographic distribution of income or tax planning strategies.

State and local taxes, net of federal

These taxes showed moderate fluctuations, declining from 0.8% in 2020 to 0.3% in 2021, then rising to 1.0% in 2022, before settling around 0.7-0.9% in the subsequent years. This variation indicates some volatility likely tied to state and local tax policies or changes in earnings subject to these taxes.

U.S. tax incentives

Tax incentives consistently contributed to reducing the effective tax rate, with values ranging between -1.3% and -1.9%. This steady negative contribution implies ongoing utilization of tax incentive provisions to lower the overall tax burden.

Tax law change related to currency translation

This item appeared only in 2024, contributing -1.7%, indicating a newly recognized effect related to currency translation and tax law adjustments that reduced the tax expense during that year.

Nondeductible goodwill

This factor was recorded only in 2022 at 1.8%, representing a one-time increase in the effective tax rate due to nondeductibility of goodwill in that period.

Other, net

The "Other, net" category consistently reduced the effective tax rate, though its impact decreased from -2.4% in 2020 to nearly negligible levels (-0.1%) by 2023 and 2024. This trend suggests a diminishing influence of miscellaneous tax items over time.

Effective tax rate

The effective tax rate exhibited some volatility, decreasing from 25.2% in 2020 to 21.2% in 2021, then rising again to 23.6% in 2022. A downward trend resumed afterward, reaching 19.7% in 2024, the lowest in the observed period. The fluctuations appear influenced primarily by the changing impacts of non-U.S. tax rates, nondeductible goodwill, and adjustments related to currency translation, as well as the consistent effect of tax incentives and other net elements.

Research expenditures

Research expenditures show a consistent and significant upward trend over the five-year period, increasing from $193 million in 2020 to $1,735 million in 2024. This suggests an intensified focus on innovation and development activities.

Tax carryforwards

Tax carryforwards exhibit a relatively stable pattern, fluctuating slightly between $1,346 million and $1,389 million, with no clear upward or downward trend observed during the period.

Postemployment benefits

Postemployment benefits demonstrate a steady decline from $1,315 million in 2020 to $560 million in 2024, indicating a possible reduction in long-term benefit liabilities or changes in postemployment benefit plans.

Employee compensation and benefits

Employee compensation and benefits increased from $267 million in 2020 to a peak of $634 million in 2023, followed by a decline to $531 million in 2024. The overall trend is upward, reflecting higher employee-related expenses despite a slight recent decrease.

Warranty reserves

Warranty reserves generally increase from $247 million in 2020 to a peak of $325 million in 2023, with a minor reduction to $303 million in 2024, showing a moderate growth trend potentially correlating with product sales or quality assurance activities.

Post sale discounts

Post sale discounts steadily rise from $153 million in 2020 to $260 million in 2024, indicating an increasing use of sales incentives or adjustments impacting revenue recognition.

Inventory valuation

Inventory valuation data is only available for 2022 to 2024, within which it fluctuates between $138 million and $183 million, showing a slight upward tendency in the latest year.

Lease obligations

Lease obligations remain relatively stable over the five years, with values fluctuating minimally around $144 million to $159 million, indicating consistent leasing commitments.

Other, net

Other, net items display volatility, peaking at $509 million in 2021 before declining to a low of $205 million in 2023 and rising again to $288 million in 2024. This irregular pattern suggests variability in miscellaneous financial components.

Deferred income tax assets, gross

Deferred income tax assets, gross steadily increase from $4,001 million in 2020 to $5,357 million in 2024, reflecting growing future tax benefits.

Valuation allowance for deferred tax assets

The valuation allowance for deferred tax assets decreases in magnitude from -$1,009 million in 2020 to -$874 million in 2024, suggesting improved realizability of deferred tax assets.

Deferred income tax assets

Net deferred income tax assets grow consistently from $2,992 million in 2020 to $4,483 million in 2024, in line with the gross asset growth and reduction in valuation allowances.

Capital and intangible assets, including lease basis differences

This item shows a steady decrease in negative values from -$1,526 million in 2020 to -$1,270 million in 2024, indicating a reduction in contra-assets or accumulated amortization impacts.

Other outside basis differences

Other outside basis differences remain relatively stable with minor fluctuations, maintaining values around -$250 million to -$284 million, reflecting consistent adjustments in basis differences.

Undistributed profits, including translation adjustments

Undistributed profits exhibit a worsening trend from -$242 million in 2020 to -$401 million in 2023, followed by improvement to -$201 million in 2024, indicating increased volatility possibly due to foreign currency or operational results.

