Caterpillar Warns Of $250 Million To $350 Million Tariff Hit After Q1 Profit Miss

Caterpillar Inc. CAT shares are trading higher on Wednesday after the company reported first-quarter 2025 results. Total sales and revenue for the quarter declined 9.8% year-over-year to $14.25 billion, missing the consensus of $14.66 billion.

The decrease was primarily due to a $1.1 billion drop in sales volume and a $250 million unfavorable price realization, largely impacted by changes in dealer inventories.

Dealer inventory increased by $100 million in the quarter, compared to a $1.4 billion increase a year ago.

CAT’s adjusted earnings were $4.24 per share, compared to $5.60 a year ago and below the consensus of $4.35.

Operating profit fell 26.7% to $2.579 billion, primarily due to a $652 million impact from lower sales volume and $250 million from unfavorable price realization.

The operating profit margin was 18.1%, down from 22.3% a year ago. The adjusted operating profit margin was 18.3% compared with 22.2% a year ago.

Enterprise operating cash flow was $1.3 billion, and the company ended the quarter with $3.6 billion in enterprise cash. The company spent $3.7 billion on stock repurchases and $0.7 billion on dividends.

 “Our strong balance sheet allowed us to deploy over $4 billion to shareholders through share repurchases and dividends during the quarter,” command Chairman and CEO Jim Umpleby.

“Our strategy for long-term profitable growth is delivering results, which reflect the benefits of our diverse portfolio and end markets,” stated incoming CEO Joe Creed.

The revenue of the machinery, energy, and transportation segment declined 11% YoY, with construction Industries down 19%, Resource Industries down 10%, energy and transportation down 2%, and other segments down 17%.

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Q2 Outlook: Caterpillar expects sales and revenues to be similar to 2024. The adjusted operating profit margin is expected to be lower than YoY, mainly due to lower price realization before considering tariff impact.

Tariffs are expected to create an additional cost headwind of $250M to $350M in Q2, net of initial mitigation actions and cost controls.

2025 Outlook Pre-tariff scenario: Caterpillar expects Full-year sales and revenues to be flat compared to 2024, better than the previous slight decline forecast.

Adjusted operating profit margin is expected to be in the top half of the annual target range, and ME&T’s free cash flow is expected to be in the top half of the annual target range.

2025 Outlook, Alternative Scenario (with Tariff Impact and Negative Economic Growth): CAT expects full-year sales and revenues to be down slightly compared to 2024, which aligns with previous expectations.

The adjusted operating profit margin and ME&T’s free cash flow are expected to be within the annual target range.

Price Action: CAT is trading higher by 3.12% at $317 premarket at the last check Wednesday.

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