(Bloomberg) -- Caterpillar Inc (NYSE:CAT) lowered its earnings forecast as it reported the first decline in quarterly profit in almost three years, adding to worries over a slowing global economy that have weighed on sales of its signature yellow machines.
The largest maker of mining and machinery equipment reported a 5.2% drop in sales and expects demand to be flat in the fourth quarter. Its shares fell.
The profit outlook suggests the deterioration in Asia that the company flagged in July has worsened. Caterpillar said in July that it was counting on dealers to work through an inventory buildup to help meet earnings targets, but Wednesday’s results signal the glut remains.
“Our volumes declined as dealers reduced their inventories, and end-user demand, while positive, was lower than our expectations,” Chief Executive Officer Jim Umpleby said in the statement. “In the fourth quarter, we now expect end-user demand to be flat and dealers to make further inventory reductions due to global economic uncertainty.”
Shares tumbled 4.3% to $127.96 in premarket trading at 6:45 a.m. in New York.
The company said third-quarter earnings fell to $2.66 a share, trailing the $2.87 average estimate of analysts. Revenue in the period slipped to $12.8 billion from $13.5 billion a year earlier.
Machine sales growth at the economic bellwether has slipped in Asia and the U.S. on weaker orders in construction industries, just as the company has been trying to raise prices.
The report comes a week after the International Monetary Fund cut its 2019 global growth forecast to a decade low, citing a broad deceleration across the world’s largest economies as trade tensions undermine the expansion.
For the individual units:
- Mining total sales were $2.31 billion in the third quarter of 2019, a decrease of $327 million. Many analysts have looked at the segment as a business that would be growing as some other sales would be slowing.
- Oil and gas-related revenue was down 9% in the quarter. Caterpillar cited the drop in reciprocating engines, units that are used in fracking. That decline was only partially offset by increased sales of turbines.
- For construction, Caterpillar saw North American sales increase but revenue from Asia was hit primarily because of lower demand in China, competitive pressures and dealer inventories.