According to the Wisdom Finance app, due to sluggish global construction demand, Caterpillar (CAT.US) announced lower profits than analysts' expectations for the third quarter, while also lowering the full-year revenue forecast.

The financial report shows that the company's adjusted earnings per share are $5.17, lower than the analysts' average expectation of $5.34. Total sales decreased by 4% to $16.11 billion, slightly higher than the expected $16.08 billion. Caterpillar's performance is often seen as an economic indicator, as the demand for its machinery equipment in mines and construction sites worldwide can reveal the health of these industries globally.

Concerns about sustained inflation and declining agricultural income have led U.S. machinery manufacturers to reduce product inventory as dealers attempt to reduce stock levels, while high manufacturing costs have also weakened profits.

Caterpillar stated that dealer purchases in the third quarter slowed compared to the previous year.

The company reported that due to the decline in sales in its largest market, North America, sales of two out of the three major business segments serving the construction and resource industries decreased.

In the third quarter, the company's overall sales in the Asia-Pacific region decreased by 7% to $2.68 billion.

Caterpillar's adjusted operating margin this quarter is 20%, while it was 20.8% in the same period last year.

Citigroup analyst Kyle Menges said, "At the beginning of this quarter, the market's expectations were quite mild, but the extent of the losses and the increase in dealer inventories were worse than expected."

After the financial report was released, Caterpillar's stock price fell more than 6% in pre-market trading.

Caterpillar is one of the world's largest heavy machinery manufacturers. At the time of the company's performance announcement, its largest market, the USA, is set to hold presidential elections in November, bringing uncertainty to the market.

Jefferies analyst stated that throughout the third quarter, apart from aviation, datacenter expansion, and electrification, the industrial sector's economic conditions remained sluggish, hardly bringing any positive momentum.

Before the earnings announcement on Wednesday, the company's stock price had risen more than 30% year-to-date, marking the biggest annual increase since 2017. Construction equipment manufacturers have benefited from the surge in equipment demand post-pandemic, partly due to the $1 trillion infrastructure bill signed by US President Biden in 2021, aimed at upgrading roads, bridges, and other transportation infrastructure.

However, the initial spike in demand for government infrastructure projects has slowed down. Currently, investors are focusing on the potential recovery in the Chinese market and the policy certainty post the US presidential election, with new policies potentially favoring new investments in industrial projects.

Looking ahead, Caterpillar has lowered its full-year revenue guidance, expecting annual revenue to be slightly below the August forecast. Previously, the company expected full-year revenue to be "slightly below" 2023. Maintaining adjusted operating margin and full-year earnings per share expectations, as price increases offset some of the impact of slowing sales.