Deborah Mary Sophia
(Reuters) – Caterpillar warned of a drop in sales in the current quarter after reporting a slight decline in first-quarter revenue on Thursday, raising fears that a months-long boom in demand for machinery may be coming to an end.
Shares of the global economic leader fell 3.7% in premarket trading after the company reported weak sales of construction equipment in all regions except North America, which benefited from President Joe Biden’s $1 trillion infrastructure bill of 2021.
After a strong 2023 in which supply chain issues and rising demand prompted dealers to stock up on tractors, combines and construction equipment, U.S. machinery makers are now seeing lower product inventories at dealers, forcing them to reduce their inventories.
Caterpillar (NYSE:) said sales of its construction equipment division, which makes the ubiquitous yellow cranes, fell 5%, while its segment serving the natural resources industry reported a 7% decline in sales.
“I really think we need to kind of re-evaluate and think through what the execution is going to look like. (Car sales) were a little weaker, and that doesn’t give me a lot of confidence for the year ahead… we’re definitely leaving with more questions,” said M Science senior analyst Alex Prudhomme.
Caterpillar has raised prices over the past two years as Biden’s push to upgrade U.S. roads, bridges and other transportation infrastructure spurred demand for its equipment.
Higher prices offset the impact of ongoing supply chain constraints and higher steel costs, helping Caterpillar’s quarterly adjusted earnings of $5.60 per share beat estimates of $5.14, according to LSEG.
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However, the company forecasts roughly flat sales this year. For the first quarter ended March 31, revenue fell to $15.80 billion from $15.86 billion a year ago, missing the estimate of $16.04 billion.