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CAT vs. DE: Which Heavy Machinery Stock Looks More Promising?
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Key Takeaways
Caterpillar posted Q2 volume gains after six straight declines, led by Energy & Transportation growth.
Deere projects 2025 net income down nearly 30% as lower farm spending pressures sales across segments.
CAT outpaces DE in ROE, dividend yield and YTD stock gains, while also benefiting from infrastructure trends.
Caterpillar Inc. (CAT - Free Report) and Deere & Company (DE - Free Report) are leading heavy equipment manufacturers. Caterpillar, widely recognized by its signature yellow machines, manufactures construction and mining equipment serving a variety of sectors like infrastructure, construction, mining, oil and gas, and transportation. Deere, known for its iconic green tractors, specializes in agricultural, forestry and turf equipment, with a strong presence in precision farming technology, and also makes construction equipment.
Caterpillar, with a market capitalization of $202 billion, and Deere, at $132 billion, are closely watched by investors to gauge the health of the broader manufacturing, infrastructure and agricultural landscape. With tariff uncertainty and contraction in the manufacturing sector, the question is which stock you should put your money on.
To find out, let us dive into the fundamentals, growth prospects and challenges of both Caterpillar and Deere.
The Case for Caterpillar
CAT's revenues have declined for the past six quarters, and earnings have fallen in the last four. This reflected persistent volume weakness in its two major segments, Resource Industries and Construction Industries, amid subdued customer spending.
Encouragingly, Caterpillar reported overall positive volumes in second-quarter 2025, after six straight quarters of declines. The rebound was largely driven by a $326 million boost in the Energy & Transportation (E&T) segment, which offset volume declines of $83 million in Construction Industries and $13 million in Resource Industries.
The downturn in China's real estate sector, particularly for 10-ton and larger excavators, which was once a key market for the company, has been a major headwind. CAT recently pointed out that China has shown positive momentum this year and expects growth in the 10-ton and above excavator industry.
CAT now expects 2025 revenues to be slightly higher than 2024 compared with its prior projection of flat revenues. The company expects a tariff impact of around $1.3-$1.5 billion. Excluding tariffs, adjusted operating margin is expected to be in the top half of its target range, corresponding to the anticipated level of revenues. Considering the impact of tariffs, Caterpillar expects the adjusted operating margin to be in the bottom half of its target range.
The company maintains its revenue projection at $42-$72 billion, while margins are anticipated between 10% and 22%, per the respective revenue levels. While high labor costs and potential tariffs remain risks, Caterpillar’s pricing and cost-control initiatives should help cushion the impacts.
Looking ahead, CAT stands to benefit from the surge in projects, driven by the United States Infrastructure Investment and Jobs Act, creating opportunities for its diverse construction equipment portfolio. The shift toward clean energy will drive the demand for essential commodities, boosting the need for Caterpillar’s mining equipment. Meanwhile, given their efficiency and safety, CAT’s autonomous fleet are gaining momentum among miners.
As technology companies establish data centers globally to support their generative AI applications, the company is witnessing robust order levels for reciprocating engines for data centers. It is planning to double its output with a multi-year capital investment. Caterpillar recently entered into a long-term strategic collaboration with Hunt Energy Company, L.P., to meet the surging power needs of data centers. The first project is planned for Texas and is expected to serve as the launchpad for a multi-year program to deliver up to one gigawatt of power generation capacity for data centers across North America.
CAT has been seeing growth in aftermarket parts and service-related revenues, which generate high margins. The company is thus focused on doubling its service revenues from $14 billion in 2016 to $28 billion in 2026.
The Case for Deere
DE has registered top-line declines in the past eight quarters and lower earnings over the last seven due to lower volumes in the agriculture and construction businesses. Weak farmer spending due to low commodity prices, tariff uncertainty and rising material, labor and logistical costs has weighed on DE’s performance.
In response to soft market conditions in the global agriculture and construction sectors, Deere has been aligning its production levels with demand. The company expects sales volumes to decline in 2025 from the prior-year’s reported level, with lower sales in all of its segments — Production & Precision Agriculture, Small Agriculture & Turf, and Construction & Forestry. The company estimates the pretax impact of tariffs for fiscal 2025 will reach $600 million. DE expects fiscal 2025 net income to be between $4.75 billion and $5.25 billion. The mid-point suggests a 29.6% decline from the net income of $7.1 billion reported in fiscal 2024.
The U.S. Department of Agriculture projects net farm income to increase 30% year over year to $180.1 billion after two years of declines. However, the increase this year will mainly be driven by a $33.1-billion year-over-year increase in direct Government farm payments. Crop receipts are anticipated to decrease 2.3% from the 2024 reported level due to lower soybean and corn prices.
Despite this current weakness, agricultural equipment demand will be supported by increased global demand for food, stemming from population growth. Also, the need to replace aging equipment will support DE’s top-line performance. The demand for its construction equipment will be supported by increased infrastructure spending.
