Caterpillar warns tariff impact bigger than previously seen

Just three weeks after its last quarterly report, Caterpillar Inc. is warning investors it now expects tariffs to have an even greater impact on its business, costing it as much as $1.8 billion this year.

“While the company continues to take initial mitigating actions to reduce this impact, trade and tariff negotiations continue to be fluid,” the US manufacturer said Thursday in a regulatory statement.

Shares fell as much as 2.2% as of 9:31 a.m. Friday in New York.

The company is one of the world’s biggest makers of machinery for mining and construction. Tariffs already took a bite out of Caterpillar’s second-quarter results, with costs coming in at the top end of its estimated range disclosed in April.

Caterpillar now expects the net impact from incremental tariffs introduced this year to be $1.5 billion to $1.8 billion — including $500 million to $600 million in the third quarter. The annual range is higher than the company’s Aug. 5 guidance of $1.3 billion to $1.5 billion, which included as much as $500 million for the current quarter.

The main reason the Irving, Texas-based company revised its outlook is the Section 232 tariffs on steel and aluminum, Citigroup Inc. analyst Kyle Menges said in a research note.

Caterpillar said it expects full-year adjusted operating margin will be near the bottom of its target range, though the revised tariff estimate isn’t expected to affect the company’s outlook on sales and revenue provided in August.

“While tariff headwinds remain a challenge, we appreciate the proactive approach, likely leaving CAT better positioned than others taking longer to provide updates,” Baird Equity Research analysts wrote in a note to clients.

(By Doug Alexander)