Caterpillar Inc. (NYSE: CAT) reported fourth-quarter and full-year 2018 results before markets opened Monday. For the quarter, the heavy equipment firm posted adjusted diluted earnings per share (EPS) of $2.55 on revenues of $14.3 billion. In the same period a year ago, the company reported adjusted EPS of $2.16 on revenues of $12.9 billion. Fourth-quarter results also compare to consensus estimates for EPS of $2.99 and $14.33 billion in revenues.

For the full year, the industrial giant reported EPS of $11.22 and revenues of $54.7 billion, compared with 2017 EPS of $6.88 and revenues of $45.5 billion. Analysts had forecast EPS of $11.64 and revenues of $54.73 billion.

The miss on quarterly and full-year EPS hurt, but what really hammered the stock Monday morning was the soft EPS outlook for 2019. The company said it expects full-year 2019 profit to increase to a range of $11.75 to $12.75. Analysts had a consensus estimate of $12.64, near the top end of the range. They would have liked to hear the company say that the bottom end of the expected range was closer to (or, preferably, above) the consensus.

CEO Jim Umpleby commented:

Our outlook assumes a modest sales increase based on the fundamentals of our diverse end markets as well as the macroeconomic and geopolitical environment. We will continue to focus on operational excellence, including cost discipline, while investing in expanded offerings and services to drive long-term profitable growth.

In the company’s machinery, energy and transportation segment, sales rose by 12% year over year, with the biggest gain coming in its resource (mining) category. Resource industry sales rose 41% in Asia/Pacific, 21% in Latin America, 17% in EMEA (Europe, Middle East, Asia) and 15% in North America. Profit in the segment virtually doubled from $210 million in the fourth quarter of 2017 to $400 million, the result of higher sales volume and higher prices.

The not-so-good news came from Caterpillar’s dealer inventory level. For 2018, dealer inventories increased by roughly $2.3 billion, compared to an increase of just $100 million in 2017. The company said it believes the increase “is reflective of current end-user demand.” The order backlog also declined sequentially by about $800 million to $16.5 billion.

Caterpillar’s shares traded down more than 5% at $129.26, after closing Friday at $136.86. The stock’s 52-week range is $112.06 to $165.88. The 12-month price target as of last night’s close was $152.15.

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