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CAT Q2 Earnings Beat Estimates on Higher Volume and Pricing
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Key Takeaways
Caterpillar beat Q2 earnings and revenue estimates on higher sales volume and favorable pricing.
CAT posted a record $72 billion backlog as sales increased across all segments and regions.
CAT expects strong Q3 sales growth and mid-to-high teens revenue growth for full-year 2026.
Caterpillar Inc. (CAT - Free Report) reported adjusted earnings of $8.17 per share for the second quarter of 2026, up 73% year over year. The figure surpassed the Zacks Consensus Estimate of $6.25 by 30.72%. Higher sales volume and favorable price realization supported the performance. Including one-time items, Caterpillar’s earnings per share were $7.77 compared with $4.62 in the year-ago quarter.
CAT’s Q2 Revenues Powered by Volume, Reports Record Backlog
Sales and revenues increased 24% to $20.5 billion and topped the consensus estimate of $19.3 billion by 6.37%. The quarter marked Caterpillar’s first-ever revenue total above $20 billion.
The $3.974 billion year-over-year revenue increase primarily reflected $3.113 billion of higher sales volume and $595 million of favorable price realization. Currency movements added $199 million, while Financial Products revenues contributed another $67 million.
Our model had projected volume growth of $1.75 billion, a favorable price impact of around $279 million and a positive currency impact of $111 million.
Higher sales of equipment to end users drove the volume increase. Sales rose across all three primary operating segments and every geographic region, indicating broad demand rather than reliance on a single business or market. Caterpillar’s order backlog surged 92% year over year to a record $72 billion.
Caterpillar's Margins Expand Sharply in Q2
Cost of goods sold rose 18% to $12.781 billion. Gross profit was up 34.7% to $7.76 billion from the prior-year quarter. The gross margin expanded 300 basis points to 37.8% from the year-ago quarter.
Selling, general and administrative expenses increased 19% to $2.018 billion, while research and development expenses advanced 12% to $616 million.
Operating profit increased 50% year over year to $4.295 billion. The operating profit margin expanded to 20.9% from 17.3%, as the profit contribution from higher volume and pricing more than offset increased operating expenses.
Adjusted operating profit climbed 54% to $4.497 billion, while the adjusted operating margin improved to 21.9% from 17.6%. The quarter included $392 million of expected International Emergency Economic Power Act (IEEPA) tariff recoveries.
CAT’s Segments Deliver Higher Sales and Improved Profits
Total Machinery, Power & Energy (MP&E) sales rose 24.9% year over year to around $19.6 billion. Operating profit was around $4.2 billion, up 51% year over year. Our model’s projection for sales and operating profit was $17.8 billion and $3.4 billion, respectively.
Construction Industries delivered the strongest segment sales growth. Revenues increased 35% to $8.346 billion, driven by $1.75 billion of higher volume and $309 million of favorable price realization. The segment’s total sales came in higher than our estimate of $7.24 billion.
Segment profit advanced 57% to $1.947 billion, due to the higher sales volume. Margin widened to 23.3% from 20.1% in the prior-year quarter. Our projection for the segment’s operating profit was $1.62 billion.
Resource Industries sales rose 20% to $4.65 billion, mainly reflecting higher equipment sales to end users, higher than our projection of $3.97 billion. Segment profit increased 23% to $693 million. Margin edged up to 14.9% from 14.5%, as higher volume offset $158 million of unfavorable manufacturing costs. Our estimate for the segment’s operating profit was $692 million.
Power & Energy sales increased 17% year over year to $8.238 billion. The improvement reflected $736 million of higher volume, $212 million of favorable pricing and a $200 million increase in intersegment sales. Our estimate was $6.67 billion. The segment reported sales growth in Power Generation (29%), followed by 9% growth in Industrial and Oil and Gas sectors.
Segment profit rose 30% to $2.027 billion, higher than our estimate of $1.83 billion. Segment margin expanded 250 basis points to 24.6%. Volume and pricing benefits outweighed $149 million of unfavorable manufacturing costs, mainly related to higher period manufacturing expenses.
Financial Products revenues advanced 10% to $1.145 billion on higher average earning assets. Segment profit increased 32% to $328 million, aided by earning-asset growth and improved Insurance Services results, partly offset by a higher provision for credit losses. Our model had projected revenues of $1.06 billion and an operating profit of $342 million for the second quarter of 2026.
