Caterpillar, Boeing Sell Off After Honeywell's Tariff Pessimism

(Bloomberg) -- Two of the most followed trade proxies in the market, Caterpillar and Boeing, are among the weakest in the Dow Jones today, potentially after cautious tariff commentary from Honeywell’s earnings conference call. The company’s executives are bracing for “hundreds of millions of dollars” in earnings pressure next year from the expanded tariff lists.

Caterpillar and Boeing dropped more than 1 percent while the Dow rose 0.5 percent. Both companies report earnings next week.

Here’s what Honeywell said about China and tariff impact:

• "While we’re hopeful there is ultimately resolution to the situation, we’re planning for the worst and making structural changes including modified some sources of supply, seeking alternative sources and taking other commercial actions as necessary to position us for 2019 and beyond."
• "We expect the impact to be minimal and manageable in 2018 as we previously discussed, but now we anticipate that the impact of 2019 prior to mitigation actions will be significant."
• "It’s our expectation that we’ll be able to effectively manage the situation and still deliver strong results as we have done through 2018 though as you know this will put some pressure on margin rate expansion."

From the Q&A:

• "We grew the Chinese market, but not at the double-digit pace that we saw earlier in the year. So that’s probably my number one area to watch. I wouldn’t say I’m concerned about it yet, but certainly an area of focus."
• "In our last discussions we talked about the fact that what we’re seeing in 2018 in terms of pressure was in the tens of millions of dollars. And as you bring List three and List four into play and you layer that on over the entirety of 2019 that starts getting into more like triple digits -- hundreds of millions of dollars."
• “The level of rigor and attention to this has been at a very high level for the last eight months and is going to continue as we go into 2019."

To contact the reporter on this story: Arie Shapira in New York at ashapira3@bloomberg.net

To contact the editors responsible for this story: Chris Nagi at chrisnagi@bloomberg.net, Courtney Dentch

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