A month has gone by since the last earnings report for Caterpillar (CAT Quick QuoteCAT - Free Report) . Shares have lost about 1.6% in that time frame, underperforming the S&P 500.

But investors have to be wondering, will the recent negative trend continue leading up to its next earnings release, or is Caterpillar due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

CAT Q3 Earnings & Revenues Beat Estimates on Higher Volumes

Caterpillar reported adjusted earnings per share of $4.95 for the third quarter of 2025, which beat the Zacks Consensus Estimate of $4.52 by a margin of 10%. The bottom line was, however, down 4% compared with the year-ago quarter.

CAT delivered higher revenues, marking a return to positive growth after six consecutive quarters of declines, which was driven by increased volumes across all segments. These gains were, however, partially offset by elevated tariff-related costs.

Including one-time items, Caterpillar’s earnings per share were $4.88, a 4% decline from the reported figure of $5.06 in the year-ago quarter.

CAT’s Q3 Revenues Up on Higher Volumes in All Segments

Caterpillar reported revenues of around $17.6 billion, which surpassed the Zacks Consensus Estimate of $16.75 billion by a margin of 5.33%. The company achieved growth across all segments, with the figure representing an all-time quarterly record. 

The top line increased 9.5% year over year due to higher sales volume of $1.55 billion (around 10%). This was attributed to improved sales volume in each of its segments, reflecting higher sales of equipment to end users. This was somewhat offset by unfavorable price realization of $191 million (1.3%) and favorable currency impact of $132 million or 1%.  

Caterpillar witnessed revenue growth in all regions, led by 13% in North America, followed by 10% in Latin America, 7% in Asia Pacific and 1% in EAME.

Caterpillar reported a sequential backlog growth of $2.4 billion in the quarter. Its backlog is currently at an all-time high of $39.9 billion.

Caterpillar’s Q3 Profits Pressured by Tariffs & Expenses

Cost of sales increased 16% year over year to approximately $11.7 billion, primarily driven by unfavorable manufacturing costs, including the impact of higher tariffs.

Gross profit was down 1.2% to $5.97 billion from the prior-year quarter. The gross margin was 33.8% compared with 37.5% in the year-ago quarter.
Selling, general and administrative (SG&A) expenses moved up 9.2% year over year to around $1.82 billion due to higher compensation expense. Research and development (R&D) expenses were up 4% to $555 million. 

CAT reported an operating profit of $3.05 billion, a 3% decline from the year-ago quarter. Unfavorable price realization, elevated manufacturing costs and SG&A and R&D expenses offset the gains from higher volumes. The operating margin was 17.3%, a 220-basis-point contraction from the year-ago quarter.

Adjusted operating profit was around $3.09 billion, down 4% from the year-ago quarter. The adjusted operating margin was 17.5% compared with 20% in the third quarter of 2024.

CAT’s Segment Performances in Q3

Machinery and Energy & Transportation (ME&T) sales rose 10% year over year to around $16.7 billion, attributed to higher volumes on increased sales of equipment to end users. 

Construction Industries' total sales were up 7% year over year to $6.76 billion on higher sales volume and favorable currency impact, offset by unfavorable price realization. 

Regionally, sales were up 8% in North America, 6% in EAME and 3% in Asia/Pacific, which was offset by a 1% dip in Latin America. 

Total sales in the Resource Industries segment were up 2% year over year to $3.11 billion. Sales in EAME, Latin America and North America were up 22%, 9% and 1%, respectively, but were offset by an 8% decline in sales in Asia/Pacific. 

Sales of the Energy & Transportation segment were around $8.4 billion, a 17% increase from last year’s quarter, aided by higher sales volumes, favorable currency impacts and price realization. 

The segment reported sales growth in Power Generation (31%), Oil and Gas sector (20%) and 5% growth in both the Industrial and Transportation sectors. Regionally, a 27% sales increase in Asia/Pacific, 26% in North America and 24% in Latin America were offset by decreases of 8% in EAME.

The ME&T segment reported an operating profit of around $3 billion, down 3% year over year. 

The Energy & Transportation segment reported a 17% year-over-year increase in operating profit to $1.68 billion.

The Construction Industries segment’s operating profit was down 7% year over year to $1.38 billion. 

The Resource Industries segment’s operating profit slumped 19% year over year to around $0.5 billion. 

Financial Products’ total revenues rose 4% from the year-ago quarter to $1.08 billion. The segment reported a profit of $241 million, marking a 2% decline year over year.

Caterpillar’s Cash Position

Caterpillar generated an operating cash flow of $8.15 billion in the first nine-month period of 2025 compared with $8.64 billion in the prior-year comparable period.

The company returned around $1.1 billion in cash to shareholders as dividends and share repurchases through the third quarter. CAT ended the quarter with cash and equivalents of around $7.5 billion, higher than the cash holding of around $6.9 billion at 2024-end.

CAT’s Expectations for Q425 & 2025

The company anticipates revenues in the fourth quarter of 2025 to grow at a solid pace year over year. CAT anticipates $650-$800 million in headwind from tariffs for the quarter. 

Adjusted operating margin is anticipated to be higher year over year, excluding tariff impact. However, including the impact of tariffs, the adjusted operating margin will be lower than the year-ago quarter.

CAT now expects 2025 revenues to be “modestly” higher compared with 2024, an improvement from its prior projection of “slightly” higher revenues. 

The company projects net incremental tariffs of around $1.6-$1.75 billion for 2025. CAT outlined its outlook for 2025 operating margins for both scenarios, including and excluding tariffs. 

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 near the bottom of its target range.

The company maintains its revenue projection at $42-$72 billion, and margins are anticipated between 10% and 22%, corresponding to the respective revenue levels.

Caterpillar expects ME&T free cash flow in 2025 to be above the midpoint of its targeted range of $5-$10 billion.
 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a upward trend in estimates review.

VGM Scores

Currently, Caterpillar has a average Growth Score of C, however its Momentum Score is doing a bit better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Interestingly, Caterpillar has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.