Caterpillar misses estimates on weakening construction

Caterpillar Inc. posted a third-quarter profit that missed analysts’ expectations as the machinery producer grappled with weakening demand in construction around the world.

The US maker of iconic yellow industrial machines reported adjusted per-share earnings of $5.17 on Wednesday, missing the $5.34 average estimate of analysts polled by Bloomberg. Caterpillar is viewed as a bellwether for the economy, with its heavy equipment deployed at construction sites, mining operations and energy projects across the globe.

The Irving, Texas-based company also warned investors that full-year sales and revenue are forecast to be “slightly lower” than it previously anticipated, while signaling that fourth-quarter revenues will be lower than the year-earlier period. Shares fell as much as 5.2% as of 9:36 a.m. in New York.

“Although we have lowered our expectations for sales to users in the fourth quarter, primarily due to lower rental fleet loading, dealer rental revenue continues to grow,” Chief Executive Officer James Umpleby said during an earnings call. “In addition, government-related infrastructure projects are expected to remain healthy.”

Earnings by Caterpillar, one of the world’s biggest producers of heavy machinery, come amid uncertainty around the November election in the US, the company’s largest market, as well as growth concerns in China.

Sales Declines

Sales of construction equipment, Caterpillar’s biggest business segment, dropped 9% from the same period a year ago on lower sales volumes of machines to customers and lower prices, the company said. North America along with the Europe, Africa and Middle East region were especially weak, with each geographical segment seeing revenue decline about 11% and 15%, respectively. Sales in the segment to the Asia-Pacific region dropped 12%.

The company reported that mining equipment revenue fell about 10%, also mainly due to lower sales volumes. Energy and transportation was a bright spot, with the segment seeing a 5% boost in sales.

Analysts had noted the company would likely see sustained strength in oil and gas, and transportation, helping to somewhat offset an expected weakness in construction. Muted economic conditions in industrial sectors through the third quarter provided little positive momentum outside aerospace, data center expansion and electrification, according to analysts at Jefferies Financial Group Inc.

— By Joe Deaux (Bloomberg)