Caterpillar Inc. (CAT NYSE) saw a decline in its share price last Tuesday. The increase in material costs resulted in a decrease of profit margins for manufacturers of heavy equipment, and with Donald Trump’s government initiation to crackdown steel imports.
Last month, Caterpillar posted a strong performance, reporting profits higher than anticipation with an outlook to a robust and abundant 2018.
Investors pose worried due to the company’s poor performance in the current year. However, the construction and machinery giant doesn’t seem perturbed by the ongoing distress and believes that the rest of the year will be productive.
On Tuesday, the company’s shares opened higher and grew by at least 4.6 percent in early trade. However, the increase in percentage did not even last for 2 hours.
The New York Stock Exchange, shares of the company, closed down by 6.2 percent. At closing, the share price was $144.44. At one point in time, Caterpillar’s shares declined by 11 percent from the day’s high.
Global Industrial Infrastructure’s Co-Group Head, Mr. Lawrence T. De Maria said, “he was surprised when the shares declined.” He added that all gages displayed that everything was normal.
Moreover, the decline in Caterpillar’s shares worsened its position in the broader market. The Dow closed the day at 424.56 points which is 1.74 percent lower last Monday.
Trump’s administration’s curb on steel imports has put limitations on supplies in the domestic market which caused an increase in the cost of metal.
Caterpillar stated that the cost of steel has increased by approximately 15 percent in the last month. Moreover, the company is reportedly raising the price of its products to balance the increase in steel prices and lower profit margin. Other heavy equipment manufacturers are also considering to increase the cost to safeguard their profit margins.
Donaldson Company Inc., a company that manufacturers filters for heavy equipment producers, confirmed last week that it had increased its price by 4 to 15 percent.