Caterpillar warned of a sales fall in the current quarter after reporting a small decline in first-quarter revenue on Thursday, sparking worries that a months-long boom in machinery demand may be coming to an end.
Shares of the global economy bellwether fell 3.7% in premarket trading after the company reported weak construction equipment sales in all regions except North America, which gained from President Joe Biden’s $1 trillion 2021 infrastructure law.
Coming off of a strong 2023 where supply chain concerns and soaring demand prompted dealers to bulk up on tractors, combines and construction equipment, US machinery makers are now seeing a moderation in product stocking at dealers, forcing them to tighten their inventories.
Caterpillar said sales at its construction equipment business, which makes its ubiquitous yellow cranes, fell 5%, while its segment that caters to natural resources industries reported a sales decline of 7%.
“I do think we have to kind of re-evaluate and think through what execution would look like. (Machines sales) came in a bit weaker and that doesn’t give me great confidence as we head through the year … we definitely are walking away with more questions,” M Science senior analyst Alex Prudhomme said.
Caterpillar had raised prices over the last two years as Biden’s push to upgrade roads, bridges and other transportation infrastructure in the US powered demand for its equipment.
The higher prices offset the impact from lingering supply chain constraints and higher costs of steel, helping Caterpillar’s quarterly adjusted profit of $5.60 per share surpass estimates of $5.14, according to LSEG data.
But the company forecast roughly flat sales for the year. For the first quarter ended March 31, revenue fell to $15.80 billion from $15.86 billion a year ago, missing estimates of $16.04 billion.
(By Deborah Sophia; Editing by Saumyadeb Chakrabarty and Devika Syamnath)
