Caterpillar Volumes Slip From Year-Ago Levels

Equipment Maker Says Trend Likely to Continue in Q2
Caterpillar equipment
(Luke Sharrett/Bloomberg)

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Caterpillar Inc. reported first-quarter results that showed machinery sales slipping from a year earlier and warned that the trend is expected to continue in its second quarter.

Shares of Caterpillar fell 4.2% in premarket trading in New York, even after the U.S. heavy equipment maker posted adjusted profit that handily beat analysts’ estimates. Yet, sales in its key construction and resource industries divisions fell, and overall revenues continued to show weakness outside North America.

Caterpillar is widely viewed as an economic bellwether, given how demand for its iconic yellow machines that dot mines and construction sites can shed light on the health of those industries around the world.

The Irving, Texas-based company said it expects sales in the second quarter to be lower than the year-earlier period while its profit margin is expected to remain steady. For the first quarter, Caterpillar reported adjusted earnings of $5.60 a share, beating the $5.13-a-share average estimate of analysts surveyed by Bloomberg.

“Underlying profitability was better than anticipated, though a larger-than-expected dealer inventory build as retail sales weaken is likely to stir angst around production schedules,” Bloomberg Intelligence analyst Christopher Ciolino said in a note.

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Caterpillar, one of the world’s biggest producers of heavy machinery, has benefited from robust earnings during the past three years, beating expectations in almost every quarter since 2020, often by posting better-than-anticipated revenues.

Caterpillar had told investors in February that this year’s sales would be broadly in line with 2023. Moderating demand in manufacturing in regions including Asia and Europe along with slowing nonresidential construction has been a challenge for machinery makers such as Caterpillar, though rising industrial activity in the U.S. and China are showing signs of promise ahead.

Sales and revenues in the latest first quarter were $15.8 billion, slightly less than the first quarter of 2023, with favorable price realization mostly offsetting lower sales volume, the company said.

Strong earnings from North America — Caterpillar’s most important market — have helped the company offset weakness from other regions, including Europe, Latin America and Asia in previous quarters. That trend continued in the first quarter. Caterpillar’s energy and transportation business also posted a 7% gain in sales and revenues, the only segment to see an increase.