(Reuters) -Caterpillar warned on Tuesday U.S. tariffs would pose significant challenges in the second half of the year and cost the construction equipment maker up to $1.5 billion in 2025.
Sweeping tariffs have pushed up costs across the company’s supply chain as it imports crucial components including sensors for its products, even as many firms rush to localize production.
“Impact of tariffs was around the top end of our estimated range for the quarter and it’s likely to be a more significant headwind to profitability in the second half of 2025,” CEO Joe Creed said.
Shares of Caterpillar, often viewed as bellwether for the industrial economy, fell about 1%, after it also flagged a tariff impact of $400 million to $500 million in the second quarter.
In the current earnings season, companies have reported a combined loss of $12.1 billion to $13.4 billion between July 16 and August 1, Reuters’ global tariff tracker shows. A majority of these were from the industrial and manufacturing segment.
Trump has said the tariffs are a response to persistent U.S. trade imbalances and declining manufacturing power, and that the moves will bring jobs and investment to the nation.
WEAK CONSTRUCTION ACTIVITY
Even though Caterpillar has been offsetting the impact of supply-chain snarls and cost inflation through price hikes, a slowdown in U.S. construction spending due to higher interest rates hit second-quarter margins for some of its equipment.
Quarterly revenue in the Asia Pacific region fell 2% to $2.89 billion. Its North American sales, which accounts for more than half of overall revenue, fell 2% to about $8.9 billion.
Adjusted profit in the second quarter fell to $4.72 per share, compared with estimates of $4.90, according to data compiled by LSEG. Its sales and revenue fell 1% to $16.7 billion from a year ago.
Still, the company expects its annual sales and revenue to be slightly higher than 2024, leaning on potential annual growth in demand for its power generation products needed to support data centers.
Data center-led sales could remain a bright spot, CFRA Research analyst Jonathan Sakraida said, although a broadening of growth across its operating segments would be needed.
Including tariffs, Caterpillar forecast 2025 adjusted profit margins in the bottom half of its annual target range.
(Reporting by Nathan Gomes in Bengaluru; Editing by Arun Koyyur)
Comments