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Volvo faces weaker demand and restructuring costs, despite investing in electrification and expansion.
Caterpillar Inc. (CAT - Free Report) and Volvo (VLVLY - Free Report) are global leaders in the heavy machinery and construction equipment industry, offering a wide range of products, including trucks, excavators and industrial engines. Both companies play a critical role in infrastructure development and are investing in electrification and autonomous technologies to shape the future of construction and transport.
Caterpillar has a market capitalization of $371.7 billion, while Volvo has a market capitalization of $71 billion. Both are closely watched by investors to gauge the health of the broader manufacturing and infrastructure landscape, especially during economic uncertainty.
The key question for investors is which offers the better opportunity today. To find out, let us dive into the fundamentals, growth prospects and challenges of Caterpillar and Volvo.
The Case for Caterpillar
Caterpillar is the world’s leading manufacturer of construction and mining equipment, off-highway diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives.
In fourth-quarter 2025, Caterpillar delivered record revenues of $19.1 billion (up 18% year over year), driven by higher volumes across all segments. The company also ended the period with a record backlog of $51.2 billion. Earnings per share rose a modest 0.4% to $5.16 in the quarter, marking a return to growth after five quarters of decline.
For 2026, Caterpillar expects revenues to grow year over year near the upper end of its long-term 5–7% CAGR target. However, adjusted operating margin is projected toward the lower end of its range, reflecting a $2.6 billion tariff impact in 2026.
The company guides an adjusted operating margin of 15–19% at around $60 billion in revenues. At $72 billion in revenues, margins are expected in the 18–22% range, while revenues of $100 billion could support margins of 21–25%.
Caterpillar is targeting revenue CAGR of 5–7% through 2030, with Machinery, Power & Energy free cash flow projected in the $6-$15 billion range. The company plans to return all free cash flow to shareholders over time and aims to grow its dividend at a high-single-digit rate.
The company’s long-term outlook is supported by rising U.S. infrastructure spending, growing demand for mining equipment tied to the energy transition and increased adoption of autonomous solutions to improve productivity and safety. In Power & Energy, sustainability initiatives and data-center investments are driving demand. Caterpillar is also expanding its high-margin aftermarket business, with service revenues targeted to increase from $24 billion in 2025 to $30 billion by 2030.
The Case for Volvo
Volvo is one of the leading manufacturers of trucks, buses and construction equipment, as well as marine and industrial engines. Its subsidiary, Volvo Construction Equipment (Volvo CE), produces a wide range of machinery for the construction, extraction, waste processing and materials handling sectors. It manufactures haulers, wheel loaders, excavators, road construction machines and compact equipment.
Volvo Group’s net sales were down 11% in the fourth quarter to SEK 123.8 billion ($13.5 billion). However, adjusted for currency and the divestment of its ownership stake in China-based SDLG (Shandong Lingong Construction Machinery Co), net sales were in line with the prior year. Increased sales in Europe were offset by lower sales in North America, South America and Asia.
Sales of vehicles were 1% lower year over year. Deliveries of new trucks decreased 3% and are expected to remain weak in the first quarter of 2026 as well.
In the fourth quarter, Construction Equipment's deliveries decreased 46%. However, adjusted for SDLG, deliveries were up 9% reflecting higher deliveries in Europe and Asia, partly offset by lower deliveries in North America and South America.
In the fourth quarter, Volvo CE’s net sales decreased 16% to SEK 18.692 billion ($2 billion). Adjusted for currency and divestment, net sales increased 12%, of which net sales of machines increased 13% and service sales 8%. The adjusted operating margin improved to 13.9% from 11.8% in the year-ago quarter, driven by a positive product mix and an improved service business, which outweighed the negative impact from lower volumes and U.S. tariffs.
Strategically, Volvo continues to invest in innovation and capacity expansion. It continues the rollout of its new range of electric models. Volvo CE recently expanded its European industrial footprint with a new crawler excavator assembly factory in Eskilstuna. The new 30,000 square meter facility will boost capacity and help capitalize on rising demand in Europe. The move is also in sync with Volvo CE’s goals to solidify its position in the key excavator market.
On Jan. 31, 2026, Volvo CE completed the acquisition of Swecon. The acquisition comprises Swecon's operations in Sweden, Germany and the Baltics, including Entrack. The acquisition is a strategic move to further invest and strengthen the retail operations and service sales in key markets and thus make the retail market core for Volvo Construction Equipment in Europe. Volvo CE recently announced its plans to sell the loss-making Rokbak business and concentrate resources on its portfolio of other hauling solutions.
