Caterpillar plummets after flagging tariffs-triggered high material costs

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Shares in Caterpillar (NYSE: CAT), the world’s no.1 heavy machinery maker, fell more than 7% in pre-market trading Tuesday, despite the company in a row.

The stock lost as much as $9.76 by 8:48 a.m. EST, dropping to $118.95, after closing at $128.71 on Monday, the lowest so far this year. The drop followed the mining and construction equipment manufacturer’s disclosure of cost concerns as a result of the Trump administration’s tariffs.

The Deerfield, Illinois-based firm said the ongoing trade war between Beijing and Washington, which has pushed up steel and aluminum prices and prompted retaliatory action from trading partners, resulted in $40 million in extra costs for materials during the third quarter.

Shares fell even as Caterpillar said 2018 profit per share hit $2.88, a third-quarter record

Caterpillar, which is considered a reliable bellwether of global economic activity, said those additional costs were more than offset by higher prices for its products and cost cuttings during the period.

As a result, it now expects the impact of tariffs to come at the low end of a previously provided range of $100 to $200 million for the second half of this year.

The company also said it would have to increase some of its prices between 1 and 4% worldwide starting in January.

The world’s biggest earthmoving equipment maker is one of the many large American manufacturers trying to keep a lid on expenses to cope with a 36% rise in the price of hot rolled steel over the past year and the tariffs impact.

“Manufacturing costs were higher due to increased material and freight costs,” the company said . “Material costs were higher primarily due to increases in steel prices and tariffs.”

Annual profit per share hit $2.88, a third-quarter record, said Caterpillar. After adjusting for restructuring costs and a tax benefit to adjust deferred balances, adjusted earnings per share in the third quarter of 2018 was $2.86, above the $2.85 expected by most analysts.

Caterpillar plummets after flagging tariffs-triggered high material costs, prices

“This was the best third-quarter profit per share in our company’s history,” the company’s chief executive Jim Umpleby . “Our global team continues to do excellent work focusing on our customers’ success and executing our strategy for profitable growth.”

The numbers say it all: revenue in the quarter hit $13.5 billion, an 18 percent rise compared to the same quarter of 2017 and well ahead of the $13.2 billion the market was predicting. Sales in Caterpillar’s largest divisions — construction, resource, and energy & transportation — all grew strongly, rising 16%, 35% and 15% respectively.

Watch the company’s chief financial officer, Andrew Bonfield, discuss third-quarter 2018 financial results: