How big of a headwind is China for Caterpillar Inc?

By: Wajeeh Khan
Wajeeh Khan
Wajeeh is a News Reporter at Invezz covering the European, Asian and North America stock markets. Wajeeh has 5… read more.
on May 18, 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.

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

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:

Are you looking for fast-news, hot-tips and market analysis? Sign-up for the Invezz newsletter, today.

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

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:

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.

Invest in crypto, stocks, ETFs & more in minutes with our preferred broker,
75.26% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.