How big of a headwind is China for Caterpillar Inc?

on May 18, 2022
Updated: Aug 4, 2022
  • Caterpillar CEO expects China sales to be slightly below 2019 levels.
  • The Fortune 100 company reported double-digit sales growth in Q1.
  • Shares of the construction equipment manufacturer are up 3.0% YTD.

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China is not as big of a headwind for Caterpillar Inc (NYSE: CAT) as some might think, said CEO Jim Umpleby this evening on CNBC’s Mad Money with Jim Cramer.

China sales to be slightly below 2019 levels

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The chief executive expects financial performance to remain resilient on strong global demand, despite weakness in China that makes up between 5.0% and 10% of the total sales for Caterpillar. He said:

For us, China is mostly hydraulic excavators, ten tonnes and above. What we’ve told our investors is that we expect that market to be slightly below the 2019 levels, but demand is very strong around the world.

Wall Street rates the construction machinery and equipment company at “overweight” right now with an average price target of $240.61 that represents a more than 10% upside from here.

Caterpillar saw double-digit sales growth in Q1

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In April, the Fortune 100 company reported market-beating results for its fiscal first quarter, which were particularly impressive considering the ongoing supply constraints. CEO Umpleby added:

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Our sales would’ve been even higher if not for supply constraints. Still, we were able to turn in double-digit sales growth in Q1 despite ongoing challenges. So, for us, demand is strong and we continue to work our way through supply constraints.

Amidst the ongoing sell-off in U.S. equities, Caterpillar stock stands among the few that are still green for the year. Its shares are up 3.0% YTD at present.

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