Caterpillar 2025 Q1 Earnings Misses Expectations as Net Income Declines 30%

Caterpillar Inc. (CAT) reported its fiscal 2025 Q1 earnings, revealing a 10% drop in revenue from 2024 Q1, missing analyst estimates by 2.3%. Earnings per share (EPS) also fell short of expectations by 3.1%. Despite the decline, Caterpillar raised its revenue outlook for 2025 to about flat, excluding tariffs, which is an improvement from its previous forecast of a slight decrease. The company anticipates a significant cost impact due to tariffs in Q2 but remains optimistic about its long-term strategy and operational resilience.

Revenue
Caterpillar's total revenue fell to $14.25 billion in 2025 Q1, marking a 9.8% decrease from $15.80 billion in 2024 Q1. The Machinery, Energy & Transportation segment led with $13.38 billion, whereas Construction Industries generated $5.18 billion. Resource Industries contributed $2.88 billion, while Energy & Transportation added $6.57 billion. The All Other Segment accounted for $91 million, and Corporate Items and Eliminations resulted in a negative $1.35 billion. Financial Products Revenues totaled $871 million, the Financial Products Segment reported $1.01 billion, and Corporate Items and Eliminations saw a negative impact of $136 million, culminating in consolidated sales and revenues of $14.25 billion.

Earnings/Net Income
Caterpillar's EPS declined 27.0% to $4.22 in 2025 Q1 from $5.78 in 2024 Q1. Meanwhile, the company's net income decreased to $2 billion in 2025 Q1, down 29.8% from $2.85 billion reported in 2024 Q1. This decline in EPS highlights a challenging performance compared to the previous year.

Price Action
The stock price of Caterpillar edged down 0.76% during the latest trading day, climbed 3.56% during the most recent full trading week, and jumped 11.18% month-to-date.

Post Earnings Price Action Review
Over the past five years, buying Caterpillar shares after a revenue increase quarter-over-quarter and holding them for 30 days has yielded moderate returns, but has consistently underperformed the market. The strategy's compound annual growth rate (CAGR) was 2.79%, trailing the benchmark significantly by 69.41%. Despite the potential for gains, the strategy faced a maximum drawdown of -14.03% and a Sharpe ratio of 0.30, indicating a challenging risk-return profile. This underscores the importance of risk management when investing in such volatile stocks. Investors should carefully weigh the risks and rewards of this approach, given its historical performance.

CEO Commentary
“I’m proud of our global team’s continued support of our customers and for delivering another quarter of solid results,” said Jim Umpleby, Chairman and CEO. He highlighted that despite the 10% decline in sales and revenues to $14.2 billion due to lower sales volume and unfavorable pricing, the company maintained a strong balance sheet and achieved an adjusted operating profit margin of 18.3%. Incoming CEO Joe Creed emphasized the long-term profitable growth strategy, stating that the diverse portfolio and end markets are delivering results, while expressing optimism about building on Caterpillar’s legacy of solving customers' challenges.

Guidance
Caterpillar expects sales and revenues for the full year 2025 to be slightly lower compared to 2024. The company anticipates a Q2 cost headwind of $250 million to $350 million due to ongoing tariff impacts. The guidance for 2025 includes a projected ME&T free cash flow in the range of $5 billion to $10 billion, reflecting expected operational resilience amid current challenges.

Additional News
Caterpillar recently announced key leadership changes, with Jim Umpleby transitioning to Executive Chairman and Joe Creed taking over as CEO, effective April 15, 2025. Additionally, the company celebrated its centennial year, marking 100 years of innovation and leadership in the industry, with a commitment to supporting its workforce for the next century. Furthermore, Caterpillar maintained its quarterly dividend of $1.41 per share, demonstrating its continued commitment to shareholder returns. These developments underscore the company's focus on leadership continuity, future growth, and shareholder value amidst current market challenges.