Over the long term, Deere is well-positioned for growth, underpinned by consistent investments in innovation and geographic expansion. Its focus on launching products with advanced technologies and features provides it a competitive edge. The company remains focused on revolutionizing agriculture with technology in an effort to make farming automated, easy to use and more precise across the production process.
How do Estimates Compare for CAT & DE?
The Zacks Consensus Estimate for Caterpillar’s 2025 earnings is $18.24 per share, indicating a year-over-year decline of 16.7%. The estimate for 2026 implies a rise of 16.9%.
EPS estimates for 2025 have moved down while the estimates for 2026 have moved up over the past 60 days.
The Zacks Consensus Estimate for Deere’s fiscal 2025 earnings is $18.62 per share, indicating a year-over-year fall of 27.3%. The 2026 estimate implies growth of 12.1%.
Both estimates have been trending south over the past 60 days.
Image Source: Zacks Investment Research
CAT & DE: Price Performance, Valuation & Other Comparisons
Year to date, CAT stock has gained 18.8%, whereas DE has gained 15.2%. Both stocks have outperformed the Industrial Products sector’s climb of 14.2% and the S&P 500’s 9.4% gain.
CAT & DE's YTD Performance Against Sector & S&P 500
Image Source: Zacks Investment Research
CAT is currently trading at a forward 12-month earnings multiple of 21.28X, higher than its five-year median. DE stock is currently trading at a forward 12-month earnings multiple of 23.82X, higher than its five-year median.
Image Source: Zacks Investment Research
CAT’s return on equity of 48.95% is way higher than DE’s 21.97%. This reflects Caterpillar’s efficient use of shareholder funds in generating profits.
Image Source: Zacks Investment Research
CAT’s dividend yield of 1.40% is higher than DE’s 1.33%.
Image Source: Zacks Investment Research
CAT or DE: Which Stock is Better for Your Portfolio?
Both Caterpillar and Deere are navigating near-term challenges, as evidenced by the recent results. That said, Caterpillar’s rebound in volumes and signs of recovery in China are encouraging. While Deere has strong long-term prospects tied to global food demand and agricultural technology innovation, its current valuation, expected decline in both top and bottom lines this fiscal year, and the downward trend in earnings estimates make it less appealing at present.
Conversely, Caterpillar offers a higher dividend yield and return on equity and its valuation is more favorable. CAT stands to benefit from secular trends like infrastructure spending, AI-driven data center growth and the energy transition. Investors looking for industrial exposure might consider Caterpillar to be the more favorable option at this time. Caterpillar currently carries a Zacks Rank #3 (Hold) while Deere carries a Zacks Rank #4 (Sell).
Image: Bigstock
CAT vs. DE: Which Heavy Machinery Stock Looks More Promising?
Key Takeaways
Caterpillar Inc. (CAT - Free Report) and Deere & Company (DE - Free Report) are leading heavy equipment manufacturers. Caterpillar, widely recognized by its signature yellow machines, manufactures construction and mining equipment serving a variety of sectors like infrastructure, construction, mining, oil and gas, and transportation. Deere, known for its iconic green tractors, specializes in agricultural, forestry and turf equipment, with a strong presence in precision farming technology, and also makes construction equipment.
Caterpillar, with a market capitalization of $202 billion, and Deere, at $132 billion, are closely watched by investors to gauge the health of the broader manufacturing, infrastructure and agricultural landscape. With tariff uncertainty and contraction in the manufacturing sector, the question is which stock you should put your money on.
To find out, let us dive into the fundamentals, growth prospects and challenges of both Caterpillar and Deere.
The Case for Caterpillar
CAT's revenues have declined for the past six quarters, and earnings have fallen in the last four. This reflected persistent volume weakness in its two major segments, Resource Industries and Construction Industries, amid subdued customer spending.
Encouragingly, Caterpillar reported overall positive volumes in second-quarter 2025, after six straight quarters of declines. The rebound was largely driven by a $326 million boost in the Energy & Transportation (E&T) segment, which offset volume declines of $83 million in Construction Industries and $13 million in Resource Industries.
The downturn in China's real estate sector, particularly for 10-ton and larger excavators, which was once a key market for the company, has been a major headwind. CAT recently pointed out that China has shown positive momentum this year and expects growth in the 10-ton and above excavator industry.
CAT now expects 2025 revenues to be slightly higher than 2024 compared with its prior projection of flat revenues. The company expects a tariff impact of around $1.3-$1.5 billion. Excluding tariffs, adjusted operating margin is expected to be in the top half of its target range, corresponding to the anticipated level of revenues. Considering the impact of tariffs, Caterpillar expects the adjusted operating margin to be in the bottom half of its target range.
The company maintains its revenue projection at $42-$72 billion, while margins are anticipated between 10% and 22%, per the respective revenue levels. While high labor costs and potential tariffs remain risks, Caterpillar’s pricing and cost-control initiatives should help cushion the impacts.
