Caterpillar has today forecast full-year earnings below analysts' expectations as it struggles with sluggish global industrial activity.
The world's biggest construction and mining equipment maker said it expects 2020 profit of $8.50 per share to $10 per share, compared with the average analyst estimate of $10.63 per share.
"We expect continued global economic uncertainty to pressure sales to users in 2020 and cause dealers to further reduce inventories," chief executive Jim Umpleby said.
The Deerfield, Illinois-based company, considered a bellwether for economic activity, has been hit hard as its customers held off on big purchases due to uncertainty sparked by a prolonged US-China trade war.
Caterpillar's forecast comes a day after the world's largest package delivery company United Parcel Service forecast 2020 profit below estimates, citing global trade weakness and a slump in domestic industrial production.
While a trade truce between the US and China has eased trade tensions, the outbreak of coronavirus has clouded the economic outlook.
The outbreak has killed more than 200 people in China and has spread to 18 countries, from Japan to the US and the UK.
Caterpillar's chief financial officer Andrew Bonfield said the 2020 earnings outlook factors in the information the company has, thus far, about the coronavirus' impact.
He, however, said the situation in China is "very fluid", which could impact the outlook.
Caterpillar expects as much as an annual 9% decline in retail sales this year, resulting in a reduction of up to $1.5 billion in dealer inventories.
In the face of weak demand, the company plans to keep a lid on its costs. It expects lower material and freight costs to cushion the hit on its profits.
Adjusted profit for the fourth quarter came in at $2.63 per share compared with $2.55 per share last year. Analysts on average expected a profit of $2.37 per share, according to IBES data from Refinitiv.
Sales in North America, its biggest market, fell 13% to $5.83 billion in the fourth quarter. Total sales fell by 8.4% to $13.14 billion.
