Caterpillar warns tariff impact bigger than previously seen

Just weeks after its last quarterly report, Caterpillar Inc. is warning investors it now expects tariffs to have an even greater impact on its business, costing it as much as $1.8 billion this year.

“While the company continues to take initial mitigating actions to reduce this impact, trade and tariff negotiations continue to be fluid,” Caterpillar said Thursday in a regulatory statement.

Caterpillar shares fell as much as 3% Friday before the start of regular trading in New York.

The company is one of the world’s biggest makers of machinery for mining and construction. The US manufacturer’s second-quarter results already had reflected the effect of tariffs, with costs coming in at the top end of its estimated range disclosed in April.

Caterpillar said it expects the net impact from incremental tariffs introduced this year to be $500 million to $600 million in the third quarter, and $1.5 billion to $1.8 billion for the full year.

The main reason the company revised its outlook is the section 232 tariffs on steel and aluminum, Citigroup Inc. analyst Kyle Menges said in a research note.

Caterpillar said it expects that full-year adjusted operating margin will be near the bottom of its target range.

The annual tariff range is higher than Caterpillar’s Aug. 5 guidance of $1.3 billion to $1.5 billion — which included as much as $500 million in its third quarter.

The revision isn’t expected to affect the company’s sales and revenue outlook provided in August.

— By Doug Alexander (Bloomberg)