ii view: bellwether Caterpillar hurt by US trade tariffs

Second-quarter results to 30 June  

• Revenue down 1% to $16.6 billion
• Adjusted earnings per share down 21% to $4.72 per share
• Operating profit margin of 17.3%, down from 20.9% in Q2 2024
• Quarterly dividend of $1.51 per share, up from $1.41 per share in the prior quarter

Chief executive Joe Creed said: “The Caterpillar team remained focused on customer success and demonstrated solid operational performance this quarter. 

“We continued to see strong orders across our segments as demand remains resilient supported by infrastructure spending and growing energy needs.”

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ii round-up:

Caterpillar Inc (NYSE:CAT) today detailed above-forecast sales but below-forecast profits as the digger and energy turbine maker battles increased economic headwinds. 

Falls for Construction and Resource industry equipment revenues more than countered increased demand for Energy and Transportation items leaving second-quarter revenues down 1% to $16.6 billion. Adjusted earnings of $4.72 per share fell from $5.99 a year ago, hindered by US trade tariffs raising manufacturing costs. Wall Street had expected outcomes of $16.5 billion and $4.90 per share respectively. 

Shares for the Dow Jones company fell 1% in post results US trading having come into these latest numbers up by around a fifth so far in 2025. That’s similar to fellow large equipment maker Deere & Co (NYSE:DE). The Dow 30 index is up almost 4% year-to-date. 

Caterpillar helps customers globally to pave roads, extract essential commodities or provide power to installations such as data centres. 

Sales for Energy and Transportation and including electric train locomotives rose 7% to $7.84 billion. Construction-related sales fell 7% to $6.2 billion, with Resource-related sales retreating 4% to $3.1 billion.

Geographically, a 6% rise in European, African and Middle Eastern (EAME) sales sat against falls of 2%, 4% and 2% for North America, Latin America and Asia Pacific. 

A quarterly dividend of $1.51 per share is up from $1.41 in the prior quarter and accompanies a $0.8 billion share buyback made during the period.  

Third-quarter results are likely in early November.    

ii view:

Began in 1925, Caterpillar today makes construction and mining equipment, off-highway diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives. Employing over 110,000 people and headquartered in Irving, Texas, North America generated most sales during 2024 at 53%. That was followed by EAME at 19%, Asia Pacific at 18% and Latin America the balance of 10%. 

For investors, US trade tariffs raising the cost of components imported from overseas have hit profits. Elevated US interest rates and ongoing uncertainty regarding prospects for China continue to warrant consideration. An estimated price/earnings (PE) ratio above the three- and 10-year averages may suggest the shares are not obviously cheap, while environmental considerations given exposure to arenas such as fossil fuel extraction are not to be overlooked. 

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On the upside, some increase in product volumes was seen, if more than countered by reduced product prices. Diversity of both product and geographical region often leave challenges for one arena countered by positives for another. Cash of $5.4 billion is held, while a record of increasing the annual total dividend for 31 years is enviable and leaves the shares sat on an estimated future yield of around 1.4% (not guaranteed).

In all, and despite ongoing risks, this titan of the industrial machinery arena continues to justify its place in many already diversified long-term investment portfolios.     

Positives: 

• Product and geographical diversity
• Enviable dividend track record

Negatives:

• Subject to currency moves
• Uncertain economic outlook

The average rating of stock market analysts:

Buy