US industrial equipment manufacturer Caterpillar has cut its full-year outlook following the release of the latest earnings report. The company revealed a drop in its sales numbers for both the US and Chinese markets, which it had blamed partly on the continually slowing global economy.
Caterpillar also partly blamed the decline in its sales to the ongoing trade dispute between China and the United States, particularly due to the impact of the tit-for-tat tariffs imposed by both countries against each other.
The Illinois-based manufacturer also stated that it expects its network of retailers to cut their inventories in the coming months if the spat between two of the world's largest economies will continue.
The company's finance chief, Andrew Bonfield, mentioned during the earnings call that dealers had reduced the value of on-hand stocks by as much as $400 million during the third quarter. The company expects dealers to further cut their existing stocks by another $900 million in the current quarter.
According to the company's quarterly earnings report, it saw its Asia-Pacific sales drop by more than 13 percent as demand from countries such as China continues to decline. The company also stated the increased competition from domestic players has cut into its numbers for the quarter. For its North American market, Caterpillar reported a decline in sales of around 3 percent.
As for its profits, Caterpillar had missed hitting initial analysts' estimates. The company reported profits of only $2.66 per share, missing the profit estimates of around $2.88 per share.
For its third-quarter ending in September, Caterpillar reported total sales of $12.76 billion. This is a 5.6 percent drop when compared to the same quarter last year. The slump in its sales was mostly dragged by its construction equipment business in China, which fell by 29 percent. Caterpillar CEO Jim Umpleby mentioned to shareholders that the company expects the demand for its products to be flat in the next quarter.
Thanks to a number of measures it had implemented, Caterpillar stated that it expects to have a lower impact on its bottom line due to the tariffs on Chinese imports. However, the company has still decided to downgrade its full-year profit forecast due to the slow demand.
Caterpillar announced that it expects its full-year profit to be somewhere between $10.90 and $11.40 per share. This is a significant cut from the $12.06 to $13.06 range it had initially forecasted.
The release of its latest earnings slightly affected the company's stock prices, which is still marginally higher than the previous year. Caterpillar's performance is commonly seen as a gauge for the state of Chinese demand and the overall health of the construction industry.
