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Caterpillar (CAT) Down 9.1% Since Last Earnings Report: Can It Rebound?
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A month has gone by since the last earnings report for Caterpillar (CAT - Free Report) . Shares have lost about 9.1% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Caterpillar due for a breakout? Well, first let's take a quick look at the most recent earnings report in order to get a better handle on the recent catalysts for Caterpillar Inc. before we dive into how investors and analysts have reacted as of late.
Caterpillar Q2 Earnings Beat Estimates on Higher Volume and Pricing
Caterpillar 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.
Caterpillar'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 increase primarily reflected $3.1 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.
Higher sales of equipment to end users drove the volume increase. Sales rose across all three primary operating segments and every geographic region. 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 billion, while research and development expenses advanced 12% to $616 million. Operating profit increased 50% year over year to around $4.3 billion. The operating 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 around $4.5 billion, while the adjusted operating margin improved to 21.9% from 17.6%. The quarter included $392 million of expected International Emergency Economic Powers Act (IEEPA) tariff recoveries.
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.
Construction Industries delivered the strongest segment sales growth. Revenues increased 35% to $8.3 billion, driven by $1.7 billion of higher volume and $309 million of favorable price realization. Segment profit advanced 57% to $1.9 billion, due to the higher sales volume. Margin widened to 23.3% from 20.1% in the prior-year quarter.
Resource Industries sales rose 20% to $4.6 billion, mainly reflecting higher equipment sales to end users. 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.
Power & Energy sales increased 17% year over year to $8.2 billion. The improvement reflected $736 million of higher volume, $212 million of favorable pricing and a $200 million increase in intersegment sales. 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 billion and 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 $1.1 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.
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 $6.7 billion in cash and equivalents.
Caterpillar'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.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a upward trend in estimates revision.
The consensus estimate has shifted 5.33% due to these changes.
VGM Scores
At this time, Caterpillar has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. 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 C. 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. It comes with little surprise Caterpillar has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
View the Zacks #1 Rank List
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Caterpillar (CAT) Down 9.1% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Caterpillar (CAT - Free Report) . Shares have lost about 9.1% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Caterpillar due for a breakout? Well, first let's take a quick look at the most recent earnings report in order to get a better handle on the recent catalysts for Caterpillar Inc. before we dive into how investors and analysts have reacted as of late.
Caterpillar Q2 Earnings Beat Estimates on Higher Volume and Pricing
Caterpillar 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.
Caterpillar'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 increase primarily reflected $3.1 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.
Higher sales of equipment to end users drove the volume increase. Sales rose across all three primary operating segments and every geographic region. 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 billion, while research and development expenses advanced 12% to $616 million. Operating profit increased 50% year over year to around $4.3 billion. The operating 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 around $4.5 billion, while the adjusted operating margin improved to 21.9% from 17.6%. The quarter included $392 million of expected International Emergency Economic Powers Act (IEEPA) tariff recoveries.
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.
Construction Industries delivered the strongest segment sales growth. Revenues increased 35% to $8.3 billion, driven by $1.7 billion of higher volume and $309 million of favorable price realization. Segment profit advanced 57% to $1.9 billion, due to the higher sales volume. Margin widened to 23.3% from 20.1% in the prior-year quarter.
Resource Industries sales rose 20% to $4.6 billion, mainly reflecting higher equipment sales to end users. 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.
Power & Energy sales increased 17% year over year to $8.2 billion. The improvement reflected $736 million of higher volume, $212 million of favorable pricing and a $200 million increase in intersegment sales. 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 billion and 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 $1.1 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.
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 $6.7 billion in cash and equivalents.
Caterpillar'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.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a upward trend in estimates revision.
The consensus estimate has shifted 5.33% due to these changes.
VGM Scores
At this time, Caterpillar has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. 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 C. 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. It comes with little surprise Caterpillar has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.