Caterpillar Shares Drop as Tariff Costs Forecast to Hit $1.8 Billion
Industrial giant lowers its full-year profit margin outlook as it braces for an escalating impact from global trade disputes.
Caterpillar Inc. shares fell 4% in after-hours trading after the industrial bellwether significantly raised its forecast for the financial impact of tariffs, signaling deepening pressure from global trade tensions.
The world’s largest manufacturer of construction and mining equipment announced Thursday it now expects the net cost impact from tariffs to reach between $1.5 billion and $1.8 billion for the full year. This marks a substantial increase from its previous estimate of $1.3 billion to $1.5 billion, which was issued just weeks earlier during its second-quarter earnings report. For the third quarter alone, the company anticipates tariff-related costs of $500 million to $600 million.
As a direct result of the escalating costs, Caterpillar projected that its full-year adjusted operating profit margin would likely be near the bottom of its previously stated target range. In a filing with the Securities and Exchange Commission, the company attributed the revision to "additional tariff clarifications and new tariffs" that have been announced since its last update in early August.
Despite the hit to profitability, the Deerfield, Illinois-based company said it does not anticipate an impact on its sales and revenue outlook for the year, suggesting it is absorbing the costs rather than seeing a drop-off in customer demand. "While the Company continues to take initial mitigating actions to reduce this impact, trade and tariff negotiations continue to be fluid," Caterpillar stated in the filing.
The announcement reversed some of the stock’s recent momentum. Before the update, Caterpillar shares had been up 20% year-to-date, but the revised guidance sent the stock down to $419.60 in after-hours activity.
As a cyclical company with a vast global footprint, Caterpillar's performance is often viewed as a proxy for the health of the global economy. Its warning highlights the tangible and growing costs that U.S. corporations are facing from the ongoing trade disputes. The company noted that it has been expanding its domestic workforce, which now stands at over 50,000 employees.
Investors and analysts will be looking for more details on the company’s mitigation strategies and its outlook on global demand during its upcoming third-quarter earnings announcement, which is scheduled for October 29, 2025.