Company Reports

Caterpillar delivered yet another dominant performance this quarter, with sales up 24% to a company record of $20.5 billion. Adjusted operating profit grew 54% to $4.5 billion, and earnings per share grew 73% to $8.17. The company boosted its sales outlook to mid- to high-teens growth.

Industrial bellwether Caterpillar is one of the world’s leading providers of heavy construction machinery and a major player in industrial engines and transportation products. While clearly a cyclical company, management has worked intensely to reduce earnings volatility and structurally improve profitability and cash flow. Leadership established targets in 2017 to boost margins 300-600 basis points through the cycle, generate $4 billion-$8 billion in annual free cash flow, and return all industrial free cash substantially to shareholders via repurchases and a progressive dividend. Management has executed very well and tackled costs via capacity rationalization and expense controls. Caterpillar has established a new goal to reach $30 billion in annual services sales by 2030. Having reached $24 billion last year, the company is well on its way to achieving this target, thereby improving margins and reducing cyclicality. The services strategy includes increasing machine digitization to enhance predictive maintenance and increase the attach rate of customer value agreements.

Caterpillar reported a 22% increase in revenue to $17.4 billion, a 20% increase in operating profit to $3.1 billion, and a 30% increase in adjusted EPS to $5.54. Management increased 2026 guidance and its five-year forecast, which was just produced in November, driven mainly by power and energy.

Industrial bellwether Caterpillar is one of the world’s leading providers of heavy construction machinery and a major player in industrial engines and transportation products. While clearly a cyclical company, management has worked intensely to reduce earnings volatility and structurally improve profitability and cash flow. Leadership established targets in 2017 to boost margins 300-600 basis points through the cycle, generate $4 billion-$8 billion in annual free cash flow, and return substantially all industrial free cash to shareholders via repurchases and a progressive dividend. Management has executed very well and tackled costs via capacity rationalization and expense controls. Caterpillar has established a new goal to reach $30 billion in annual services sales by 2030. Having reached $24 billion last year, the company is well on its way to achieving this target, which improves margins and reduces cyclicality. The services strategy includes increasing digitization of machines to enhance predictive maintenance and increase the attach rate of customer value agreements.

Caterpillar posted record revenue of $64 billion (4% growth) in its machinery, power & energy (MPE) segments and operating margin of 17.0%. While within its targeted range, margins were at the lower end due almost entirely to tariffs. Backlog of $51 billion points to strong growth ahead.

Industrial bellwether Caterpillar is one of the world’s leading providers of heavy construction machinery and a major player in industrial engines and transportation products. While clearly a cyclical company, management has worked intensely to reduce earnings volatility and structurally improve profitability and cash flow. Leadership established targets in 2017 to boost margins 300-600 basis points through the cycle, generate $4 billion-$8 billion in annual free cash flow, and return substantially all industrial free cash to shareholders via repurchases and a progressive dividend. Management has executed very well and tackled costs via capacity rationalization and expense controls. Caterpillar has established a new goal to reach $30 billion in annual services sales by 2030. Having reached $24 billion last year, the company is well on its way to achieving this target, which improves margins and reduces cyclicality. The services strategy includes increasing digitization of machines to enhance predictive maintenance and increase the attach rate of customer value agreements.

Caterpillar delivered very impressive third-quarter results with the shares popping over 10%. Revenue grew in all segments, but 7% growth in construction industries and 17% in energy and transportation was especially impressive.

Industrial bellwether Caterpillar is one of the world’s leading providers of heavy construction machinery and a major player in industrial engines and transportation products. While clearly a cyclical company, management has worked intensely to reduce earnings volatility and structurally improve profitability and cash flow. Leadership established targets in 2017 to boost margins 300-600 basis points through the cycle, generate $4 billion-$8 billion in annual free cash flow, and return substantially all industrial free cash to shareholders via repurchases and a progressive dividend. Management has executed very well and tackled costs via capacity rationalization and expense controls. Caterpillar established a goal to reach $28 billion in annual services sales by 2026 (2 times over 10 years). Having reached $23 billion last year, the company is well on its way to achieving this target, which improves margins and reduces cyclicality. The services strategy includes increasing digitization of machines to enhance predictive maintenance and increase the attach rate of customer value agreements.

Industrial bellwether Caterpillar is one of the world’s leading providers of heavy construction machinery and a major player in industrial engines and transportation products. While clearly a cyclical company, management has worked intensely to reduce earnings volatility and structurally improve profitability and cash flow. Leadership established targets in 2017 to boost margins 300-600 basis points through cycle, generate $4 billion-$8 billion in annual free cash flow, and return substantially all industrial free cash to shareholders via repurchases and a progressive dividend. Management has executed very well and tackled costs via capacity rationalization and expense controls. Caterpillar established a goal to reach $28 billion in annual services sales by 2026 (2 times over 10 years). Having reached $23 billion last year, the company is well on its way to achieving this target, which improves margins and reduces cyclicality. The services strategy includes increasing digitization of machines to enhance predictive maintenance and increase the attach rate of customer value agreements.

Caterpillar saw weaker operating profit and earnings in its construction- and mining-related businesses, offset by ongoing robust performance in power solutions offerings to data centers from the engines business. Tariff impacts came in near the harshest end of management’s estimates.

