Caterpillar Inc. (CAT Quick QuoteCAT - Free Report) shares have gained 51% year to date, outperforming the manufacturing - construction and mining industry's 45.3% growth. In comparison, the Zacks Industrial Products sector and the S&P 500 have advanced 13.4% and 11.1%, respectively.

CAT has also delivered stronger returns than competitors, Komatsu (KMTUY Quick QuoteKMTUY - Free Report) and Terex Corp. (TEX Quick QuoteTEX - Free Report) , whose shares have risen 26.2% and 9.1%, respectively, during the same period.

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From a technical standpoint, Caterpillar has been trading above both its 50-day and 200-day simple moving averages (SMA) indicating sustained upward momentum. The stock’s strength reflects investor confidence in the company’s operational execution, financial position and long-term growth strategy.

CAT Trading Above 50-Day & 200-Day Moving Average

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While the impressive rally may attract investors, it is important to assess the drivers behind the stock’s performance and determine whether the momentum is sustainable or if potential risks could weigh on future returns.

CAT Ends Q126 With Record Backlog, Revenues Boosted by Demand

Caterpillar generated approximately $17.4 billion in first-quarter 2026 revenues, representing a 22% year-over-year increase. Growth was largely fueled by a $2.3 billion rise in sales volume across its business segments.

Higher dealer inventory levels and stronger end-user demand contributed to volume gains across all three major operating segments. The company ended the quarter with a record backlog of $62.7 billion, highlighting robust demand visibility.

Caterpillar Demonstrates Strong Earnings Momentum

Cost of sales climbed 26% year over year due to higher manufacturing expenses, including tariff related impacts. Adjusted operating margin dipped slightly to 18% from 18.3% in the year-ago quarter.

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. 

CAT Raises 2026 Revenue Outlook, Margin Pressure Remains

For 2026, Caterpillar expects low double-digit revenue growth compared with 2025. Previously, management had projected revenue growth near the upper end of its long-term 5-7% CAGR target.

Adjusted operating margin is expected to land near the lower end of the company’s target range due to ongoing tariff-related costs. However, management indicated that margins should exceed prior 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 Continue Moving 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 29.4%, while the 2027 estimate implies growth of 23.7%, reflecting improving confidence in the company’s earnings trajectory.

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How did Caterpillar’s Peers Perform in the Quarter?

Komatsu reported earnings per share of 75 cents in the quarter 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 were up 11%. Backlog increased sequentially to $7.1 billion and book-to-bill was at 109%.

Caterpillar Trades at a Premium Valuation

CAT is currently trading at a forward 12-month P/E of 31.90X, at a premium compared with the industry’s 30.07X. 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 14.88X and 11.00X, respectively.

CAT Continues to Deliver Superior Returns

Caterpillar’s return on equity (ROE) is 48.21%, higher than the industry’s average of 46.94%. It is also higher than the S&P 500’s return of 34.07%. Meanwhile, Komatsu offers an ROE of 10.83% and Terex an ROE of 13.43%. 

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Caterpillar Positioned for Long-Term Growth

Caterpillar recently increased its long-term revenue CAGR target to 6-9% through 2030, up from the previously stated 5-7% range. Management aims to increase Construction Industries sales to users by 25% from 2024 levels by 2030, triple the number of autonomous trucks operating in Resource Industries, and expand Power Generation sales to more than three times. 

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.

Key growth catalysts include U.S. infrastructure spending, mining demand tied to the energy transition, increased automation adoption  and expanding investments in data centers and sustainability initiatives.

How Should Investors Approach CAT Stock Now?

Caterpillar continues to execute well, delivering strong revenue growth, accelerating earnings, a record backlog and rising earnings estimates despite a challenging macroeconomic environment. The company remains well positioned to capitalize on long-term secular trends, including infrastructure investment, electrification-related mining demand, data center expansion and growth in its high-margin services business.

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.