Caterpillar tumbles as 'high-water mark' cited by CFO

Shares of Caterpillar tumbled Tuesday after Chief Financial Officer Brad Halverson said on a conference call that first-quarter adjusted profit per share will be the "high watermark" for the year, discouraging investors.

The stock dropped more than 6% after earlier rallying.

The comment came after the construction and mining equipment maker raised its 2018 earnings expectations by up to 24%, buoying shares at the beginning of Tuesday's session.

The company, citing continued strength for construction in the U.S. and China, is looking for full-year earnings per share to be in the range of $9.75 to $10.75, up from its prior call of $7.75 to $8.75.

For the first quarter, the company earned $2.82 per share, topping the Thomson Reuters consensus forecast for $2.12 per share. Revenue for the quarter came in at $12.86 billion, topping the forecast for $11.98 billion.

Besides strong demand, the company noted that it's benefiting from cost-cutting measures, which are widening margins while a recovery in mining is also boosting its business.

Caterpillar’s outlook may be a signal that the company does not expect a full-fledged trade war with China, which could be damaging to the company. In the first three months of 2018, Caterpillar’s stock staged its worst quarterly performance since 2015, taking a hit from trade tensions.

Ticker Security Last Change Change %
CAT CATERPILLAR, INC. 200.65 -0.38 -0.19%

The company’s forecast suggests that the company isn’t baking major trade issues into its outlook.

Caterpillar’s outlook could improve in subsequent quarters, with banks including Goldman Sachs hiking their outlooks on commodity prices. Higher commodity prices generally translate into more mining activity, and that in turn would be a positive for Caterpillar.