Caterpillar's Profit Outlook Dims as China Slows and Costs Bite -- 2nd Update
28 Januar 2019 - 4:37PM
Dow Jones News
By Austen Hufford
Caterpillar Inc. set lower-than-expected profit targets for
2019, as China's slowing economy and higher material and
transportation costs weighed on the machinery giant.
A growing number of industrial companies have said they are
making fewer sales in China, threatening a strong three-year run
for U.S. manufacturers. Caterpillar has said that up to 10% of its
sales are made in China.
Like other manufacturers, Caterpillar has also raised prices to
offset rising transportation and material expenses. Some of those
higher costs are a result of U.S. tariffs on foreign goods
including steel and aluminum.
"Material costs and freight were adverse and worse than we were
expecting," Caterpillar Financial Chief Andrew Bonfield said on
Monday in an interview.
Caterpillar's shares fell 5.5% in premarket trading.
The company said it expects to make a profit of $11.75 to $12.75
a share in 2019, below what analysts were expecting. Caterpillar
said it expects a modest increase in revenue.
Caterpillar said that lower demand in China is leading to
declining sales in Asia and that the company expects the overall
market for excavators in China to be largely flat this year.
Caterpillar said costs related to tariffs came in close to the
bottom end of the $100 million to $200 million range it had
expected for 2018.
The company has said it plans to raise prices between 1% and 4%
in 2019 on most of its machines and engines to offset higher costs.
Other manufacturers have also said they raising prices to cover
higher costs. Caterpillar said Monday it benefited from these
higher prices, primarily in its construction machinery
business.
The Deerfield, Ill.-based company said sales of its excavators,
bulldozers and other equipment rose 12% to $13.6 billion in its
fourth quarter.
Caterpillar reported adjusted earnings of $2.55 a share in the
quarter, above last year's $2.16 but below analyst expectations of
$2.99, according to surveys by Refinitiv.
It was the first time Caterpillar fell short of expectations for
its adjusted earnings-per-share since the quarter ended in March
2016, and the largest percentage miss going back to at least 2014,
according to FactSet data.
Total sales, including revenue from financial products, rose 11%
to $14.34 billion, compared with analyst expectations of $14.33
billion.
In all, the company reported a fourth-quarter profit of $1.05
billion, or $1.78 a share, compared with a loss of $1.3 billion, or
$2.18 a share, a year earlier. The losses a year earlier were
driven by the impact of changes to U.S. tax laws.
Write to Austen Hufford at austen.hufford@wsj.com
(END) Dow Jones Newswires
January 28, 2019 10:22 ET (15:22 GMT)
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