Caterpillar sees lower 2025 sales should Trump tariffs stay

Caterpillar Inc. expects slightly lower sales this year if Trump administration tariffs remain in place and the economy dips into a recession in the second half.

The guidance, in line with previous expectations, came as the heavy-equipment maker posted first-quarter earnings that fell short of analysts’ estimates. The company painted two scenarios in its results’ presentation, forecasting operating profit to be within its annual target range if factoring in tariffs and a recession.

Without levies, profit would be at the top end of that range, with sales little changed from last year, Caterpillar said.

Shares of the company dropped 0.6% in early trading in New York on Wednesday.

The results at Caterpillar — a bellwether for the health of the global economy — come as businesses around the world navigate the turmoil triggered by the sweeping tariffs threatened by US President Donald Trump. That uncertainty has left many executives struggling to forecast what demand may look like through the rest of the year.

Caterpillar said it expects an additional cost headwind of $250 million to $350 million in the second quarter from tariffs, “net of initial mitigation actions and cost controls.”

Company executives expressed some hope in an earnings call Wednesday that tariff impacts will be mitigated. The firm also noted that most of the impacts facing Caterpillar come from retaliatory tariffs China struck on the US this year.

“We’re cautiously optimistic that there will be some trade deals struck and that the tariff impact will be lower than it is currently,” said Jim Umpleby, Caterpillar’s top executive. “Obviously it’s a very dynamic situation.”

The company posted adjusted earnings per share of $4.25, missing the $4.32 average estimate of analysts polled by Bloomberg, with the company citing lower sales volume driven mainly by the impact from changes in dealer inventories.

“While the headline EPS/revenue miss look disappointing, the guts of the report/outlook aren’t that bad,” analysts at Vital Knowledge said in a Wednesday note.

Caterpillar’s earnings call marked a finale for Umpleby as CEO, who will step down from the role on Thursday but remain as chairman. Umpleby, 67, took over in 2017 when Caterpillar was struggling through the sharp downturn of the so-called commodity super cycle and as growth in China, the world’s second-largest economy, matured.

For years, Caterpillar focused the growth of its business on gaining market share across various industries, including construction and mining. But significant capital spending to acquire that share left the company in a tough position amid China’s slowdown and the end of the commodities boom.

Umpleby arrived with a different approach: focusing on profit margins, growing Caterpillar’s services business and expanding its energy sector offerings. The CEO also took a more mild-mannered approach to the role, with accountant-like focus on operations that yielded a more than 230% rise in shares in more than eight years.

Chief operating officer Joe Creed, who will succeed Umpleby as CEO, told analysts he’ll focus on growing services, profit margins and shareholder returns.

“We’re a dividend aristocrat,” Creed said Wednesday. “We want to remain that way.”

(By Jacob Lorinc and Joe Deaux)