Caterpillar just flashed the latest warning sign for the global economy

Business Insider Finance 3 weeks ago
  • Caterpillar just flashed the latest warning sign for the global economy.
  • The construction and manufacturing equipment titan, viewed as a bellwether for global industry, revealed a 6% drop in sales and an 8% drop in profit per share in the third quarter.
  • "In the fourth quarter, we now expect end-user demand to be flat and dealers to make further inventory reductions due to global economic uncertainty," Caterpillar's CEO warned.
  • View Business Insider's homepage for more stories.

Caterpillar just flashed the latest warning sign for the global economy. 

The construction and manufacturing equipment titan, viewed as a bellwether for global industry, revealed a 6% drop in sales and an 8% drop in profit per share in the third quarter.

Caterpillar produces so much of the world's equipment that a decline in its business often indicates a broader slowdown in construction and factory activity. Weaker demand for its products typically means people are building and manufacturing less, which doesn't bode well for global economic growth.

The company blamed the sales decline on dealers slashing inventories by $400 million last quarter, after raising them by $800 million in the same period of 2018. CEO Jim Umpleby warned that pattern is likely to continue.

"In the fourth quarter, we now expect end-user demand to be flat and dealers to make further inventory reductions due to global economic uncertainty," he said in the earnings release, adding that Caterpillar is ready to respond swiftly to any positive or negative developments in the global economy next year.

Caterpillar's shares climbed 0.7% in early trading on Wednesday.

"This is not a stock that has been knocking it out the park, so there is not that far to fall on a miss as some, with investors showing concerns about falling manufacturing PMI figures and slowing growth in China and elsewhere for over a year now," Neil Wilson, chief markets analyst at Markets.com, said in an email.

"The question for Cat now is whether this latest downswing in the PMI data marks the trough or if there is further to run to the downside."

Related economic sectors such as shipping are also weathering a slowdown, partly due to the US-China trade war that has raged for more than a year.

"Clearly for the last year there certainly has been indecision, uncertainty in the industry," Mario Cordero, executive director at the Port of Long Beach in California, said in an interview with Bloomberg Television. "You're now seeing actually the impact."

Hasbro also published disappointing results this week, sending its shares down more than 15%. The toymaker blamed the trade war for its struggles: "As we've communicated, the threat and enactment of tariffs reduced revenues in the third quarter and increased expenses to deliver product to retail."


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The New York Times › Finance › 3 weeks ago
A slowing global economy is taking a toll on Caterpillar, which is cutting its outlook for the year after profits and revenue slid in the third quarter.
Washington Times › 3 weeks ago
A slowing global economy is taking a toll on Caterpillar, which is cutting its outlook for the year after profits and revenue slid in the third quarter.
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The New York Times › Finance › 3 weeks ago
Industrial bellwether Caterpillar Inc reported a drop in sales in the United States and China in the third quarter, leading it to cut its outlook for the year and adding to evidence that the global economy is firmly on the decline.
New York Daily News › 3 weeks ago
A slowing global economy is taking a toll on Caterpillar, which is cutting its outlook for the year after profits and revenue slid in the third quarter.
ABC News › Finance › 3 weeks ago
Squeeze is on at Caterpillar, which cut its outlook for the year after dealers slashed inventories.
Chicago Tribune › Finance › 3 weeks ago
Deerfield-based Caterpillar said it had profit of $1.49 billion, or $2.66 per share, well short of the $2.90 that Wall Street was looking for, according to industry analysts surveyed by FactSet.
NBC News › Finance › 3 weeks ago
Shares in Caterpillar, seen as a bellwether of American trade, are underperforming the broader market this year as global trade tensions continue to weigh.
CNN › Finance › 3 weeks ago
Caterpillar, stung by the trade war and global economic slowdown, posted a surprise drop in third-quarter profit as sales slumped in nearly every region around the world.
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