After Caterpillar Inc. delivered a mixed second-quarter earnings result, CNBC’s ‘Mad Money’ host Jim Cramer highlighted how President Donald Trump‘s policies are reshaping corporate cost structures and may normalize tariff hits as a business expense.
What Happened:
Caterpillar’s GAAP operating profit of $2.860 billion, representing a 17.3% margin, decreased by $622 million, or 18%, compared with $3.482 billion from the second quarter of the previous fiscal year.
This was primarily due to unfavorable manufacturing costs, which the company repeatedly said “largely reflected the impact of higher tariffs.”
Cramer highlighted in a series of X posts that despite this hit, he bought the stock anyway.
Apart from the margin pressure, the management underscored that the tariffs also hit the segment sales of ‘resource industries’ and ‘energy & transportation’ during the quarter.
Despite the tariff hit, Caterpillar said the order backlog increased by approximately $2.5 billion during the quarter across all primary segments.
Cramer further explained that any price pressure from tariffs will become a built-in cost for companies, and investors would eventually stop caring.
This is underpinned by the fact that investors would buy “growth with tariff costs” over “no growth with no tariff,” noted Cramer.
Why It Matters:
The company expects the third quarter incremental tariff costs to range between $400 million and $500 million. For the full year, it estimates net incremental tariff costs of $1.3 billion to $1.5 billion.
Disclosure: Benzinga
© 2022 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Disclosure: Interactive Brokers Third Party
Information posted on IBKR Campus that is provided by third-parties does NOT constitute a recommendation that you should contract for the services of that third party. Third-party participants who contribute to IBKR Campus are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered, their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.
This material is from Benzinga and is being posted with its permission. The views expressed in this material are solely those of the author and/or Benzinga and Interactive Brokers is not endorsing or recommending any investment or trading discussed in the material. This material is not and should not be construed as an offer to buy or sell any security. It should not be construed as research or investment advice or a recommendation to buy, sell or hold any security or commodity. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.
Disclosure: ETFs
Any discussion or mention of an ETF is not to be construed as recommendation, promotion or solicitation. All investors should review and consider associated investment risks, charges and expenses of the investment company or fund prior to investing. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.
Disclosure: Futures Trading
Futures are not suitable for all investors. The amount you may lose may be greater than your initial investment. Before trading futures, please read the CFTC Risk Disclosure. A copy and additional information are available at the Warnings and Disclosures section of your local Interactive Brokers website.
Join The Conversation
If you have a general question, it may already be covered in our FAQs page. go to: IBKR Ireland FAQs or IBKR U.K. FAQs. If you have an account-specific question or concern, please reach out to Client Services: IBKR Ireland or IBKR U.K..
Visit IBKR U.K. Open an IBKR U.K. Account