Caterpillar Inc (NYSE:CAT) shares took a slight tumble in pre-market trading on Wednesday after the heavy machinery maker reported anemic third-quarter results and cut its earnings forecast for the year.
The Illinois-based company attributed its lackluster quarterly showing to a slowdown in inventories from dealers. And this business setback is likely to continue to hamper its results in the coming months due to the current climate of economic uncertainty, according to CEO Jim Umpleby.
Dealers slashed their inventories by about $400 million in the third quarter after ratcheting up their inventories by about $800 million in the same period a year ago.
READ: Caterpillar’s 2Q earnings beat Street on record profit
“In the fourth quarter, we now expect end-user demand to be flat and dealers to make further inventory reductions due to global economic uncertainty,” said Umpleby in a statement.
“Our volumes declined as dealers reduced their inventories and end-user demand, while positive was lower than our expectations,” he added.
In the three months ended September 30, the industrial bellwether posted per-share earnings of $2.66, missing Wall Street’s estimate of $2.88 per share. Its revenue for the quarter, meanwhile, amounted to $12.8 billion, which also fell short of the Street’s estimate of $13.6 billion.
Another disappointment was Caterpillar’s move to slash its full-year profit outlook to a range of $10.90 to $11.40, from its previous outlook of $12.06 to $13.06.
And in a sign of the corrosive impact of the trade war between the US and China, the heavy machine maker also reported that sales across Asia slumped in the quarter – with construction machine sales down by as much as 29% in the region – due to a fallout in demand in China and the rise of competition.
“Sales in Asia/Pacific were lower across most of the region primarily due to lower demand in China, including unfavorable changes in dealer inventories, amid continued competitive pressures,” according to Caterpillar.
In pre-market trading, Caterpillar shares were down by 0.5% at $133.01.