Caterpillar shares drop after earnings miss Street, global economic bellwether cuts guidance

Shares of Caterpillar dropped after the company posted disappointing second-quarter results as higher material costs including tariffs and lower demand in China made a dent in its profit.

Caterpillar earned $2.83 per share in the second quarter, versus consensus estimate of $3.12 per share, according to Refinitiv. Revenue also disappointed with $14.432 billion reported compared to the $14.435 billion Wall Street analysts expected, according to Refinitiv.

The heavy machinery manufacturer also lowered full-year earnings guidance to be at the lower end of previous range of $12.06 to $13.06, short of the estimate of $12.24 per share.

Shares of Caterpillar fell 3.8% in premarket trading on Wednesday following the earnings release.

The worse-than-expected results are partially due to the increase in manufacturing costs, which came from “higher material costs, including tariffs, variable labor and burden and warranty expense,” the company said.

Caterpillar’s sales in Asia-Pacific declined in the second quarter mainly because of the lower demand in China, the company said. 

The trade bellwether significantly underperformed the broad market in 2019 as global trade tensions continue to weigh. Its stock is up only about 8% compared to the S&P 500’s nearly 20% gain this year. 

Company management failed to address the earnings and revenue miss in the company’s press release, with executives trumpeting its cost structure and operations.

“We have the right strategy in place to deliver long-term profitable growth through our continued focus on strategic investments, including growing services and expanding offerings. We will also continue to focus on driving operational excellence including a flexible and competitive cost structure,” said Caterpillar Chairman and CEO Jim Umpleby in a statement.