While these initiatives position Volvo for long-term growth, near-term performance remains impacted by restructuring costs, higher operating expenses and softer end-market demand.
How do Estimates Compare for CAT & VLVLY?
The Zacks Consensus Estimate for Caterpillar’s 2026 earnings is $22.85 per share, indicating year-over-year growth of 19.9%. The estimate for 2027 of $27.79 suggests a rise of 21.6%.
The Zacks Consensus Estimate for Volvo’s 2026 earnings is $2.26 per share, indicating year-over-year growth of 30.6%. The 2027 estimate of $2.72 implies growth of 20.4%.
Image Source: Zacks Investment Research
EPS estimates for Caterpillar for both 2026 and 2027 have been trending north over the past 60 days. The estimates for Volvo for 2026 and 2027 have moved down over the past 60 days.
Image Source: Zacks Investment Research
Caterpillar & Volvo: Price Performance, Valuation & Other Comparisons
In a year, CAT stock has surged 170.6%, whereas VLVLY has gained 35.6%.
Image Source: Zacks Investment Research
Caterpillar is currently trading at a forward 12-month earnings multiple of 32.77X. Volvo’s stock is trading at a forward 12-month earnings multiple of 14.67X.
Image Source: Zacks Investment Research
CAT’s return on equity of 45.76% is way higher than VLVLY’s 23.01%. This reflects Caterpillar’s efficient use of shareholder funds in generating profits.
Image Source: Zacks Investment Research
CAT or VLVLY: Which Stock is Better for Your Portfolio?
Both companies offer exposure to long-term infrastructure and industrial growth themes, but they differ in execution and near-term visibility. Caterpillar stands out for its scale, consistent performance, strong backlog and improving earnings outlook, even as it navigates cost pressures. Volvo, while strategically sound and investing for the future, is still working through cyclical demand weakness and operational adjustments.
Despite a higher valuation, Caterpillar’s return on equity is significantly higher. Investors looking for exposure to construction equipment might consider Caterpillar to be the more favorable option at this time. Also, upward estimate revision activity instils optimism for the stock.
While Caterpillar currently carries a Zacks Rank #3 (Hold), Volvo carries a Zacks Rank #4 (Sell).
View the Zacks #1 Rank List
Image: Bigstock
Caterpillar vs. Volvo: Which Industrial Equipment Stock is a Better Buy?
Key Takeaways
Caterpillar Inc. (CAT - Free Report) and Volvo (VLVLY - Free Report) are global leaders in the heavy machinery and construction equipment industry, offering a wide range of products, including trucks, excavators and industrial engines. Both companies play a critical role in infrastructure development and are investing in electrification and autonomous technologies to shape the future of construction and transport.
Caterpillar has a market capitalization of $371.7 billion, while Volvo has a market capitalization of $71 billion. Both are closely watched by investors to gauge the health of the broader manufacturing and infrastructure landscape, especially during economic uncertainty.
The key question for investors is which offers the better opportunity today. To find out, let us dive into the fundamentals, growth prospects and challenges of Caterpillar and Volvo.
The Case for Caterpillar
Caterpillar is the world’s leading manufacturer of construction and mining equipment, off-highway diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives.
In fourth-quarter 2025, Caterpillar delivered record revenues of $19.1 billion (up 18% year over year), driven by higher volumes across all segments. The company also ended the period with a record backlog of $51.2 billion. Earnings per share rose a modest 0.4% to $5.16 in the quarter, marking a return to growth after five quarters of decline.
For 2026, Caterpillar expects revenues to grow year over year near the upper end of its long-term 5–7% CAGR target. However, adjusted operating margin is projected toward the lower end of its range, reflecting a $2.6 billion tariff impact in 2026.
The company guides an adjusted operating margin of 15–19% at around $60 billion in revenues. At $72 billion in revenues, margins are expected in the 18–22% range, while revenues of $100 billion could support margins of 21–25%.
Caterpillar is targeting revenue CAGR of 5–7% through 2030, with Machinery, Power & Energy free cash flow projected in the $6-$15 billion range. The company plans to return all free cash flow to shareholders over time and aims to grow its dividend at a high-single-digit rate.
The company’s long-term outlook is supported by rising U.S. infrastructure spending, growing demand for mining equipment tied to the energy transition and increased adoption of autonomous solutions to improve productivity and safety. In Power & Energy, sustainability initiatives and data-center investments are driving demand. Caterpillar is also expanding its high-margin aftermarket business, with service revenues targeted to increase from $24 billion in 2025 to $30 billion by 2030.
