Caterpillar Q2 Earnings Beat Expectations, Autonomous Truck Business Thriving

This Week In The Road to Autonomy Index — For the week of July 31, 2023, The Road to Autonomy Index declined 1.98%, while the S&P 500 declined 2.29%. The Road to Autonomy Index outperformed the S&P 500 by 0.31%.

The top performing stocks in The Road to Autonomy Index this week were Caterpillar which returned 6.15%, Amazon which returned 5.57% and Toyota which returned 5.52%.

On this episode, Grayson Brulte discusses Caterpillar, a The Road to Autonomy Index component company Q2 2023 earnings. For the quarter Caterpillar reported sales and revenues increased 22% to $17.3 billion with a profit per share of $5.67 beating Wall Street expectations of $4.50 per share as polled by FactSet.

In the words Seth Weber, Equity Analyst at Wells Fargo; Caterpillar “continues to out-execute our expectations”. The Caterpillar business is firing on all cylinders and led by the growth in their construction division where sales rose 19% to $7.2 billion in the quarter with a 20.8% margin. As sales in the construction division grow at a healthy pace, CAT is continuing to invest in and grow their autonomous truck division.

CAT reported they currently have 600 autonomous trucks in operation around the world. This is the largest deployment of autonomous trucks in the world and currently the most profitable deployment of autonomous trucks.

Over the next 12 to 18 months, both Cruise and Waymo will surpass CAT to take the crown for having the largest deployment of autonomous vehicles or trucks in the world. While Cruise and Waymo will both pass CAT in terms of the size of their autonomous deployments, in our opinion CAT will retain the title of the world’s most profitable autonomous vehicle deployment.

The market for CAT to sell autonomous trucks is expanding as mine operations with little as 12 to 14 trucks are currently looking at deploying CAT autonomous mining trucks according to Jim Umpleby, Chairman and CEO of Caterpillar.

Mr. Umpleby and the Caterpillar board clearly realizes the economic benefits that can be achieved from autonomy for their clients, CAT is investing to deliver those products as Mr. Umpleby stated the following on the Q2 earnings call; “We’re certainly long-term bullish about that business”.

Imperial Oil, a Caterpillar customer, has converted 73 out of their 79 Caterpillar 797 heavy-haul trucks to autonomous. With the remaining trucks becoming autonomous by the end of Q3 2023. By converting the CAT trucks to autonomous trucks, Imperial Oil is seeing unit cash benefits of at least $1 dollar per barrel and potential for productivity upside around 10% to 15% as compared to a staffed truck.

Autonomy is increasing efficiency for Imperial Oil and profits for Caterpillar. It’s a win-win scenario that benefits shareholders of both companies. It is this approach that more companies such as Amazon, a The Road to Autonomy Index component company should consider as there are immense benefits.

Amazon, currently in the process of revamping their grocery strategy has an opportunity to both gain market share in grocery which currently stands at 1.8% and usher in the era of autonomous trucking. To capitalize on this opportunity, Amazon should for one week have all items at one of their newly refreshed Amazon Fresh Stores in either Chicago or California be delivered by autonomous trucks.

By having the deliveries done by autonomous trucks, Amazon will be able to demonstrate to the public the power of autonomy — cost savings. On average we estimate that when autonomous trucks are integrated into the grocery supply chain, the cost of groceries could decrease by 20%.

For one week, have all items at those stores discounted by 20% and highlight the fact that this was achieved because of autonomy. Doing this would demonstrate to the public the power of autonomy, while demonstrating the positive economic impact that autonomy will have on their wallets.

If this was done, overnight Amazon would become the most popular grocer in terms of consumers wanting to “try their store” because of the cost savings. Morgan Stanley Research estimates that 47% of shoppers started shopping at a new grocer in 2023 as compared to 41% in 2022 because of inflation. Lowering costs by 20% because of the economic savings created by autonomy will help to usher in the autonomy economy.

Today we are merely at the starting line for what is to come with autonomy and its economic impact on society. We are at the dawn of The Autonomy Economy. Autonomy will be one of the largest industries in the future and the time to prepare is now.

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The Road to Autonomy Index®

The Road to Autonomy Index is an autonomous vehicle index comprised of 38 publicly-traded companies. The Index is a rules-based equity benchmark index that is calculated by Standard and Poor’s Dow Jones Indices. The Index measures the performance of a basket of global companies that are involved in the development and commercialization of autonomous driving technologies.

Included in the Index are companies that are developing autonomous vehicles (self-driving cars), autonomous trucks and off-road specialty vehicles. As well as transportation, technology, industrial and services companies that have identified autonomy as a key component of their growth strategies. 

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