Caterpillar Inc. (NYSE:CAT) cautioned of a decline in sales for the current quarter following a slight dip in first-quarter revenue reported on Thursday, sparking concerns that the prolonged surge in machinery demand might be tapering off.
Shares of the global economic indicator dropped 7% in early trading after the company revealed sluggish construction equipment sales across regions except North America, which benefited from President Joe Biden’s $1 trillion 2021 infrastructure legislation.
After a robust 2023 marked by supply chain challenges and surging demand prompting dealers to increase their stock of tractors, combines, and construction equipment, U.S. machinery manufacturers are witnessing a slowdown in dealer product stocking, necessitating inventory adjustments.
Caterpillar disclosed a 5% decline in sales at its construction equipment segment, known for its iconic yellow cranes, while its natural resources division reported a 7% decrease in sales.
M Science senior analyst Alex Prudhomme highlighted the need for re-evaluation, emphasizing the importance of understanding execution strategies amidst weaker machine sales. Their concerns about future confidence and lingering questions were evident.
The company had implemented price hikes over the past two years amid Biden’s infrastructure push, driving demand for its equipment. These increases helped offset the impact of ongoing supply chain constraints and rising steel costs, resulting in Caterpillar’s quarterly adjusted profit of $5.60 per share, surpassing estimates of $5.14, according to LSEG data.
However, Caterpillar forecast approximately flat sales for the year. For the first quarter ending March 31, revenue dipped to $15.80 billion from $15.86 billion a year ago, falling short of estimates of $16.04 billion.
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Author Faith Yakubu 
