(Reuters) – Caterpillar on Wednesday reported lower-than-expected first-quarter results on weak construction equipment demand and outlined two scenarios for its annual sales forecast, one of which included the potential impact of extensive tariffs.
The two different scenarios by the company considered a bellwether for global economy is a sign of how difficult it was for U.S. companies to plan around President Donald Trump’s chaotic trade policies.
Shares of Caterpillar rose about 1% after the industrial giant forecast an improvement over its prior expectations under a scenario that excluded tariff impact.
Including tariffs, Caterpillar said it expects annual sales and revenue to be slightly down from 2024, but in line with its prior expectations.
“Pervasive tariffs will have a negative impact on their (Caterpillar’s) volume of sales, but their ability to flex manufacturing and backlog visibility suggests they can weather the storm,” Third Bridge analyst Ryan Keeney said.
The company expects an additional tariff-related cost of between $250 million and $350 million in its second quarter.
Its incoming CEO Joe Creed said Caterpillar has implemented several short-term actions such as cost reductions and evaluating overhead costs.
Caterpillar benefited from former President Joe Biden’s 2021 infrastructure law, a $1 trillion spending package that boosted demand for construction equipment.
But that momentum has slowed as project starts ease and private sector investment shows some hesitancy amid higher interest rates.
High borrowing costs and inflation have pressured dealers to realign inventory levels to match demand, while weakness in China’s property sector affected infrastructure spending and hurt Caterpillar’s sales in the region.
Quarterly revenue in the Asia-Pacific region fell 12% to $2.4 billion. The company does not provide a country-specific breakup for revenue.
Quarterly adjusted profit per share fell to $4.25 compared with analysts’ average estimate of $4.35, according to data compiled by LSEG.
Its first-quarter sales and revenue fell about 10% to $14.2 billion, missing expectations of $14.66 billion.
(Reporting by Nathan Gomes in Bengaluru; Editing by Arun Koyyur)
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