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CAT Q3 Earnings Beat Estimates on Higher Volume and Pricing
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Key Takeaways
Caterpillar's Q3 adjusted EPS rose 45.5% to $7.20, beating estimates on higher volume and favorable pricing.
Sales climbed 17.3% to $20.68 billion, while its order backlog surged 95.7% to a record $78.1 billion.
Caterpillar's operating cash flow increased 16% and maintained its 2026 revenue growth outlook.
Caterpillar Inc. (CAT - Free Report) reported adjusted earnings of $7.20 per share for the third quarter of 2026, up 45.5% year over year. The figure surpassed the Zacks Consensus Estimate of $7.12 by 1.12%. Higher sales volume and favorable price realization supported the performance.
Including one-time items, Caterpillar's earnings per share were $7.13 compared with $4.88 in the year-ago quarter.
Caterpillar Inc. Price, Consensus and EPS Surprise
Sales and revenues increased 17.3% to $20.68 billion, surpassing the consensus estimate of $20.58 billion by 0.48%. Caterpillar's order backlog surged 95.7% year over year to a record $78.1 billion, reflecting strong order rates.
The $3.04 billion year-over-year revenue increase primarily reflected $2.21 billion of higher sales volume and $663 million of favorable price realization. Currency movements added $58 million.
Higher sales of equipment to end users drove volume growth. Sales increased across all three primary operating segments. Geographically, North America led with 24% growth, while Latin America and Europe, Africa and the Middle East each recorded 15% growth. Asia/Pacific revenues declined 2%.
Our model had projected volume growth of $1.78 billion, a favorable price impact of around $492 million and a positive currency impact of $122 million.
Caterpillar's Operating Margins Expand in Q3
Cost of goods sold increased 14.2% to $13.33 billion. Gross profit rose 23.2% to $7.35 billion, while gross margin expanded approximately 170 basis points to 35.5%.
Selling, general and administrative expenses declined 1.4% to $1.80 billion, while research and development expenses increased 7.4% to $596 million.
Operating profit increased 38.1% to $4.21 billion. The operating profit margin expanded to 20.4% from 17.3% in the prior-year quarter. Higher volume and favorable pricing outweighed $415 million of unfavorable manufacturing costs.
Adjusted operating profit increased 37.8% to $4.26 billion, while adjusted operating margin improved to 20.6% from 17.5%. Results included $128 million of International Emergency Economic Power Act (IEEPA) tariff recoveries. Excluding these recoveries, tariff costs were approximately $600 million.
CAT's Segments Post Sales and Profit Growth
Total Machinery, Power & Energy (MP&E) sales rose 18% year over year to around $19.7 billion. Operating profit was $4.1 billion, up 38% year over year. Our model’s projection for sales and operating profit was $19.1 billion and $3.73 billion, respectively.
Construction Industries sales climbed 18.1% to $7.98 billion. Higher volume contributed $874 million, while favorable pricing added $349 million. The segment’s total sales came in higher than our estimate of $7.6 billion.
Segment profit advanced 33% to $1.83 billion. Margin widened to 22.9% from 20.4%, despite $252 million of unfavorable manufacturing costs, including higher freight expenses. Our projection for the segment’s operating profit was $1.61 billion.
Resource Industries sales rose 15.4% to $4.62 billion, reflecting $478 million of higher volume and $96 million of favorable pricing. It came in higher than our projection of $4.52 billion. Mining, Heavy Construction and Quarry & Aggregates sales increased 22%, while Rail sales declined 5%.
Segment profit increased 14.3% to $622 million. However, margin edged down to 13.5% from 13.6%, as $208 million of unfavorable manufacturing costs, primarily higher material costs including tariffs, offset volume and pricing benefits. Our estimate for the segment’s operating profit was $617 million.
Power & Energy sales increased 17.7% to $8.78 billion, supported by $879 million of higher volume and $216 million of favorable pricing. Our estimate was $8.6 billion. Power Generation sales advanced 30%, driven mainly by turbines and large reciprocating engines, particularly in data center applications. Oil and Gas sales increased 13%.
Segment profit rose 31.2% to $2.14 billion, while margin expanded 250 basis points to 24.4%, mainly reflecting higher sales volume. Our estimate was $1.97 billion.
Financial Products revenues increased 9.4% to $1.18 billion, primarily reflecting higher average earning assets. Lower average financing rates partially offset the improvement.
Segment profit increased 9.5% to $264 million. Benefits from higher-earning assets were partly offset by a $34 million increase in credit-loss provisions. Cat Financial's past-due rate improved to 1.31% from 1.47% a year earlier.
Our model had projected revenues of $1.19 billion and an operating profit of $247 million for the third quarter of 2026.
