Shares of the world's largest construction and mining equipment maker fell 6 percent in New York Stock Exchange trading.
Factory shutdowns, clogged ports and labor shortages triggered by the pandemic have hammered companies across industries over the last year, causing manufacturing costs to soar and production lines to freeze.
"Supply chain has been a wild card for all of us in 2021," Chief Financial Officer Andrew Bonfield told Reuters in an interview.
Caterpillar said it expects to raise prices again this year, after hiking rates twice last year, to help mitigate some of the soaring costs.
Public spending, like U.S. President Joe Biden's $1 trillion infrastructure law, are giving Caterpillar's customers the confidence to buy new equipment, Bonfield told investors on a call.
Higher demand and Caterpillar's ongoing cost-control measures have helped anchor the company's bottom line, but supply chain constraints are weighing on operating margins.
"The broad-based strength in demand was overshadowed by higher-than-expected manufacturing costs due to production inefficiencies," said Rene Lipsch, Senior Credit Officer for Moody's Corp.
The company said it expects headwinds to its adjusted operating profit margin in the first quarter versus a year earlier, but sees improvement throughout the rest of the year.
Federal Reserve Chairman Jerome Powell has signaled an imminent rise in short-term interest rates could come as early as March. With rates being near zero since the onset of the pandemic, the Fed anticipates tighter monetary policy and strong job growth could help tame inflation, though some analysts predict it will do little to relieve supply-chain snags.
"Given the overall demand outlook that's strong, I don't think a rise in interest rates will have an impact on the supply chain in the near term," said Chad Dillard, senior analyst at Bernstein.
Total revenue rose 23% to $13.80 billion in the fourth quarter as construction demand across most of its regions saw unprecedented public spending.
Analysts, on average, had estimated revenue of $13.15 billion, according to Refinitiv data.
The company reported a profit of $2.12 billion in the quarter ended Dec. 31, compared with $780 million a year earlier. On an adjusted basis, Caterpillar earned $2.69 per share, topping analysts estimates for $2.26 a share, according to Refinitiv I/B/E/S.
(This story has been refiled to fix spelling of 'being' in paragraph 10)
(Reporting by Uday Sampath in Bengaluru and Bianca Flowers in New York; Editing by Shinjini Ganguli, Shounak Dasgupta, Kirsten Donovan and Nick Zieminski)
By Bianca Flowers and Uday Sampath Kumar