Caterpillar Inc. (CAT) Earnings & Analysis

Latest quarter

Caterpillar reported third-quarter revenue of $20.7 billion, above the consensus of $20.6 billion. Adjusted earnings per share were $7.20, also above the consensus of $7.12.

Revenue rose from $17.6 billion a year earlier, and the company attributed the increase primarily to higher sales volume and favorable price realization. Its filing said sales increased across all three primary segments: Power & Energy benefited from power-generation equipment and services, while Construction Industries sold more equipment to end users. Resource Industries also grew, although its rail sales fell as international locomotive deliveries declined.

Caterpillar reported diluted earnings per share of $7.13, up from $4.88 a year earlier. Operating margin increased to 20.4% from 17.3%, and the filing attributed the increase in operating profit primarily to the profit impact of higher sales volume. Free cash flow was $3.6 billion, compared with $2.8 billion a year earlier.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

CEO Joseph Creed said order rates across Caterpillar’s primary segments pushed backlog to $78 billion, up 96% from a year earlier. He said capacity remained the main constraint on Power & Energy growth as the company increased production of large engines and turbines.

Creed said third-quarter power-generation sales to users grew 75%, driven by demand for turbines and large engines in data-center applications. Construction Industries sales to users rose 20%, with rental fleet loading contributing to growth. Resource Industries sales to users rose 4%, below the company’s expectations, as shipping and commissioning delays held back mining deliveries.

CFO Kyle Epley said higher volume and favorable pricing lifted the adjusted operating margin to 20.6%, partly offset by manufacturing costs including freight and capacity-expansion expenses. He said Caterpillar recognized $128 million in IEEPA tariff recoveries during the quarter.

On investment, Creed said Caterpillar plans to use part of its Winston-Salem facility to assemble and test large engines for natural gas compression. He also described a $1 billion investment to expand manufacturing capacity in Sanford for compact construction equipment.

In response to questions about backlog, Creed said lead times varied by product: large engines and turbines extended into late 2028 and 2029, while smaller engines had shorter lead times. Epley said 58% of backlog was expected to be sold within the next 12 months. Creed declined to quantify the breakdown of orders among hyperscalers, colocation providers and other customer types.

Looking to the fourth quarter, Epley said Caterpillar expects moderate company-wide sales growth and a higher adjusted operating margin than a year earlier. He said a seasonal dealer inventory reduction would weigh on Construction Industries sales volume, even as sales to users continued to grow.

Guidance

CFO Kyle Epley said Caterpillar now expects 2026 capital expenditure of about $3.3 billion, down from its prior expectation of $3.5 billion. He said restructuring costs are now expected to be about $300 million, at the low end of the prior range. CEO Joseph Creed said the company now expects locomotive deliveries to be slightly lower than in 2025 because of delivery timing.