Caterpillar warns of significant tariff-related cost increases

In the United States, Caterpillar Inc. reported a decline in its first-quarter revenue, falling to $14.25 billion from $15.8 billion a year prior. This downturn was attributed to a decrease in demand for the company's equipment, with sales volume dropping by $1.1 billion. Despite the disappointing results that did not meet analyst expectations, Caterpillar's shares saw a boost of over 3% prior to the market opening on Wednesday. The company has indicated that the ongoing trade war, particularly regarding tariffs implemented by President Donald Trump, has added a layer of uncertainty to its financial outlook. Caterpillar projects that tariff costs will reach up to $350 million in the second quarter alone. This estimate reflects the company's concerns regarding the broader implications of the trade policies on the U.S. economy, which remain unclear. Caterpillar's earnings for the first quarter were reported at $2 billion, or $4.20 per share, a decline from the previous year's earnings of $2.86 billion, or $5.75 per share. Adjusted earnings, excluding restructuring costs, were slightly better at $4.25 per share, still falling short of the $4.30 per share anticipated by Wall Street analysts. Faced with these challenges, the company has indicated that it anticipates its sales for the second quarter will be in line with the same period from the previous year. In terms of inventory, dealer inventories increased by $100 million during the quarter, a significant decrease from the $1.4 billion increase during the same time last year. Amidst these pressures, Caterpillar also made a significant leadership transition, announcing that D. James Umpleby III will step down as CEO to become the executive chairman, while Chief Operating Officer Joseph Creed is set to take over as CEO and board member. Overall, Caterpillar's outlook remains cautious as it adjusts its forecasts in response to ongoing trade dynamics.