CAT's Cash Flow Strengthens
Machinery, Power & Energy operating cash flow increased 16% to $4.5 billion in the third quarter of 2026. Free cash flow rose 19% to $3.8 billion, supported mainly by stronger profit.
Caterpillar returned approximately $2 billion to shareholders through share repurchases and dividends. The company ended September with $7.93 billion in cash and cash equivalents.
Caterpillar's Outlook for Q4 and 2026
For the fourth quarter of 2026, management expects moderate sales and revenue growth year over year. Adjusted operating margin is projected to improve from the prior-year quarter. Tariff costs are anticipated at approximately $600 million, about $200 million below the year-ago level.
For 2026, Caterpillar maintained its expectation of mid-to-high-teens revenue growth. Adjusted operating margin is projected to be higher than in 2025 and near the bottom of its annual target range, excluding tariff recoveries.
Management expects full-year tariff costs of approximately $2.2 billion, excluding recoveries. Machinery, Power & Energy free cash flow is projected in the upper half of the $6-$15 billion annual target range. Capital expenditures are expected to total approximately $3.3 billion.
How did Caterpillar’s Peer Perform in the Quarter?
Terex Corporation (TEX - Free Report) reported third-quarter 2026 earnings per share of $1.50, beating the Zacks Consensus Estimate of $1.42. The figure came in line with the year-ago quarter.
Terex’s revenues increased 58% year over year to $2.2 billion, which surpassed the Zacks Consensus Estimate of $2.17 billion.
Manufacturing & Construction Stocks Awaiting Results
Astec Industries (ASTE - Free Report) is expected to release its third-quarter 2026 results on Nov. 5, 2026. The Zacks Consensus Estimate for Astec’s earnings is pegged at 50 cents per share, indicating a 6.4% improvement from the year-ago quarter.
The consensus estimate for Astec’s top line is pegged at $377.4 million, indicating a 7.8% rise from the prior year’s actual. Astec has a trailing negative four-quarter average surprise of 0.4%.
Komatsu (KMTUY - Free Report) is expected to release its third-quarter 2026 results on Nov. 4, 2026. The Zacks Consensus Estimate for Komatsu’s earnings is pegged at 64 cents per share, indicating a 1.6% improvement from the year-ago quarter. Komatsu has a trailing four-quarter average surprise of around 9%.
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CAT Q3 Earnings Beat Estimates on Higher Volume and Pricing
Key Takeaways
Caterpillar Inc. (CAT - Free Report) reported adjusted earnings of $7.20 per share for the third quarter of 2026, up 45.5% year over year. The figure surpassed the Zacks Consensus Estimate of $7.12 by 1.12%. Higher sales volume and favorable price realization supported the performance.
Including one-time items, Caterpillar's earnings per share were $7.13 compared with $4.88 in the year-ago quarter.
Caterpillar Inc. Price, Consensus and EPS Surprise
Caterpillar Inc. price-consensus-eps-surprise-chart | Caterpillar Inc. Quote
CAT's Q3 Revenues Gain on Volume and Pricing
Sales and revenues increased 17.3% to $20.68 billion, surpassing the consensus estimate of $20.58 billion by 0.48%. Caterpillar's order backlog surged 95.7% year over year to a record $78.1 billion, reflecting strong order rates.
The $3.04 billion year-over-year revenue increase primarily reflected $2.21 billion of higher sales volume and $663 million of favorable price realization. Currency movements added $58 million.
Higher sales of equipment to end users drove volume growth. Sales increased across all three primary operating segments. Geographically, North America led with 24% growth, while Latin America and Europe, Africa and the Middle East each recorded 15% growth. Asia/Pacific revenues declined 2%.
Our model had projected volume growth of $1.78 billion, a favorable price impact of around $492 million and a positive currency impact of $122 million.
Caterpillar's Operating Margins Expand in Q3
Cost of goods sold increased 14.2% to $13.33 billion. Gross profit rose 23.2% to $7.35 billion, while gross margin expanded approximately 170 basis points to 35.5%.
Selling, general and administrative expenses declined 1.4% to $1.80 billion, while research and development expenses increased 7.4% to $596 million.
Operating profit increased 38.1% to $4.21 billion. The operating profit margin expanded to 20.4% from 17.3% in the prior-year quarter. Higher volume and favorable pricing outweighed $415 million of unfavorable manufacturing costs.
Adjusted operating profit increased 37.8% to $4.26 billion, while adjusted operating margin improved to 20.6% from 17.5%. Results included $128 million of International Emergency Economic Power Act (IEEPA) tariff recoveries. Excluding these recoveries, tariff costs were approximately $600 million.
