Why Caterpillar Stock Slumped by Nearly 4% on Friday

Key Points

• The company is anticipating higher than previously expected costs from tariffs.

• These levies will affect both its current quarter and its results for the full year.

• 10 stocks we like better than Caterpillar ›

It seems that the current round of tariffs enacted by the current presidential administration is going to wound Caterpillar (NYSE: CAT) more than previously expected. On a new, not very encouraging revision of the impact of the levies on the industrial company's business, investors traded out of the stock on Friday.

Ultimately, it closed the day almost 4% lower in price, which didn't look good next to the S&P 500 index's relatively modest 0.6% slip.

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An unhappy Cat

After market close Thursday, Caterpillar divulged in a regulatory filing that it now expects to take a tariff-related hit to its fundamentals totaling $1.5 billion to $1.8 billion across this year. That means potentially several hundreds of millions of dollars more than the original forecast of $1.5 billion it provided within its second-quarter earnings report.

Image source: Getty Images.

Between then and now, a set of modifications and new levies have been announced by the administration. The company added that for its current (third) quarter, the tariff impact would be $500 million to $600 million.

Caterpillar said in the filing that it would supply more updates in its Q3 earnings release and accompanying conference call. Both are slated for Oct. 29.

Cutting time

On Friday, two analysts elected to lower their price targets on Caterpillar in the wake of the disclosure. While Baird's Mircea Dobre still feels the company is worthy of an outperform (i.e., buy) recommendation, he's reset his fair value assessment to $495 per share from the preceding $500.

His peer Noah Kaye at Oppenheimer reduced his price target to $480 per share from $493 but also maintained his outperform rating.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.