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Tariffs lead to higher costs Caterpillar shares have fallen the most since 2011

iconNov 7, 2018 14:51
Source:SMM

SMM11, July 7 / PRNewswire-Asianet /-Caterpillar (Caterpillar), a US heavy machinery maker, fell 7.5 per cent on Tuesday after the company released a less optimistic 2018 forecast, with management pointing out that costs were rising due to tariffs.

The company later said in a statement, "due to the increase in raw materials and freight, manufacturing costs have increased." The rise in raw material costs is mainly due to higher steel prices and tariffs. The negative freight costs are mainly due to the inefficiency of the supply chain as the industry continues to respond to strong global demand. The impact of tariffs on raw material costs in the third quarter was about $40 million. Caterpillar shares posted their worst performance since August 8, 2011; the stock is down more than 31 per cent from its record high hit in January. "for the whole of 2018, we expect the impact of the recent tariffs to be in the low end of the range of $100m to $200m previously provided," the company said.

(Dow Jones Industrial component), the Dow Jones Industrial average, said it hoped to offset rising material costs through price increases and "operational excellence and cost discipline". The company said it would notify dealers in the third quarter that global machine and engine prices would rise by 1% to 4%.

After adjusting restructuring costs and tax breaks to adjust the deferred balance, the company's adjusted earnings per share for the third quarter of 2018 was $2.86, higher than the $2.85 expected by analysts surveyed by Refinitiv. The company reported earnings of $1.95 a share, 46% higher than the same period last year. Refinitiv's revenue was $13.51 billion, higher than the $13.29 billion forecast in the Refinitiv survey and up 18 per cent from a year earlier.

The company, which currently employs 123100 people worldwide, has increased its global workforce by about 8200 from the end of the third quarter of 2017, thanks in large part to increased production.

Jim Umpleby, Caterpillar's chief executive, said: "this is the highest third quarter profit per share in our company's history. Our global team continues to work well, focusing on customer success and implementing our profit growth strategy.

The company also said sales of excavators, bulldozers and other heavy machinery rose 19 per cent to $12.76 billion in the quarter.

Analysts such as (Rob Wertheimer) (Rob Wertheimer) of (Melius Research), a Melius research firm, believe that despite Wall Street's actions, Caterpillar's fundamentals remain strong.

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