Industrial bellwether Caterpillar is one of the world’s leading providers of heavy construction machinery and a major player in industrial engines and transportation products. While clearly a cyclical company, management has worked intensely to reduce earnings volatility and structurally improve profitability and cash flow. Leadership established targets in 2017 to boost margins 300-600 basis points through cycle, generate $4 billion-$8 billion in annual free cash flow, and return substantially all industrial free cash to shareholders via repurchases and a progressive dividend. Management has executed very well and tackled costs via capacity rationalization and expense controls. Caterpillar established a goal to reach $28 billion in annual services sales by 2026 (2 times over 10 years). Having reached $23 billion last year, the company is well on its way to achieving this target, which improves margins and reduces cyclicality. The services strategy includes increasing digitization of machines to enhance predictive maintenance and increase the attach rate of customer value agreements.

Caterpillar’s first-quarter 2025 results showed some green-shoots across its portfolio with a $5 billion backlog increase and a slightly better full-year outlook compared with last quarter excluding a potential tariff impact. The earnings call was CEO Jim Umpleby’s farewell performance as the company announced on April 15 that he is handing the reins to COO Joe Creed and transitioning to executive chairman. Creed has been a key player in Caterpillar’s efforts to diversify end markets and capture more of its profit pool via services, which we expect to continue.

Industrial bellwether Caterpillar is one of the world’s leading providers of heavy construction machinery and a major player in industrial engines and transportation products. While clearly a cyclical company, management has worked intensely to reduce earnings volatility and structurally improve profitability and cash flow. Leadership established targets in 2017 to boost margins 300-600 basis points through cycle, generate $4 billion-$8 billion in annual free cash flow, and return substantially all industrial free cash to shareholders via repurchases and a progressive dividend. Management has executed very well and tackled costs via capacity rationalization and expense controls. Caterpillar established a goal to reach $28 billion in annual services sales by 2026 (2 times over 10 years). Having reached $23 billion last year, the company is well on its way to achieving this target, which improves margins and reduces cyclicality. The services strategy includes increasing digitization of machines to enhance predictive maintenance and increase the attach rate of customer value agreements.

Industrial bellwether Caterpillar is one of the world’s leading providers of heavy construction machinery and a major player in industrial engines and transportation products. While clearly a cyclical company, management has worked intensely to reduce earnings volatility and structurally improve profitability and cash flow. Leadership established targets in 2017 to boost margins 300-600 basis points through cycle, generate $4 billion-$8 billion in annual free cash flow, and return substantially all industrial free cash to shareholders via repurchases and a progressive dividend. Management has executed very well and tackled costs via capacity rationalization and expense controls. Caterpillar established a goal to reach $28 billion in annual services sales by 2026 (2 times over 10 years). Having reached $23 billion last year, the company is well on its way to achieving this target, which improves margins and reduces cyclicality. The services strategy includes increasing digitization of machines to enhance predictive maintenance and increase the attach rate of customer value agreements.

Caterpillar reported ongoing weakness in its construction and resource businesses in the fourth quarter, offset by the energy & transportation business and continued growth in margin-accretive services. While services growth of 4% decelerated, group margins are impacted less than the top-line conditions would otherwise dictate.

After taking a fresh look at industrial bellwether Caterpillar, we’ve raised our fair value estimate to $425 per share from $267 to reflect our more constructive view on the company’s growth prospects and that management has structurally increased its through-cycle margins north of 20% versus our prior view in the mid-teens. We’re maintaining our wide economic moat rating and are increasing our Capital Allocation Rating to Exemplary given management’s focus on profitable growth and maintainably higher through-cycle returns. This is in addition to generous shareholder remuneration via its progressive dividend and returning substantially all remaining free cash flow to shareholders via share repurchases.

Industrial bellwether Caterpillar is one of the world’s leading providers of heavy construction machinery and a major player in industrial engines and transportation products. While clearly a cyclical company, management has worked intensely to reduce earnings volatility and structurally improve profitability and cash flow. Leadership established targets in 2017 to boost margins 300-600 basis points through cycle, generate $4 billion-$8 billion in annual free cash flow, and return substantially all industrial free cash to shareholders via repurchases and a progressive dividend. Management has executed very well and tackled costs via capacity rationalization and expense controls. Caterpillar established a goal to reach $28 billion in annual services sales by 2026 (2 times over 10 years). Having reached $23 billion last year, the company is well on its way to achieving this target, which improves margins and reduces cyclicality. The services strategy includes increasing digitization of machines to enhance predictive maintenance and increase the attach rate of customer value agreements.

We believe Caterpillar will continue to be the leader in the global heavy machinery market with an extensive portfolio of construction, mining, energy, and transportation products. For nearly a century, the company has been a trusted manufacturer of mission-critical heavy machinery, which has led to its position as one of the world’s most valuable brands. High-quality, extremely reliable, and efficient products underpin the strong brand. Customers also value Caterpillar’s ability to lower the total cost of ownership.

Third-quarter results for wide-moat-rated Caterpillar were lower than our expectations, driven primarily by lower sales volume in the construction and resource segments. Consolidated revenue decreased 4% year over year as only the energy and transportation segment experienced growth. That said, the consolidated operating margin was resilient in the quarter at 20%, largely due to favorable pricing. We have raised our fair value estimate to $267 per share from $249 due to an increase in our midcycle margin forecast.

Wide-moat-rated Caterpillar reported mixed second-quarter results as revenue declines were offset by margin gains in the quarter. Consolidated revenue fell 4% year over year to $16.7 billion, as favorable pricing partially offset lower volume. Adjusted operating margin rose 110 basis points to 22.4% because of a combination of higher pricing and lower manufacturing costs. As a result, management updated full-year guidance to account for lower revenue estimates and for margins to exceed the original target range provided at the beginning of the year.