Dow Jones heavy equipment giant Caterpillar reported mixed second-quarter earnings and revenue before the stock market open Tuesday, after the Dow Jones Industrial Average's rebound from support on Monday. Caterpillar management predicts ongoing support for demand due to federal infrastructure spending and increased U.S. energy build out.
Caterpillar, seen as a bellwether for the global economy, saw second-quarter profit dip 21% to $4.72 per share with sales totaling $16.57 billion, down less than 1% compared to a year ago. Prior to the earnings report, analysts expected Q2 EPS of $4.89 and revenue coming in at $16.30 billion, according to FactSet.
The Dow giant's operating profit for the second quarter was $2.86 billion, a decrease of $622 million, or 18%, compared with $3.48 billion a year ago. The company said the decline was "mainly due to unfavorable manufacturing costs" based on the "impact of higher tariffs."
Caterpillar has now booked four consecutive quarters of declining earnings and sales.
"The Caterpillar team remained focused on customer success and demonstrated solid operational performance this quarter," Caterpillar CEO Joe Creed said in Tuesday's earnings release. "We continued to see strong orders across our segments as demand remains resilient supported by infrastructure spending and growing energy needs."
For the full year, Caterpillar predicts an impact between $1.3 billion and $1.5 billion from President Donald Trump's tariff policies. That includes a $400 million to $500 million hit in Q3, according to Caterpillar's outlook release Tuesday.
The Dow industrials heavy equipment giant forecasts revenue to be "slightly higher" compared to the $64.81 billion in 2024.
Dow Jones: Caterpillar Stock
The Dow stock fell as low as 426.57 intraday before ending Tuesday's stock market up a fraction to 434.03, adding to a 1.2% advance form Monday.
Edward Jones analyst Faisal Hersi wrote Tuesday that Caterpillar's results were mixed "as strong backlog growth was offset by continued pricing pressures."
"We expect a negative stock reaction to the earnings shortfall and a weaker-than-expected profit margin outlook," Hersi said.
"Caterpillar remains well positioned to benefit from the shift in construction spending toward infrastructure projects supported by a pickup in government investments. While we expect continued growth in mining and oil & gas end-markets, we don't see a sharp upward increase in capital spending in the near term due to producers maintaining their spending discipline," the analyst added.
Caterpillar stock plowed through to an all-time high of 441.15 on July 31. However, shares of the Dow giant retreated Friday amid a broader stock market sell-off after Trump said the U.S. will place a 35% tariff on Canadian goods.
However, Caterpillar remains in a buy zone above a buy point of 418.50, according to MarketSurge charts.
Investors can keep tabs on the IBD Leaderboard watchlist, the IBD 50 list of top growth stocks and IBD SwingTrader along with the IBD Sector Leaders list.
The Dow stock has a robust 93 Composite Rating out of a best-possible 99. Caterpillar also has an 88 Relative Strength Rating and a 571 EPS Rating.
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