Caterpillar Says Chip Shortage May Hurt Equipment Deliveries

(Bloomberg) -- Caterpillar Inc. is warning of potential impacts ahead due to a global chip shortage, putting a damper on better-than-expected earnings for the world’s biggest maker of mining and construction equipment.

“Although we haven’t been impacted yet, the global semiconductor shortage may have an impact later this year,” Chief Financial Officer Andrew Bonfield said in a Thursday interview. “It’s a risk and obviously we’re keeping a close eye on it.”

The cautionary words come after Caterpillar posted first-quarter revenue and profit that topped analysts’ estimates, in what Bonfield described as “very strong performance” for the start of the year fueled by construction growth in the U.S. and China.

Caterpillar joins some of the world’s biggest automakers and tech giants in highlighting the impacts of a chip shortage that’s already caused Honda Motor Co. to halt output at Japanese plants and Apple Inc. and Samsung Electronics Co. in flagging production cuts and lost revenue.

The shortfall comes as Caterpillar expects a big ramp up in machinery production through the rest of the year. While the company has been able to mitigate the issue so far, Bonfield said such shortages could mean Caterpillar may not be able to fully meet demand from its customers this year.

Caterpillar’s quarterly results surpassed Wall Street’s expectations, with sales jumping 12% to $11.9 billion in the period and per-share adjusted earnings of $2.87 topping the $1.95 a share average estimate of analysts’ estimates compiled by Bloomberg.

Shares of Caterpillar fell 2.3% to $226.99 at 10:09 a.m. trading in New York.

Caterpillar has been riding high on expectations for a sales recovery, with the stock coming off its best quarter in more than a decade in a bet on improving orders amid mass vaccine rollouts and signs of rebounding industrial demand.

Other Takeaways:

• With global metal prices surging to multi-year and all-time highs, Caterpillar’s CEO said during an earnings call that the company is seeing a “gradual” improvement in the pace of mining equipment sales.
• Construction in the U.S. and China remain the brightest spots for the company. Management said demand will continue growing in the U.S. while staying strong in China. Still, the company said they expect the second half to be more challenging in China because the Asian nation began recovering much sooner than the rest of the world.
• Dealer inventories grew, but executives don’t expect a “significant” increase through the rest of the year and the focus remains on producing closely to consumer demand.
• Caterpillar again chose not to give a full-year outlook, saying that uncertainty around the globe still remains, making it difficult to give specific forecasts for investors. The underlying message is that the recovery is real, but the pandemic is still a factor.

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