Caterpillar pushes profit higher
Machinery giant has offset rising costs, due in part to metal tariffs, with price increases While Caterpillar narrowly beat expectations, the outlook for more rising costs spooked investors.
Caterpillar Inc. reported higher profit thanks to price increases and rising sales, offsetting higher costs to make and ship its machinery due in part to metal tariffs.
Like other manufacturing companies, Caterpillar has been working to ramp up production while keeping a lid on rising costs for materials and transport. Caterpillar said on Tuesday that lead times and availability have been hurt by constraints for some parts and components. “The sharp increase in demand has led to supply chain challenges across the industry,” the company said in a release on Tuesday.
Though Caterpillar narrowly beat expectations for profit and warnings in the quarter, the outlook for more rising costs spooked investors. Caterpillar’s shares fell 5.9% in premarket trading on Tuesday.
Caterpillar said it would raise prices 1% to 4% worldwide next year on most machines and engines to offset some of the higher costs. Other manufacturers have also said they are passing on higher costs by raising prices.
Caterpillar said recently imposed tariff costs reached about $40 million in the third quarter. The giant machinery maker now expects the impact to be at the low end of its previously provided range of $100 million (U.S.) to $200 million for the year. Caterpillar reported adjusted earnings of $2.86 a share in its third quarter, above last year’s $1.95 and analyst expectations of $2.85. In the fourth quarter, Caterpillar said higher prices and operational efficiencies would offset higher material and transportation costs.
The company reported its latest monthly retail sales on Monday with total machine sales rising 21% globally in the three months through September, down from the 23% growth seen in August and 24% growth seen in July.
Construction equipment sales in Asia rose11%, down from19% in August. Analysts have been closely watching companies with exposure to China over a potential slowdown there. Last week, China’s reported its slowest economic growth rate since the financial crisis. Caterpillar said Tuesday that increased nonresidential building construction and infrastructure activities in China lead to improved demand in China and higher dealer inventories.
The Deerfield, Ill.-based company said sales of its excavators, bulldozers and other equipment rose 19% to $12.76 billion in its third quarter.
Caterpillar reaffirmed its adjusted earnings per share guidance for the year of $11 to $12.
Total sales, including revenue from the company’s financial products, rose 18% to $13.51 billion. The company’s full-time workforce grew to 123,100 employees as of Sept. 30, up from 114,900 a year before.
In all, the company reported a third-quarter profit of $1.73 billion, or $2.88 a share, up from $1.06 billion, or $1.77 a share, a year earlier.
Analysts polled by Thomson Reuters had forecast $13.29 billion in sales.