We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Can Caterpillar's E&T Segment Continue to be Its Saving Grace?
Read MoreHide Full Article
Key Takeaways
CAT's E&T segment grew to $28.8B in 2024, or 47% of total sales, with a 12.5% CAGR from 2021 to 2024.
E&T operating margin rose to 24.3% in Q1 2025, helping offset declines in other key business segments.
Demand from AI-driven data centers and oil & gas is expected to fuel E&T growth.
Caterpillar Inc. (CAT - Free Report) is increasingly relying on the Energy & Transportation (E&T) segment to cushion the impact of continued softness in its Construction Industries and Resource Industries segments.
The E&T segment, which supports customers across oil and gas, power generation, marine, rail and industrial sectors, has grown considerably over the past few years. In 2024, the segment generated $28.8 billion in revenues, accounting for 47% of Caterpillar’s total revenues. This reflects growth from 2021. This also indicates a robust compound annual growth rate (CAGR) of 12.5% over 2021-2024, well above the 4.8% and 7.5% growth seen in Construction and Resource Industries, respectively.
The E&T segment has delivered steady gains in operating margins since the third quarter of 2022, rising from 18.7% to 24.3% in the first quarter of 2025. This offset the weaker performances of the other two segments on CAT’s overall results.
Backed by this momentum, our model projects the E&T segment’s operating margin at 24.8% in 2025 (higher than the 23.8% in 2024), with operating profit at $6.02 billion (up 5.1% year over year). In comparison, the Construction Industries segment is projected to see a 16.1% decline in operating profit, while Resource Industries may fall 4.7%.
The E&T segment’s total sales are forecast to grow 1% to $29.2 billion in 2025 against the 6.4% declines in the Construction Industries and Resource Industries Segment’s 3.7%. Over the 2024–2027 period, E&T is expected to grow at a CAGR of 2.5%, ahead of the projected 0.6% for Construction Industries and 2.1% for Resource Industries segments.
Multiple factors will aid this strength. In the Oil and Gas sector (which accounts for 29% of segment sales), focus on sustainability and strength in reciprocating engine orders, especially for large engine replacements, will drive demand for CAT equipment.
Power Generation (32% of segment sales) is expected to see robust growth, driven by increasing demand from data centers supporting generative AI. The company is planning to double its output with a multi-year capital investment.
Sales will also improve in transportation, courtesy of an increase in rail services driven by international locomotives. Growth in marine as customers update aging fleets and pickup in the industrial sector will also drive the segment’s performance.
How CAT’s E&T Segment Stacks Up Against Peers
Caterpillar’s E&T business competes with Cummins Inc.’s (CMI - Free Report) Power Systems segment and GE Vernova Inc.’s (GEV - Free Report) Power segment.
Cummins’ Power Systems segment contributed 16% of its total sales in 2024. The segment’s sales increased 13% to $6.4 billion in 2024 and 19% to $1.6 billion in the first quarter of 2025, both on a year-over-year basis. This was driven by higher demand in power generation markets, especially in North America and China. Cummins expects this to continue this year as well.
GE Vernova’s Power segment generated $18 billion (51% of its total sales) in fiscal 2024, which marked a 4% increase year over year. In the first quarter of 2025, revenues were up 10% year over year to $4.4 billion. For both time periods, the growth was led by strength in the Gas Power business. For 2025, GE Vernova expects the Power segment to deliver mid-single-digit organic revenue growth. The strength will be driven by multiple factors, including demand from data centers associated with Artificial Intelligence, and it is thus investing to increase the Gas Power capacity.
CAT’s Price Performance, Valuation & Estimates
CAT shares have gained 9.3% over the past year compared with the industry’s 7.7% growth. In comparison, the Zacks Industrial Products sector has moved up 4.3%. The S&P 500 has gained 9.3% in the same time frame.
Image Source: Zacks Investment Research
Caterpillar is currently trading at a forward 12-month price/earnings (P/E) ratio of 18.17X compared with the industry average of 17.29X.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for CAT’s 2025 earnings indicates a year-over-year decline of 14.6%. The consensus mark for revenues implies a drop of 2.4% for the year. The earnings estimate for 2026 indicates 12.8% growth, with revenue estimates rising 4.7%.
Earnings estimates for Caterpillar for 2025 have moved down 1.32% over the past 60 days, while the estimate for 2026 has moved up 0.3%.
