CAT Caterpillar Inc

By Austen Hufford 

Caterpillar Inc. cut its profit forecast for the year, saying that global economic uncertainty is prompting customers to hold off on big purchases.

The Deerfield, Ill.-based maker of asphalt pavers and backhoe loaders said on Wednesday that sales of its machines fell across most of its segments and regions as the company's dealers reduced their inventories and customers bought fewer machines than expected.

Caterpillar now thinks sales will decline this year compared to 2018.

"People who are buying large capital equipment are impacted by the uncertainty in the global economy," Caterpillar financial chief Andrew Bonfield said Wednesday in an interview. "Our customers are not in financial difficulties. Our customers are being cautious."

Shares were flat in premarket trading as the company missed revenue estimates by analysts for the first time since the fourth quarter of 2016.

The company, which sells its construction equipment and mining machines to customers in 193 countries, is widely viewed as a barometer for global economic health. This year, the world-wide economy is expected to grow at its slowest rate since the 2009 recession, according to the International Monetary Fund. In the U.S., there are concerns that a decline in manufacturing is starting to weigh on the broader economy. In China, business activity is continuing to decelerate.

Caterpillar sells to dealers who then sell to customers. Global demand by the company's end-customers rose 6% in the three months through September even as dealers cut their inventories of products like excavators and pipelayers. The company expects demand by customers to be flat in its current fourth quarter and for dealers to continue to reduce their inventory levels.

As a major manufacturer with a global supply chain, Caterpillar is facing higher costs as a result of tariffs enacted by the U.S. in its trade fight with China and other nations. Caterpillar said it now expects tariff costs to be below $250 million, under its previous expectation of $250 million to $300 million in tariff-related costs. The company had $110 million in tariff-related costs last year.

Caterpillar said higher prices increased revenue by $86 million in the quarter. That was offset by volume declines, which reduced revenue by $751 million.

In all for the third quarter, Caterpillar said revenue fell 5.6% to $12.76 billion, below the $13.4 billion expected by analysts polled by Factset.

Profit per share fell to $2.66 from $2.88 in the same quarter a year before. Analysts polled by FactSet were expecting $2.90.

--

Patrick Thomas

contributed to this article.

Write to Austen Hufford at austen.hufford@wsj.com

(END) Dow Jones Newswires

October 23, 2019 08:48 ET (12:48 GMT)

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