The Case for Volvo
Volvo is one of the leading manufacturers of trucks, buses and construction equipment, as well as marine and industrial engines. Its subsidiary, Volvo Construction Equipment (Volvo CE), produces a wide range of machinery for the construction, extraction, waste processing and materials handling sectors. It manufactures haulers, wheel loaders, excavators, road construction machines and compact equipment.
Volvo Group’s net sales were down 11% in the fourth quarter to SEK 123.8 billion ($13.5 billion). However, adjusted for currency and the divestment of its ownership stake in China-based SDLG (Shandong Lingong Construction Machinery Co), net sales were in line with the prior year. Increased sales in Europe were offset by lower sales in North America, South America and Asia.
Sales of vehicles were 1% lower year over year. Deliveries of new trucks decreased 3% and are expected to remain weak in the first quarter of 2026 as well.
In the fourth quarter, Construction Equipment's deliveries decreased 46%. However, adjusted for SDLG, deliveries were up 9% reflecting higher deliveries in Europe and Asia, partly offset by lower deliveries in North America and South America.
In the fourth quarter, Volvo CE’s net sales decreased 16% to SEK 18.692 billion ($2 billion). Adjusted for currency and divestment, net sales increased 12%, of which net sales of machines increased 13% and service sales 8%. The adjusted operating margin improved to 13.9% from 11.8% in the year-ago quarter, driven by a positive product mix and an improved service business, which outweighed the negative impact from lower volumes and U.S. tariffs.
Strategically, Volvo continues to invest in innovation and capacity expansion. It continues the rollout of its new range of electric models. Volvo CE recently expanded its European industrial footprint with a new crawler excavator assembly factory in Eskilstuna. The new 30,000 square meter facility will boost capacity and help capitalize on rising demand in Europe. The move is also in sync with Volvo CE’s goals to solidify its position in the key excavator market.
On Jan. 31, 2026, Volvo CE completed the acquisition of Swecon. The acquisition comprises Swecon's operations in Sweden, Germany and the Baltics, including Entrack. The acquisition is a strategic move to further invest and strengthen the retail operations and service sales in key markets and thus make the retail market core for Volvo Construction Equipment in Europe. Volvo CE recently announced its plans to sell the loss-making Rokbak business and concentrate resources on its portfolio of other hauling solutions.
While these initiatives position Volvo for long-term growth, near-term performance remains impacted by restructuring costs, higher operating expenses and softer end-market demand.
How do Estimates Compare for CAT & VLVLY?
The Zacks Consensus Estimate for Caterpillar’s 2026 earnings is $22.85 per share, indicating year-over-year growth of 19.9%. The estimate for 2027 of $27.79 suggests a rise of 21.6%.
The Zacks Consensus Estimate for Volvo’s 2026 earnings is $2.26 per share, indicating year-over-year growth of 30.6%. The 2027 estimate of $2.72 implies growth of 20.4%.
Image Source: Zacks Investment Research
EPS estimates for Caterpillar for both 2026 and 2027 have been trending north over the past 60 days. The estimates for Volvo for 2026 and 2027 have moved down over the past 60 days.
Image Source: Zacks Investment Research
Caterpillar & Volvo: Price Performance, Valuation & Other Comparisons
In a year, CAT stock has surged 170.6%, whereas VLVLY has gained 35.6%.
Image Source: Zacks Investment Research
Caterpillar is currently trading at a forward 12-month earnings multiple of 32.77X. Volvo’s stock is trading at a forward 12-month earnings multiple of 14.67X.
Image Source: Zacks Investment Research
CAT’s return on equity of 45.76% is way higher than VLVLY’s 23.01%. This reflects Caterpillar’s efficient use of shareholder funds in generating profits.
Image Source: Zacks Investment Research
CAT or VLVLY: Which Stock is Better for Your Portfolio?
Both companies offer exposure to long-term infrastructure and industrial growth themes, but they differ in execution and near-term visibility. Caterpillar stands out for its scale, consistent performance, strong backlog and improving earnings outlook, even as it navigates cost pressures. Volvo, while strategically sound and investing for the future, is still working through cyclical demand weakness and operational adjustments.
Despite a higher valuation, Caterpillar’s return on equity is significantly higher. Investors looking for exposure to construction equipment might consider Caterpillar to be the more favorable option at this time. Also, upward estimate revision activity instils optimism for the stock.
While Caterpillar currently carries a Zacks Rank #3 (Hold), Volvo carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.