Image Source: Zacks Investment Research
Caterpillar stock currently carries a Zacks Rank #3 (Hold).
Image: Bigstock
Can Caterpillar's E&T Segment Continue to be Its Saving Grace?
Key Takeaways
Caterpillar Inc. (CAT - Free Report) is increasingly relying on the Energy & Transportation (E&T) segment to cushion the impact of continued softness in its Construction Industries and Resource Industries segments.
The E&T segment, which supports customers across oil and gas, power generation, marine, rail and industrial sectors, has grown considerably over the past few years. In 2024, the segment generated $28.8 billion in revenues, accounting for 47% of Caterpillar’s total revenues. This reflects growth from 2021. This also indicates a robust compound annual growth rate (CAGR) of 12.5% over 2021-2024, well above the 4.8% and 7.5% growth seen in Construction and Resource Industries, respectively.
The E&T segment has delivered steady gains in operating margins since the third quarter of 2022, rising from 18.7% to 24.3% in the first quarter of 2025. This offset the weaker performances of the other two segments on CAT’s overall results.
Backed by this momentum, our model projects the E&T segment’s operating margin at 24.8% in 2025 (higher than the 23.8% in 2024), with operating profit at $6.02 billion (up 5.1% year over year). In comparison, the Construction Industries segment is projected to see a 16.1% decline in operating profit, while Resource Industries may fall 4.7%.
The E&T segment’s total sales are forecast to grow 1% to $29.2 billion in 2025 against the 6.4% declines in the Construction Industries and Resource Industries Segment’s 3.7%. Over the 2024–2027 period, E&T is expected to grow at a CAGR of 2.5%, ahead of the projected 0.6% for Construction Industries and 2.1% for Resource Industries segments.
Multiple factors will aid this strength. In the Oil and Gas sector (which accounts for 29% of segment sales), focus on sustainability and strength in reciprocating engine orders, especially for large engine replacements, will drive demand for CAT equipment.
Power Generation (32% of segment sales) is expected to see robust growth, driven by increasing demand from data centers supporting generative AI. The company is planning to double its output with a multi-year capital investment.
Sales will also improve in transportation, courtesy of an increase in rail services driven by international locomotives. Growth in marine as customers update aging fleets and pickup in the industrial sector will also drive the segment’s performance.
How CAT’s E&T Segment Stacks Up Against Peers
Caterpillar’s E&T business competes with Cummins Inc.’s (CMI - Free Report) Power Systems segment and GE Vernova Inc.’s (GEV - Free Report) Power segment.
Cummins’ Power Systems segment contributed 16% of its total sales in 2024. The segment’s sales increased 13% to $6.4 billion in 2024 and 19% to $1.6 billion in the first quarter of 2025, both on a year-over-year basis. This was driven by higher demand in power generation markets, especially in North America and China. Cummins expects this to continue this year as well.
GE Vernova’s Power segment generated $18 billion (51% of its total sales) in fiscal 2024, which marked a 4% increase year over year. In the first quarter of 2025, revenues were up 10% year over year to $4.4 billion. For both time periods, the growth was led by strength in the Gas Power business.
For 2025, GE Vernova expects the Power segment to deliver mid-single-digit organic revenue growth. The strength will be driven by multiple factors, including demand from data centers associated with Artificial Intelligence, and it is thus investing to increase the Gas Power capacity.
CAT’s Price Performance, Valuation & Estimates
CAT shares have gained 9.3% over the past year compared with the industry’s 7.7% growth. In comparison, the Zacks Industrial Products sector has moved up 4.3%. The S&P 500 has gained 9.3% in the same time frame.
Image Source: Zacks Investment Research
Caterpillar is currently trading at a forward 12-month price/earnings (P/E) ratio of 18.17X compared with the industry average of 17.29X.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for CAT’s 2025 earnings indicates a year-over-year decline of 14.6%. The consensus mark for revenues implies a drop of 2.4% for the year. The earnings estimate for 2026 indicates 12.8% growth, with revenue estimates rising 4.7%.
Earnings estimates for Caterpillar for 2025 have moved down 1.32% over the past 60 days, while the estimate for 2026 has moved up 0.3%.
Image Source: Zacks Investment Research
Caterpillar stock currently carries a Zacks Rank #3 (Hold).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.