Caterpillar misses Q2 profit estimates as operating margin gets squeezed

Caterpillar (NYSE:CAT) reported second-quarter results Tuesday that fell short of Wall Street’s earnings expectations, even as the industrial giant delivered stronger-than-expected revenue. The stock slipped 1.3% in pre-market trading following the release.

The company posted adjusted earnings of $4.72 per share, missing the consensus estimate of $4.80. GAAP earnings came in at $4.62 per share, down from $5.48 a year earlier, and compared with the consensus estimate of $4.79 a share.

Revenue for the quarter totaled $16.57 billion, exceeding analyst expectations of $16.26 billion, but still reflecting a 1% year-over-year decline.

Chief Executive Joe Creed said the company “remained focused on customer success” and highlighted continued strong demand across segments, supported by infrastructure and energy spending. However, profit margins narrowed significantly compared with the same period last year, as rising tariffs and weaker pricing weighed on the bottom line.

Adjusted operating margin dropped to 17.6% from 22.4% a year earlier, while adjusted profit per share fell more than 20% year-over-year. The decline was largely driven by higher manufacturing costs and unfavorable price realization, particularly in the Construction and Resource Industries segments.

Segment Breakdown

• Construction Industries saw a 7% revenue drop to $6.19 billion, with profit plunging 29% to $1.24 billion. The segment was hit hardest by lower pricing and a reduction in dealer inventories, especially in North and Latin America.
• Resource Industries revenue fell 4% to $3.09 billion, while profit declined 25%, also due to weaker pricing and the impact of higher tariffs on manufacturing costs.
• Energy & Transportation, by contrast, was a bright spot, growing 7% to $7.84 billion in revenue. Segment profit rose 4% to $1.59 billion, driven by strong sales in power generation and oil and gas applications.

Caterpillar (NYSE:CAT) also reported $3.1 billion in operating cash flow and returned $1.5 billion to shareholders through dividends and stock repurchases in the quarter.

The company continues to face macroeconomic headwinds, including rising input costs and currency pressures, but said it sees resilient demand in key end markets heading into the second half of the year.