Looking ahead, CAT stands to benefit from the surge in projects, driven by the United States Infrastructure Investment and Jobs Act, creating opportunities for its diverse construction equipment portfolio. The shift toward clean energy will drive the demand for essential commodities, boosting the need for Caterpillar’s mining equipment. Meanwhile, given their efficiency and safety, CAT’s autonomous fleet are gaining momentum among miners.
As technology companies establish data centers globally to support their generative AI applications, the company is witnessing robust order levels for reciprocating engines for data centers. It is planning to double its output with a multi-year capital investment. Caterpillar recently entered into a long-term strategic collaboration with Hunt Energy Company, L.P., to meet the surging power needs of data centers. The first project is planned for Texas and is expected to serve as the launchpad for a multi-year program to deliver up to one gigawatt of power generation capacity for data centers across North America.
CAT has been seeing growth in aftermarket parts and service-related revenues, which generate high margins. The company is thus focused on doubling its service revenues from $14 billion in 2016 to $28 billion in 2026.
The Case for Deere
DE has registered top-line declines in the past eight quarters and lower earnings over the last seven due to lower volumes in the agriculture and construction businesses. Weak farmer spending due to low commodity prices, tariff uncertainty and rising material, labor and logistical costs has weighed on DE’s performance.
In response to soft market conditions in the global agriculture and construction sectors, Deere has been aligning its production levels with demand. The company expects sales volumes to decline in 2025 from the prior-year’s reported level, with lower sales in all of its segments — Production & Precision Agriculture, Small Agriculture & Turf, and Construction & Forestry. The company estimates the pretax impact of tariffs for fiscal 2025 will reach $600 million.
DE expects fiscal 2025 net income to be between $4.75 billion and $5.25 billion. The mid-point suggests a 29.6% decline from the net income of $7.1 billion reported in fiscal 2024.
The U.S. Department of Agriculture projects net farm income to increase 30% year over year to $180.1 billion after two years of declines. However, the increase this year will mainly be driven by a $33.1-billion year-over-year increase in direct Government farm payments. Crop receipts are anticipated to decrease 2.3% from the 2024 reported level due to lower soybean and corn prices.
Despite this current weakness, agricultural equipment demand will be supported by increased global demand for food, stemming from population growth. Also, the need to replace aging equipment will support DE’s top-line performance. The demand for its construction equipment will be supported by increased infrastructure spending.
Over the long term, Deere is well-positioned for growth, underpinned by consistent investments in innovation and geographic expansion. Its focus on launching products with advanced technologies and features provides it a competitive edge. The company remains focused on revolutionizing agriculture with technology in an effort to make farming automated, easy to use and more precise across the production process.
How do Estimates Compare for CAT & DE?
The Zacks Consensus Estimate for Caterpillar’s 2025 earnings is $18.24 per share, indicating a year-over-year decline of 16.7%. The estimate for 2026 implies a rise of 16.9%.
EPS estimates for 2025 have moved down while the estimates for 2026 have moved up over the past 60 days.
The Zacks Consensus Estimate for Deere’s fiscal 2025 earnings is $18.62 per share, indicating a year-over-year fall of 27.3%. The 2026 estimate implies growth of 12.1%.
Both estimates have been trending south over the past 60 days.
Image Source: Zacks Investment Research
CAT & DE: Price Performance, Valuation & Other Comparisons
Year to date, CAT stock has gained 18.8%, whereas DE has gained 15.2%. Both stocks have outperformed the Industrial Products sector’s climb of 14.2% and the S&P 500’s 9.4% gain.
CAT & DE's YTD Performance Against Sector & S&P 500
Image Source: Zacks Investment Research
CAT is currently trading at a forward 12-month earnings multiple of 21.28X, higher than its five-year median. DE stock is currently trading at a forward 12-month earnings multiple of 23.82X, higher than its five-year median.
Image Source: Zacks Investment Research
CAT’s return on equity of 48.95% is way higher than DE’s 21.97%. This reflects Caterpillar’s efficient use of shareholder funds in generating profits.
Image Source: Zacks Investment Research
CAT’s dividend yield of 1.40% is higher than DE’s 1.33%.
Image Source: Zacks Investment Research
CAT or DE: Which Stock is Better for Your Portfolio?
Both Caterpillar and Deere are navigating near-term challenges, as evidenced by the recent results. That said, Caterpillar’s rebound in volumes and signs of recovery in China are encouraging. While Deere has strong long-term prospects tied to global food demand and agricultural technology innovation, its current valuation, expected decline in both top and bottom lines this fiscal year, and the downward trend in earnings estimates make it less appealing at present.
Conversely, Caterpillar offers a higher dividend yield and return on equity and its valuation is more favorable. CAT stands to benefit from secular trends like infrastructure spending, AI-driven data center growth and the energy transition. Investors looking for industrial exposure might consider Caterpillar to be the more favorable option at this time. Caterpillar currently carries a Zacks Rank #3 (Hold) while Deere carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.