Caterpillar Stock Drops as It Resizes Tariff Hit. Why Wall Street Isn’t Worried.

Caterpillar said Thursday that the net impact of tariffs would be between $500 million to $600 million for the third quarter and approximately $1.5 to $1.8 billion for 2025 (Getty Images)

Caterpillar stock dropped after the company updated the impact of tariffs on 2025 earnings.

Investors don’t seem happy, but Wall Street isn’t worried.

The company on Thursday said the net impact of import levies would be between $500 million to $600 million for the third quarter and approximately $1.5 billion to $1.8 billion for 2025. That’s up from prior guidance, provided in early August, of $1.3 billion to $1.5 billion.

Caterpillar shares fell 3.7% to $419.94 on Friday, while the S&P 500 and Dow Jones Industrial Average lost 0.6% and 0.2%, respectively.

“Since the Company released its second quarter earnings on August 5, 2025, several additional clarifications and additional tariffs have been announced,” reads part of Caterpillar’s release. “The Company now expects its full year adjusted operating profit margin to be near the bottom of the target margin range.” Sales guidance is unchanged. Revenue is expected to be almost $65 billion, according to FactSet, slightly higher compared with 2024.

In 2023, Cat provided a range of profit margins at various sales levels. At $65 billion, margins should land between roughly 16% and 20%. Wall Street currently projects about 17% margins, so estimates might come down roughly one percentage point, removing some $500 million in operating profit.

Baird analyst Mig Dobre lowered his 2025 earnings estimate by $1.05 to $17.40, following the update. He cut his price target $5 to $495, but still rates shares Buy. “Cat remains a top idea,” he wrote on Thursday, adding that dealer inventories are in better shape, which is a positive for Cat sales in 2026. “While tariff/price headwinds remain frustrating, we appreciate management’s proactive approach in providing timely intra-quarter updates with the added clarity, likely a positive differentiator relative to peers.”

“The fact that Cat is seeing more tariff impact with the latest guidance on section 232 steel and aluminum tariffs is of little surprise to us following what we heard from OEMs at [trade show] Farm Progress,” wrote Citi analyst Kyle Menges on Thursday. “We think international [machinery makers] are facing more impact than Cat is, which could be a boon to Cat’s market share in North America, and we think [that] should make it a bit easier for Cat to mitigate tariff impacts.”

He rates shares Buy and left his price target at $500.

Overall, 54% of analysts covering Cat stock rate shares Buy, according to FactSet. The average Buy-rating ratio for stocks in the S&P 500 is about 55%. The average analyst price target for Cat stock is about $454 a share.

Coming into Friday trading, Cat stock was up 20% year to date and up 25% over the past 12 months.

Write to Al Root at allen.root@dowjones.com