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Caterpillar Set to Report Q3 Earnings: Buy, Sell or Hold the Stock?

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Key Takeaways

  • Caterpillar is expected to post 43.8% earnings growth and 16.7% revenue growth in Q3 2026.
  • A record $72 billion backlog, volume gains and strong aftermarket services are expected to drive growth.
  • CAT faces $600 million in tariff costs, but higher sales and pricing are expected to support profitability.

Caterpillar Inc. (CAT - Free Report) is expected to report year-over-year growth in both earnings and revenues when it reports third-quarter 2026 results on Oct. 29, before the opening bell. If the company meets these expectations, it will mark its fourth consecutive quarter of year-over-year growth in both metrics.

The Zacks Consensus Estimate for CAT’s third-quarter 2026 earnings has moved up 2.7% over the past 60 days to $7.12 per share, implying 43.8% growth from the year-ago actual. The consensus estimate for revenues is pegged at $20.58 billion for the quarter, indicating 16.7% year-over-year growth. 

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Caterpillar’s Earnings Surprise History

CAT’s earnings outpaced the Zacks Consensus Estimate in each of the trailing four, the average surprise being 18.1%. This is depicted in the following chart.

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Image Source: Zacks Investment Research

What the Zacks Model Unveils for CAT Stock

Our proven model predicts a likely earnings beat this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. That is precisely the case here.

You can uncover the best stocks before they are reported with our Earnings ESP Filter.

Earnings ESP: Caterpillar has an Earnings ESP of +2.98%.

Zacks Rank: CAT currently carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Factors Likely to Have Shaped Caterpillar’s Q3 Performance

The broader manufacturing environment remained supportive during the quarter, with the Institute for Supply Management’s manufacturing index remaining above 50%. The index was 55.6% in July, 54.6% in August and 54.5% in September. The New Orders Index also remained above 50 throughout this period. This is likely to have been reflected in Caterpillar’s order volumes.

Volume gains across all segments are projected to have been the primary driver of revenue growth in the third quarter. CAT’s record backlog of $72 billion at the beginning of the quarter, along with ongoing strength in aftermarket parts and service-related revenues, is also likely to have supported growth.  Overall, we expect volumes contributing 10.6% to revenue growth, supplemented by 2.9% from pricing and a 0.7% favorable currency impact. 

However, elevated tariff expenses are likely to have weighed on profitability. Tariff costs are estimated at approximately $600 million for the third quarter, with about 50% attributable to Construction Industries and 25% each to Power & Energy and Resource Industries.

Cost of sales is projected to increase 10.6% year over year. Selling, general and administrative expenses and research and development costs are expected to rise 8.7% and 10.3%, respectively, reflecting higher compensation expenses and strategic investments in technology, including autonomous solutions.

Despite these cost pressures, stronger revenues are expected to have led to growth in operating income in the quarter. Our model projects adjusted operating income to increase 25.7% year over year to $3.88 billion. The adjusted operating margin is expected at 19.3%, up from 17.5% in the third quarter of 2025.

Our Projections for CAT's Segments in Q3

Our model projects the Resource Industries segment's external sales at $4.43 billion for the quarter, indicating a 13% year-over-year rise. We expect a 10.3% rise in volume for the segment, a pricing impact of 1.9% and a positive 0.8% impact from currency translation.

The segment is expected to report an operating profit of $617 million, suggesting 13.5% year-over-year growth. The segment’s operating margin is projected to be 13.9%, in line with the third quarter of 2025. Higher sales volume and favorable price realization are expected to have been partially offset by increased manufacturing costs, including tariff costs and SG&A and R&D expenses. 

The Construction Industries segment’s external sales are projected at $7.49 billion, indicating growth of 12% from the year-ago quarter’s actual. We expect an 8.8% improvement in volumes, a 2.7% impact of pricing and a 0.6% gain from currency translation. 

The segment’s operating profit is projected to be $1.61 billion, indicating year-over-year growth of 17.2%. We project the segment’s margins at 21.5%, higher than the year-ago quarter’s 20.6%. Higher sales volume and favorable price realization are expected to have negated the impact of increased manufacturing costs, including tariff and freight costs.

For the Power & Energy segment, we expect external sales to be $7.26 billion, suggesting a 17.5% rise from the year-ago quarter’s actual. Volume growth is projected to be 13% on improved demand across all sectors: Power Generation, Oil and Gas and Industrial. Pricing is expected to contribute 3.9% to the segment’s sales growth, while currency is expected to have had a positive 0.7% impact.

Our estimate for the segment’s operating profit is $1.97 billion for the third quarter of 2026, suggesting a 20.3% increase year over year. Segment margin is projected at 27.1%, higher than the 26.4% reported in the third quarter of 2025. Gains from stronger volume and favorable price realization are expected to have been partially offset by higher manufacturing costs.

Caterpillar’s Price Performance & Valuation

CAT has gained 30.3% in the past year compared with its industry’s 20% growth. It has also outperformed the broader Zacks Industrial Products sector’s 6.5% growth and the S&P 500’s climb of 11.1%. 

CAT stock has outpaced other players in the industry, like Astec Industries (ASTE - Free Report) , Komatsu (KMTUY - Free Report) and Terex (TEX - Free Report) . In the past year, Komatsu has gained 11.3% while Terex and Astec have declined 12.3% and 19.6%, respectively.

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Image Source: Zacks Investment Research

Caterpillar is currently trading at a forward 12-month P/E of 21.18X, a premium compared with the industry’s 19.69X.

The stock is also not cheap compared with Terex, Astec and Komatsu, which are trading at 8.99X, 10.25X and 15.22X, respectively. Notably, Terex, Astec and Komatsu are trading below the industry’s average.

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Image Source: Zacks Investment Research

Investment Thesis on CAT

Caterpillar’s long-term outlook remains compelling. The company is well-positioned to benefit from global infrastructure spending, urbanization trends and the ongoing transition toward cleaner energy systems. Its strong brand and market presence, and diversified business model position it for improved performance going forward. Expanding its service revenues, which generate higher margins, provides a solid foundation for sustained growth. Additionally, Caterpillar’s robust balance sheet supports continued investment in innovation, alongside shareholder returns through dividends and buybacks. While tariffs are expected to have raised costs, volume growth, as well as CAT’s pricing and cost-cutting efforts, can help counter the impacts.

How Should You Play Caterpillar Stock Pre-Q3 Earnings?

Caterpillar’s upcoming third-quarter 2026 results are likely to reflect solid demand across its diversified businesses, supported by an expansionary manufacturing environment, a record $72 billion backlog and continued strength in aftermarket parts and services. Our estimates indicate year-over-year growth in sales and operating income across all three segments. While tariffs and higher technology-related investments could elevate costs, robust volumes and pricing are expected to have supported profitability.

We recommend buying CAT stock ahead of its third-quarter earnings release, supported by a favorable earnings outlook, a strong track record of earnings surprises and the potential for another earnings beat. The company’s exposure to long-term growth opportunities in infrastructure, mining and energy further strengthens its investment case. While CAT’s forward P/E of 21.18X is higher than the industry average and those of its key peers, the premium is partly justified by its solid operating performance and promising growth prospects.

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