Deferred income tax liabilities

Deferred income tax liabilities steadily decrease from -$2,052 million in 2020 to -$1,724 million in 2024, suggesting lower future tax obligations.

Deferred income taxes, net

Net deferred income taxes show a strong upward trend, rising from $940 million in 2020 to $2,759 million in 2024, reflecting a substantial improvement in the net tax position over the period.

Deferred Income Tax Assets

Over the five-year period from 2020 to 2024, deferred income tax assets showed a consistent upward trend. Starting at 1,358 million US dollars in 2020, there was a steady increase each year, reaching 3,191 million US dollars in 2024. This represents a cumulative growth of approximately 135% over the period, indicating an expanding recognition of temporary differences that will reduce future tax liability.

Deferred Income Tax Liabilities

Deferred income tax liabilities exhibited relatively stable behavior across the same period. The values fluctuated within a narrow range, beginning at 418 million US dollars in 2020 and slightly varying to 432 million US dollars by 2024. This stability suggests that the temporary differences causing deferred liabilities have remained fairly constant.

Overall Insight

The growing disparity between deferred income tax assets and liabilities over the examined years points to an improving net deferred tax asset position. This may signal the company's increasing ability to offset future taxable income with recognized deductible temporary differences. The stable level of deferred liabilities, contrasted with the marked rise in deferred assets, reflects a positive change in the company's tax-related asset portfolio.

Total Assets

Reported total assets showed a generally upward trend from 78,324 million US dollars in 2020 to 87,764 million in 2024. A slight decline occurred in 2022, where assets fell to 81,943 million from 82,793 million in 2021, before resuming growth in subsequent years. Adjusted total assets displayed a similar pattern but maintained slightly lower values throughout the period, decreasing from 76,966 million in 2020 to 84,573 million in 2024, with a modest dip in 2022.

Total Liabilities

Reported total liabilities increased gradually from 62,946 million in 2020 to 68,270 million in 2024. The liabilities rose consistently year over year, although the growth rate was moderate. Adjusted total liabilities followed a consistent pattern closely aligned with reported liabilities, moving from 62,528 million in 2020 to 67,838 million in 2024. The adjustment impact on liabilities is minimal, indicating stable deferred income tax effects on this component.

Equity Attributable to Common Shareholders

Reported equity attributable to common shareholders demonstrated positive growth from 15,331 million in 2020 to 19,491 million in 2024. A decline was observed in 2022, where equity dropped from 16,484 million in 2021 to 15,869 million, followed by a notable recovery reaching a peak of 19,494 million in 2023 before slightly falling to 19,491 million in 2024. Adjusted equity reflected a similar trend but with consistently lower values, moving from 14,391 million in 2020 to 16,732 million in 2024. The adjustment leads to a reduction in reported equity, particularly noticeable in the years following 2021.

Profit Attributable to Common Stockholders

Reported profit attributable to common stockholders displayed strong growth over the five-year period, increasing from 2,998 million in 2020 to 10,792 million in 2024. The profit more than doubled between 2020 and 2021 and continued to rise steadily afterward. Adjusted profit figures followed the same upward trajectory but were consistently lower than the reported profits, rising from 2,924 million in 2020 to 10,171 million in 2024. The gap between reported and adjusted profits widened in the later years, suggesting increasing impacts of tax adjustments on profitability.

Summary of Trends

The data reveals a general expansion in the company’s asset base and profitability over the period analyzed. Both reported and adjusted figures reflect growth, with minor setbacks in 2022 across assets and equity. Liabilities increased moderately, maintaining a stable relationship with assets and equity. Adjustments for deferred income taxes and other factors appear to consistently reduce total assets, liabilities, equity, and profits relative to reported values, with the adjustment effect on profits becoming more pronounced in recent years. Overall, the financial position strengthened, supported by robust profit growth and increasing equity, despite fluctuations in asset levels during the period.

Over the analyzed period, the reported and adjusted net profit margins demonstrate an upward trend, indicating improving profitability. Starting from 7.68% reported in the earliest period, the margin rises steadily to 17.59% in the most recent period. The adjusted net profit margin follows a similar trajectory with slightly lower values but consistent growth, reaching 16.58% in the latest year.

The total asset turnover ratios, both reported and adjusted, show an overall increase, reflecting enhanced efficiency in asset utilization. Reported total asset turnover grows from 0.5 to a peak around 0.73 before a slight decline to 0.7, while adjusted turnover exhibits a comparable pattern but consistently remains marginally higher, peaking at 0.75 and then moderating to 0.73 in the final year.

