Caterpillar Inc. (CAT Quick QuoteCAT - Free Report) delivered a strong first-quarter 2026 performance, with both revenues and earnings rising year over year. The company witnessed volume growth across all segments, despite tariff headwinds.

Both the top and bottom-line figures topped the respective Zacks Consensus Estimate, sending CAT shares up 8% following the results.

Over the past year, CAT stock has gained 172.5%, outperforming the industry’s 154.4% growth. In comparison, the Zacks Industrial Products sector has gained 34.9% and the S&P 500 has risen 33.8%. It has also outpaced peers Komatsu (KMTUY Quick QuoteKMTUY - Free Report) and Terex Corporation (TEX Quick QuoteTEX - Free Report) , which returned 39.2% and 49.3%, respectively.

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Before addressing how investors should position themselves in CAT stock, let’s take a closer look at the company’s quarterly performance and underlying fundamentals.

CAT Q1 Highlights: Volumes Up, Record Backlog & Margins Dip

Caterpillar reported revenues of roughly $17.4 billion in Q1 2026, up 22% year over year, driven primarily by a $2.3 billion increase in sales volume across segments. Pricing added $426 million, with currency tailwinds and Financial Products revenues also contributing. Higher dealer inventory build and increased end-user equipment demand supported volume growth across all three major segments. CAT ended the quarter with a record backlog of $62.7 billion.

Cost of sales climbed 26% year over year due to higher manufacturing expenses, including the impact of tariffs. Adjusted operating margin narrowed to 18% from 18.3% in the first quarter of 2025.

Despite the impact of tariffs, adjusted earnings per share increased 30.4% year over year to $5.54. This marked an acceleration from the 0.4% rise reported in the fourth quarter of 2025. 

Operating cash flow was around $1.9 billion in the first quarter of 2026 compared with $1.3 billion in the prior-year quarter. CAT ended the quarter with cash and equivalents of around $4.1 billion compared with the cash holding of around $9.98 billion at 2025-end.

CAT 2026 Revenue Outlook Raised, Margin Pressure Remains

For 2026, Caterpillar expects low double-digit sales and revenue growth compared with 2025. Earlier, the company had projected year-over-year revenue growth near the upper end of its long-term 5-7% CAGR target. 

Adjusted operating margin is expected near the bottom of the targeted range, factoring in continued tariff pressures. The company, however, indicate margins would be higher than previous expectations.  

Caterpillar maintains its adjusted operating margins of 15–19% at revenue levels of around $60 billion. If revenues reach $72 billion, operating margins are expected to be 18–22%, while revenues of $100 billion could support margins in the range of 21–25%. This is shown in the chart below.

Image Source: Caterpillar Inc.

Full-year Machinery, Power & Energy (MP&E) free cash flow is expected to be higher year over year.

Caterpillar’s Earnings Estimates for 2026 & 2027 Trend Higher

Earnings estimates for CAT have moved up for both 2026 and 2027 over the past 60 days.

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The Zacks Consensus Estimate for 2026 points to year-over-year earnings growth of 21.09%, while the 2027 estimate implies growth of 22.28%, reflecting improving confidence in the company’s earnings trajectory.

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How did Caterpillar’s Peers Fare in the Quarter?

Komatsu reported earnings per share of 75 cents in the fourth quarter of 2025 (ended March 31, 2026), down 18% year over year. Komatsu’s revenues came in at around $7.76 billion, marking a 3% rise on a year-over-year basis. Komatsu’s Construction, Mining & Utility Equipment sales increased 6.5% in the quarter, while Industrial Machinery & Others sales decreased 1.2%.

Terex reported adjusted earnings per share of 98 cents in the first quarter of 2026, 18% higher than the prior-year quarter. Net sales were reported at $1.73 billion, reflecting a 41% jump year over year. Results include the contribution from the REV Group, which is now operating as the Specialty Vehicles (SV) segment.  Proforma sales up 11%. Backlog increased sequentially to $7.1 billion and book-to-bill was at 109%.

Caterpillar’s Premium Valuation

CAT is currently trading at a forward 12-month P/E of 35.22X, at a premium compared with the industry’s 17.98X. Its Value Score of D suggests a stretched valuation at this moment.

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Meanwhile, Komatsu and Terex are cheaper options, trading at a forward 12-month P/E of 17.98X and 11.49X, respectively.

Caterpillar Lifts Long-Term Growth Targets

Caterpillar has raised its long-term revenue CAGR target to 6–9% through 2030. The company had earlier stated a range of 5-7% at its Investor Day. Operational goals include increasing Construction Industries’ sales to users to 1.25x by 2030, compared with 2024, tripling autonomous trucks in Resource Industries from 2024 levels and growing Power Generation sales from 1.3x to more than 3.0x (updated from the prior expectation of 2.0X).

CAT recently announced another agreement to provide PROPWR up to 2.1 gigawatts of large gas generator sets for prime power generation in support of data center, oil and gas and industrial applications. The company will deliver generator sets over the next five years, with additional scope for long-term services growth opportunities in the future. This represents the sixth agreement with at least one gigawatt of Caterpillar equipment for prime power applications.

Connected assets are expected to rise from more than 1.6 million to 2 million, while e-commerce sales per business day are projected to jump from 4% to more than 50% by 2030. Services revenues are targeted to rise from $24 billion in 2025 to $30 billion by 2030.

Caterpillar’s growth is expected to be driven by U.S. infrastructure spending, mining demand linked to energy transition, automation adoption and rising data center and sustainability-related investments.

How to Approach CAT Stock After Earnings Beat?

Existing investors can continue holding CAT stock, supported by strong long-term demand drivers, improving earnings visibility and expanding high-margin services. Upward estimate revisions reinforce the positive outlook.

However, CAT’s premium valuation suggests that new investors may want to wait for a more attractive entry point. The company currently has a Zacks Rank #3 (Hold), which supports our thesis. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.