Arthur J. Villasanta – Fourth Estate Contributor
Deerfield, IL, United States (4E) – Caterpillar, Inc, the world’s largest construction equipment manufacturer, yesterday revealed disappointing 2018 guidance, saying rising costs stemming from Trump’s tariffs are eating into its revenues and profit.
Caterpillar’s shares fell 7.5% at the news. It was worst day for Caterpillar stocks on Wall Street since Aug. 8, 2011. The stock is down more than 31 percent from all-time highs in January. It fell even as Caterpillar said its 2018 profit per share hit $2.88, a third-quarter record.
Caterpillar said the impact of tariffs on its third-quarter material costs was about $40 million. “For the full year of 2018, we expect the impact of recently imposed tariffs will be at the low end of the previously provided range of $100 million to $200 million,” said Caterpillar.
Caterpillar pointed out its manufacturing costs “were higher due to increased material and freight costs. Material costs were higher primarily due to increases in steel prices and tariffs. Freight costs were unfavorable primarily due to supply chain inefficiencies as the industry continues to respond to strong global demand.”
Caterpillar hopes to more than offset the impact of rising material costs by raising prices while boosting “operational excellence and cost discipline.”
The company said it notified its dealers in the third quarter of the upcoming price increases ranging from 1% to 4% worldwide on machines and engines with certain exceptions. The new, higher prices will take effect in January 2019, and are “a result of current industry factors and general economic conditions.”
Adjusted earnings per share in the third quarter was $2.86, slightly higher the $2.85 expected by analysts. Caterpillar reported revenues of $13.51 billion, which was 18% higher year-on-year. Its global workforce increased by 8,200 from the end of the third quarter of 2017 to 123,100 people worldwide.
“This was the best third-quarter profit per share in our company’s history,” said Caterpillar CEO Jim Umpleby. “Our global team continues to do excellent work focusing on our customers’ success and executing our strategy for profitable growth.”
Caterpillar said sales of its excavators, bulldozers and other heavy machinery rose 19 percent to $12.76 billion for the quarter.
Seven months into the U.S. tariffs on imported aluminum and steel, Caterpillar is trying to limit expenses to cope with a 36 percent rise in the price of hot rolled steel over the past year.
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