Financial leverage ratios display relative stability with minor fluctuations. Reported financial leverage starts at 5.11, decreases slightly over the years to approximately 4.5, suggesting a modest reduction in reliance on debt financing. Adjusted financial leverage mirrors this trend, initially higher than reported figures, declining to about 4.9 before rising slightly again to 5.05.

Return on equity (ROE) evidences significant improvement, aligning with enhanced profitability and asset efficiency. Reported ROE increases markedly from 19.56% to 55.37%, with adjusted ROE showing even higher figures, culminating at 60.79% in the last year. This pattern underscores strong value generation for equity holders over time.

Return on assets (ROA) also improves consistently, reflecting better overall asset profitability. The reported ROA grows from 3.83% to 12.3%, and adjusted ROA follows a similar path, reaching 12.03%. The convergence of reported and adjusted figures over time suggests that the adjustments related to deferred income taxes have less impact on asset returns in the later periods.

In summary, the data indicate sustained enhancements in profitability, asset efficiency, and equity returns throughout the observed timeframe. Despite a slight decrease in asset turnover ratios in the final year, the overall financial performance metrics point to a robust and improving operational and financial position. The relatively stable financial leverage suggests controlled risk exposure amid these performance gains.

Profit attributable to common stockholders

The reported profit showed a consistent upward trend over the five-year period. Starting at 2,998 million US dollars in 2020, it increased significantly to 6,489 million in 2021 and continued to grow steadily, reaching 10,792 million by 2024. The adjusted profit followed a similar pattern, beginning at 2,924 million in 2020 and rising to 10,171 million in 2024, demonstrating sustained growth after accounting for deferred income tax adjustments. The difference between reported and adjusted profits remains relatively stable, indicating that deferred tax effects did not drastically alter the profitability figures.

Net profit margin

The reported net profit margin increased notably from 7.68% in 2020 to 17.59% in 2024, reflecting improved profitability relative to revenue. The margin experienced a particularly sharp rise in 2021, aligning with the surge in reported profits, followed by continued gradual improvements. The adjusted net profit margin exhibited a parallel trend, increasing from 7.49% in 2020 to 16.58% in 2024. This consistent growth in both reported and adjusted margins suggests enhanced operational efficiency and/or favorable market conditions throughout the period under review.

Total Assets

The reported total assets demonstrated a generally increasing trend from 2020 to 2024, rising from 78,324 million US dollars in 2020 to 87,764 million US dollars in 2024. A slight decline was noted in 2022 compared to 2021, where reported total assets decreased from 82,793 million to 81,943 million US dollars, before resuming growth in subsequent years.

The adjusted total assets followed a similar pattern, starting at 76,966 million US dollars in 2020 and reaching 84,573 million US dollars in 2024. The adjustment led to slightly lower asset values compared to reported figures throughout the period. The trend also includes a minor dip in 2022, after which a steady increase occurred.

Total Asset Turnover

Reported total asset turnover showed a positive development over the years, increasing from 0.5 in 2020 to a peak of 0.73 in 2023. However, it saw a small decline to 0.7 in 2024. This pattern indicates improving efficiency in using assets to generate revenue, with a slight reduction in 2024.

The adjusted total asset turnover closely mirrored the reported values but was consistently marginally higher. This ratio rose steadily from 0.51 in 2020 to 0.75 in 2023, then decreased slightly to 0.73 in 2024. The adjusted data suggests an even better asset utilization performance after accounting for income tax adjustments.

Total Assets

The reported total assets increased steadily from 78,324 million US$ in 2020 to 87,764 million US$ in 2024, showing an overall growth trend. Similarly, the adjusted total assets followed the same pattern, rising from 76,966 million US$ in 2020 to a peak of 84,842 million US$ in 2023, with a slight decline to 84,573 million US$ in 2024. This suggests a consistent expansion in asset base, with adjustments reflecting a marginally more conservative asset valuation over the periods.

Equity Attributable to Common Shareholders

Reported equity attributable to common shareholders showed growth from 15,331 million US$ in 2020 to 19,491 million US$ in 2024, with a noticeable increase between 2022 and 2023. The adjusted equity figures exhibit a similar upward trend, increasing from 14,391 million US$ in 2020 to 16,732 million US$ in 2024, but with less pronounced growth and a dip in 2022. The adjusted figures consistently remain below the reported figures, indicating the impact of deferred income tax adjustments on equity valuation.

Financial Leverage

The reported financial leverage ratio decreased over the five-year period, from 5.11 in 2020 to around 4.5 in 2023 and 2024. This decline suggests a reduction in the company's reliance on debt relative to equity. In contrast, the adjusted financial leverage ratio increased from 5.35 in 2020 to a peak of 5.59 in 2022 before declining to 5.05 in 2024. The adjusted leverage remains consistently higher than the reported values, reflecting the influence of deferred tax liabilities or other balance sheet adjustments, which result in an increased relative level of leverage.

