(Bloomberg) — Caterpillar Inc. reported first-quarter results that showed equipment sales fell from a year ago and warned that trend is expected to continue in the second quarter.
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Shares of Caterpillar fell as much as 9.1% in New York, their biggest intraday decline in four years, after the heavy equipment maker said in its earnings report that it expected second-quarter sales to be lower than in the same period last year. While the company posted adjusted profit that beat analysts’ estimates, sales fell in its key construction and materials divisions and overall sales outside North America continued to show weakness.
Caterpillar is widely viewed as an economic leader because demand for its iconic yellow machines seen in mines and construction sites can provide insight into the health of these industries around the world. Caterpillar reported adjusted first-quarter profit of $5.60 per share, beating the average estimate of $5.13 per share of analysts surveyed by Bloomberg.
“Underlying profitability was better than expected, although a larger-than-expected build in dealer inventory will likely raise concerns about production plans given weakening retail sales,” Bloomberg Intelligence analyst Christopher Ciolino said in a note.
Caterpillar, one of the world’s largest heavy equipment manufacturers, has benefited from robust profits over the past three years and has beaten expectations in almost every quarter since 2020, often by posting better-than-expected sales.
“We expect continued good demand for our products and services in most of our end markets,” Chief Executive Officer Jim Umpleby said during Thursday’s earnings call.
He reiterated the company’s February forecast that sales and revenue in 2024 would be broadly in line with last year’s record levels. Caterpillar doesn’t expect a significant change in equipment dealer inventory this year, which is “likely to be a headwind to sales in 2024,” Umpleby said.
Weakening manufacturing demand in regions such as Asia and Europe and slowing non-residential construction have posed a challenge for machinery makers such as Caterpillar, although rising industrial activity in the US and China shows signs of a promising future.
Sales and revenue were $15.8 billion in the most recent first quarter, slightly less than the first quarter of 2023, with favorable price realization largely offsetting lower sales volume, the company said.
Strong earnings from North America – Caterpillar’s most important market – have helped the company offset weakness in other regions, including Europe, Latin America and Asia, in recent quarters. This trend continued in the first quarter. Caterpillar’s energy and transportation business also posted a 7% increase in sales and earnings, making it the only segment to see an increase.
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