CAT's Segments Post Sales and Profit Growth
Total Machinery, Power & Energy (MP&E) sales rose 18% year over year to around $19.7 billion. Operating profit was $4.1 billion, up 38% year over year. Our model’s projection for sales and operating profit was $19.1 billion and $3.73 billion, respectively.
Construction Industries sales climbed 18.1% to $7.98 billion. Higher volume contributed $874 million, while favorable pricing added $349 million. The segment’s total sales came in higher than our estimate of $7.6 billion.
Segment profit advanced 33% to $1.83 billion. Margin widened to 22.9% from 20.4%, despite $252 million of unfavorable manufacturing costs, including higher freight expenses. Our projection for the segment’s operating profit was $1.61 billion.
Resource Industries sales rose 15.4% to $4.62 billion, reflecting $478 million of higher volume and $96 million of favorable pricing. It came in higher than our projection of $4.52 billion. Mining, Heavy Construction and Quarry & Aggregates sales increased 22%, while Rail sales declined 5%.
Segment profit increased 14.3% to $622 million. However, margin edged down to 13.5% from 13.6%, as $208 million of unfavorable manufacturing costs, primarily higher material costs including tariffs, offset volume and pricing benefits. Our estimate for the segment’s operating profit was $617 million.
Power & Energy sales increased 17.7% to $8.78 billion, supported by $879 million of higher volume and $216 million of favorable pricing. Our estimate was $8.6 billion. Power Generation sales advanced 30%, driven mainly by turbines and large reciprocating engines, particularly in data center applications. Oil and Gas sales increased 13%.
Segment profit rose 31.2% to $2.14 billion, while margin expanded 250 basis points to 24.4%, mainly reflecting higher sales volume. Our estimate was $1.97 billion.
Financial Products revenues increased 9.4% to $1.18 billion, primarily reflecting higher average earning assets. Lower average financing rates partially offset the improvement.
Segment profit increased 9.5% to $264 million. Benefits from higher-earning assets were partly offset by a $34 million increase in credit-loss provisions. Cat Financial's past-due rate improved to 1.31% from 1.47% a year earlier.
Our model had projected revenues of $1.19 billion and an operating profit of $247 million for the third quarter of 2026.
CAT's Cash Flow Strengthens
Machinery, Power & Energy operating cash flow increased 16% to $4.5 billion in the third quarter of 2026. Free cash flow rose 19% to $3.8 billion, supported mainly by stronger profit.
Caterpillar returned approximately $2 billion to shareholders through share repurchases and dividends. The company ended September with $7.93 billion in cash and cash equivalents.
Caterpillar's Outlook for Q4 and 2026
For the fourth quarter of 2026, management expects moderate sales and revenue growth year over year. Adjusted operating margin is projected to improve from the prior-year quarter. Tariff costs are anticipated at approximately $600 million, about $200 million below the year-ago level.
For 2026, Caterpillar maintained its expectation of mid-to-high-teens revenue growth. Adjusted operating margin is projected to be higher than in 2025 and near the bottom of its annual target range, excluding tariff recoveries.
Management expects full-year tariff costs of approximately $2.2 billion, excluding recoveries. Machinery, Power & Energy free cash flow is projected in the upper half of the $6-$15 billion annual target range. Capital expenditures are expected to total approximately $3.3 billion.
Caterpillar Stock’s Price Performance & Zacks Rank
Over the past year, Caterpillar stock has gained 23.3% compared with the industry’s 13.2% growth.
Image Source: Zacks Investment Research
Caterpillar carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
How did Caterpillar’s Peer Perform in the Quarter?
Terex Corporation (TEX - Free Report) reported third-quarter 2026 earnings per share of $1.50, beating the Zacks Consensus Estimate of $1.42. The figure came in line with the year-ago quarter.
Terex’s revenues increased 58% year over year to $2.2 billion, which surpassed the Zacks Consensus Estimate of $2.17 billion.
Manufacturing & Construction Stocks Awaiting Results
Astec Industries (ASTE - Free Report) is expected to release its third-quarter 2026 results on Nov. 5, 2026. The Zacks Consensus Estimate for Astec’s earnings is pegged at 50 cents per share, indicating a 6.4% improvement from the year-ago quarter.
The consensus estimate for Astec’s top line is pegged at $377.4 million, indicating a 7.8% rise from the prior year’s actual. Astec has a trailing negative four-quarter average surprise of 0.4%.
Komatsu (KMTUY - Free Report) is expected to release its third-quarter 2026 results on Nov. 4, 2026. The Zacks Consensus Estimate for Komatsu’s earnings is pegged at 64 cents per share, indicating a 1.6% improvement from the year-ago quarter. Komatsu has a trailing four-quarter average surprise of around 9%.