Overall Trends

The data indicate steady growth in the asset base and equity over the period analyzed, with the adjusted values consistently lower than the reported ones, revealing the effect of income tax adjustments on the balance sheet. Financial leverage shows a decreasing trend in reported terms, suggesting improved capital structure strength, while the adjusted leverage presents more variability, highlighting the importance of considering deferred tax effects when assessing financial risk.

Profit Trends

The reported profit attributable to common stockholders demonstrates a consistent upward trajectory from 2020 through 2024. Starting at 2,998 million US dollars in 2020, it more than tripled by 2024, reaching 10,792 million US dollars. The adjusted profit follows a similar pattern, increasing steadily from 2,924 million US dollars in 2020 to 10,171 million US dollars in 2024. Both reported and adjusted profits show minor deviations between their respective values, with the adjusted figures slightly lower across all years, indicating that adjustments, potentially for deferred tax and other factors, have a modest diminishing effect on profitability measures.

Equity Trends

Reported equity attributable to common shareholders saw initial growth from 15,331 million US dollars in 2020 to a peak of 19,494 million US dollars in 2023, with a slight decrease to 19,491 million US dollars in 2024. Adjusted equity shows a more fluctuating pattern, rising from 14,391 million US dollars in 2020 to 17,314 million US dollars in 2023 before declining to 16,732 million US dollars in 2024. The adjusted equity values consistently trail the reported equity, suggesting that adjustments reduce the equity metrics, possibly by accounting for deferred taxes or other liabilities.

Return on Equity (ROE) Trends

Both reported and adjusted ROE percentages exhibit significant growth across the reviewed years, highlighting improving profitability relative to shareholder equity. Reported ROE climbs from 19.56% in 2020 to 55.37% in 2024, while adjusted ROE increases from 20.32% to 60.79% over the same period. The consistently higher adjusted ROE compared to reported ROE suggests that when adjusted for deferred income taxes or related factors, profitability efficiency is even more pronounced. This implies a commendable enhancement in generating returns for shareholders despite equity fluctuations.

Overall Insights

The data reveals robust profitability growth over the five-year span, supported by rising net profits and increasing efficiency in equity utilization. Although equity figures show some variability, particularly in the adjusted values, the steep incline in ROE metrics underscores effective capital management and improved operational outcomes. The minor differences between reported and adjusted figures highlight the impact of deferred taxation adjustments, which reduce asset and profit measurements but enhance the apparent return efficiency. These trends suggest strengthening financial health and shareholder value.

Profit Attributable to Common Stockholders

The reported profit attributable to common stockholders shows a consistent upward trend over the five periods, increasing from 2,998 million US dollars in 2020 to 10,792 million US dollars in 2024. The adjusted profit, which accounts for deferred income tax effects, follows a similar trajectory, rising from 2,924 million to 10,171 million US dollars during the same interval. This indicates sustained profitability growth with minor differences between reported and adjusted figures, suggesting limited impact from tax adjustments on net earnings.

Total Assets

Reported total assets exhibit a moderate increase from 78,324 million US dollars in 2020 to a peak of 87,476 million in 2023, followed by a slight stabilization at 87,764 million in 2024. The adjusted total assets trend aligns closely, rising from 76,966 million to 84,842 million and then marginally declining to 84,573 million in 2024. The slight divergence between reported and adjusted assets reflects adjustments primarily related to deferred tax accounting, with overall asset base growth indicating expansion or reinvestment.

Return on Assets (ROA)

Reported ROA demonstrates a marked improvement over the periods, increasing steadily from 3.83% in 2020 to 12.30% in 2024. Adjusted ROA also rises continuously, albeit with slightly lower values, from 3.80% to 12.03%. The growing ROA figures, both reported and adjusted, reflect enhanced efficiency in utilizing assets to generate profit. The narrowing gap between reported and adjusted ROA percentages over time suggests consistent operational performance and stable tax-related adjustments.

Overall Analysis

The financial data points to strong profitability growth and improving asset utilization over the five-year period. Both reported and adjusted figures reveal positive trends, with profitability outpacing asset growth, as evidenced by rising ROA metrics. The adjustments for deferred income taxes have a marginal but consistent effect on reported figures, slightly lowering profit, total assets, and ROA. The company appears to be enhancing operational efficiency while maintaining asset growth, which contributes to steadily increasing returns for common stockholders.