Caterpillar's Cash Flow and Outlook Strengthen
Machinery, Power & Energy operating cash flow reached $5.7 billion, up 94% year over year. Free cash flow more than doubled to $5.1 billion. CAT returned $2.2 billion to shareholders through $1.5 billion of share repurchases and $700 million of dividends. Caterpillar ended the quarter with $6.713 billion in cash and equivalents
CAT’s Expectations for Q3 & 2026
Looking to third-quarter 2026, management expects strong growth in sales and revenues compared with the year-ago period. Tariff costs are expected to be in line with the year-ago quarter. CAT anticipates the adjusted operating margin to be higher year over year in the third quarter. For context, the adjusted operating margin was 17.5% in the third quarter of 2025.
For 2026, management expects sales and revenues to grow in the mid-to-high teens. Adjusted operating margin is projected near the bottom of its target range, excluding tariff recoveries. MP&E free cash flow is expected in the top half of the company’s target range. The company forecasts tariff costs of around $2.2 billion, excluding tariff recoveries.
The company maintain its adjusted operating margin outlook 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.
How did Caterpillar’s Peers Perform in the Quarter?
Komatsu (KMTUY - Free Report) reported earnings per share of 67 cents for the quarter ended June 30, 2026, surpassing the Zacks Consensus Estimate of 59 cents. Earnings declined 3% year over year. Komatsu’s revenues came in at around $6.54 billion, marking a 4% rise on a year-over-year basis. Komatsu’s Construction, Mining & Utility Equipment sales increased 14.4% in the quarter, while Industrial Machinery & Others sales rose 21.7%.
Terex Corporation (TEX - Free Report) reported second quarter 2026 earnings per share of $1.37, beating the Zacks Consensus Estimate of $1.25. The figure marked an 8% decline from the year-ago quarter. Terex’s revenues increased 51% year over year to $2.24 billion, which surpassed the Zacks Consensus Estimate of $2.14 billion.
A Manufacturing & Construction Stock Awaiting Results
Astec Industries (ASTE - Free Report) is expected to release its second-quarter 2026 results tomorrow. The Zacks Consensus Estimate for Astec’s earnings is pegged at $1.05 per share, indicating a 19.3% improvement from the year-ago quarter.
The consensus estimate for Astec’s top line is pegged at $402.5 million, indicating a 21.9% rise from the prior year’s actual. Astec has a trailing four-quarter average surprise of 3.01%.
View the Zacks #1 Rank List
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CAT Q2 Earnings Beat Estimates on Higher Volume and Pricing
Key Takeaways
Caterpillar Inc. (CAT - Free Report) reported adjusted earnings of $8.17 per share for the second quarter of 2026, up 73% year over year. The figure surpassed the Zacks Consensus Estimate of $6.25 by 30.72%. Higher sales volume and favorable price realization supported the performance.
Including one-time items, Caterpillar’s earnings per share were $7.77 compared with $4.62 in the year-ago quarter.
CAT’s Q2 Revenues Powered by Volume, Reports Record Backlog
Sales and revenues increased 24% to $20.5 billion and topped the consensus estimate of $19.3 billion by 6.37%. The quarter marked Caterpillar’s first-ever revenue total above $20 billion.
The $3.974 billion year-over-year revenue increase primarily reflected $3.113 billion of higher sales volume and $595 million of favorable price realization. Currency movements added $199 million, while Financial Products revenues contributed another $67 million.
Our model had projected volume growth of $1.75 billion, a favorable price impact of around $279 million and a positive currency impact of $111 million.
Higher sales of equipment to end users drove the volume increase. Sales rose across all three primary operating segments and every geographic region, indicating broad demand rather than reliance on a single business or market. Caterpillar’s order backlog surged 92% year over year to a record $72 billion.
Caterpillar's Margins Expand Sharply in Q2
Cost of goods sold rose 18% to $12.781 billion. Gross profit was up 34.7% to $7.76 billion from the prior-year quarter. The gross margin expanded 300 basis points to 37.8% from the year-ago quarter.
Selling, general and administrative expenses increased 19% to $2.018 billion, while research and development expenses advanced 12% to $616 million.
Operating profit increased 50% year over year to $4.295 billion. The operating profit margin expanded to 20.9% from 17.3%, as the profit contribution from higher volume and pricing more than offset increased operating expenses.
Adjusted operating profit climbed 54% to $4.497 billion, while the adjusted operating margin improved to 21.9% from 17.6%. The quarter included $392 million of expected International Emergency Economic Power Act (IEEPA) tariff recoveries.
