Shares of Caterpillar (NYSE: CAT) dropped sharply Tuesday after it gave disappointing 2018 guidance and management pointed out costs were rising because of tariffs.
The company reiterated its prior 2018 EPS guidance range of $11.00 to $12.00 adjusted, but Wall Street expected the company to raise that forecast. The lower range of that forecast fell short of the $11.65 EPS estimated by analysts, according to Refinitiv. Caterpillar also said it is facing higher material and freight costs.
"Manufacturing costs were higher due to increased material and freight costs. Material costs were higher primarily due to increases in steel prices and tariffs," the company stated in a press release.
"In the fourth quarter, price realization, operational excellence and cost discipline are expected to more than offset higher material and freight costs, including tariffs."
Caterpillar's stock has slid in 2018 as concerns over the trade relationship between the United States and China persist.
The big machinery exporter said 2018 profit per share hit $2.88, a third-quarter record. But after adjusting for restructuring costs and a tax benefit to adjust deferred balances, adjusted earnings per share in the third quarter of 2018 was $2.86, above the $2.85 expected by analysts.
The EPS results have proven 46% higher than third-quarter 2017 results of $1.95 per share. Revenues of $13.51 billion topped analyst expectations of $13.29 billion.
"This was the best third-quarter profit per share in our company's history," said Caterpillar CEO Jim Umpleby.
"Our global team continues to do excellent work focusing on our customers' success and executing our strategy for profitable growth."
Shares plummeted $9.98, or 7.7%, to $118.94, to a new 52-week trading low.