CAT’s Segments Deliver Higher Sales and Improved Profits
Total Machinery, Power & Energy (MP&E) sales rose 24.9% year over year to around $19.6 billion. Operating profit was around $4.2 billion, up 51% year over year. Our model’s projection for sales and operating profit was $17.8 billion and $3.4 billion, respectively.
Construction Industries delivered the strongest segment sales growth. Revenues increased 35% to $8.346 billion, driven by $1.75 billion of higher volume and $309 million of favorable price realization. The segment’s total sales came in higher than our estimate of $7.24 billion.
Segment profit advanced 57% to $1.947 billion, due to the higher sales volume. Margin widened to 23.3% from 20.1% in the prior-year quarter. Our projection for the segment’s operating profit was $1.62 billion.
Resource Industries sales rose 20% to $4.65 billion, mainly reflecting higher equipment sales to end users, higher than our projection of $3.97 billion. Segment profit increased 23% to $693 million. Margin edged up to 14.9% from 14.5%, as higher volume offset $158 million of unfavorable manufacturing costs. Our estimate for the segment’s operating profit was $692 million.
Power & Energy sales increased 17% year over year to $8.238 billion. The improvement reflected $736 million of higher volume, $212 million of favorable pricing and a $200 million increase in intersegment sales. Our estimate was $6.67 billion. The segment reported sales growth in Power Generation (29%), followed by 9% growth in Industrial and Oil and Gas sectors.
Segment profit rose 30% to $2.027 billion, higher than our estimate of $1.83 billion. Segment margin expanded 250 basis points to 24.6%. Volume and pricing benefits outweighed $149 million of unfavorable manufacturing costs, mainly related to higher period manufacturing expenses.
Financial Products revenues advanced 10% to $1.145 billion on higher average earning assets. Segment profit increased 32% to $328 million, aided by earning-asset growth and improved Insurance Services results, partly offset by a higher provision for credit losses. Our model had projected revenues of $1.06 billion and an operating profit of $342 million for the second quarter of 2026.
Caterpillar's Cash Flow and Outlook Strengthen
Machinery, Power & Energy operating cash flow reached $5.7 billion, up 94% year over year. Free cash flow more than doubled to $5.1 billion. CAT returned $2.2 billion to shareholders through $1.5 billion of share repurchases and $700 million of dividends. Caterpillar ended the quarter with $6.713 billion in cash and equivalents
CAT’s Expectations for Q3 & 2026
Looking to third-quarter 2026, management expects strong growth in sales and revenues compared with the year-ago period. Tariff costs are expected to be in line with the year-ago quarter. CAT anticipates the adjusted operating margin to be higher year over year in the third quarter. For context, the adjusted operating margin was 17.5% in the third quarter of 2025.
For 2026, management expects sales and revenues to grow in the mid-to-high teens. Adjusted operating margin is projected near the bottom of its target range, excluding tariff recoveries. MP&E free cash flow is expected in the top half of the company’s target range. The company forecasts tariff costs of around $2.2 billion, excluding tariff recoveries.
The company maintain its adjusted operating margin outlook 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.
Caterpillar Stock’s Price Performance & Zacks Rank
Over the past year, Caterpillar stock has gained 91.4% compared with the industry’s 76% growth.
Image Source: Zacks Investment Research
Caterpillar carries a Zacks Rank #3 (Hold) at present. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
How did Caterpillar’s Peers Perform in the Quarter?
Komatsu (KMTUY - Free Report) reported earnings per share of 67 cents for the quarter ended June 30, 2026, surpassing the Zacks Consensus Estimate of 59 cents. Earnings declined 3% year over year. Komatsu’s revenues came in at around $6.54 billion, marking a 4% rise on a year-over-year basis. Komatsu’s Construction, Mining & Utility Equipment sales increased 14.4% in the quarter, while Industrial Machinery & Others sales rose 21.7%.
Terex Corporation (TEX - Free Report) reported second quarter 2026 earnings per share of $1.37, beating the Zacks Consensus Estimate of $1.25. The figure marked an 8% decline from the year-ago quarter.
Terex’s revenues increased 51% year over year to $2.24 billion, which surpassed the Zacks Consensus Estimate of $2.14 billion.
A Manufacturing & Construction Stock Awaiting Results
Astec Industries (ASTE - Free Report) is expected to release its second-quarter 2026 results tomorrow. The Zacks Consensus Estimate for Astec’s earnings is pegged at $1.05 per share, indicating a 19.3% improvement from the year-ago quarter.
The consensus estimate for Astec’s top line is pegged at $402.5 million, indicating a 21.9% rise from the prior year’s actual. Astec has a trailing four-quarter average surprise of 3.01%.