Key Stats for Caterpillar Stock
- Past-Week Performance: 2%
- 52-Week Range: $267 to $723
- Valuation Model Target Price: $822
- Implied Upside: 18.8%
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What Happened?
Caterpillar Inc. stock rose about 2% this week, finishing near $678 per share, as investors reacted to continued earnings follow-through and fresh details from the company’s latest earnings transcript.
Shares held their gains through the week despite trading not far from their $723 52-week high, signaling sustained buying interest rather than a short-lived reaction.
The stock moved higher last week as confidence grew around Caterpillar’s earnings durability and multi-year demand visibility.
Recent coverage highlighted that the market is increasingly focused on backlog strength and power-related growth, particularly as infrastructure spending and AI-driven data center investment continue to support long-cycle demand.
That confidence was reinforced by Caterpillar’s earnings update. The company delivered record full-year 2025 sales of $67.6 billion and adjusted EPS of $19.06, supported by $9.5 billion in MP&E free cash flow, while Q4 sales reached a record $19.1 billion, up 18% year over year.
Total backlog surged to an all-time high of $51 billion, up 71% from last year, providing extended visibility beyond the next year.
CEO Joe Creed noted, “Our record backlog of $51 billion provides strong momentum to start the year,” with only 62% of backlog expected to ship within 12 months, underscoring multi-year demand.
Additional momentum came from accelerating power and data center demand. Power & Energy sales rose 37% in Q4, including 44% growth in power generation, driven by AI and data center-related needs.
Caterpillar also secured a 2-gigawatt generator order for the Monarch Compute Campus, one of the largest power-solutions deals in company history.
While management flagged $2.6 billion in expected tariff-related costs in 2026, they still guided to sales growth near the top of the 5%–7% range, helping explain why shares moved higher last week despite cost headwinds.
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Is Caterpillar Undervalued?
Under valuation assumptions, the stock is modeled using:
- Revenue Growth (CAGR): 8.1%
- Operating Margins: 21.1%
- Exit P/E Multiple: 23.5x
Caterpillar’s revenue outlook shows a brief step down in 2024, followed by a return to mid-to-high single-digit growth, with sales projected to rise from about $67.6 billion in 2025 to roughly $95.7 billion by 2030.
That trajectory reflects sustained infrastructure spending, higher energy and commodities investment, and steady fleet replacement demand rather than a short-lived cyclical rebound.
Analyst expectations continue to reflect expansion driven by backlog conversion and mix improvement, with aftermarket parts and services playing a larger role in stabilizing revenue across cycles. This supports the view that future returns depend more on earnings durability and cash flow consistency than on aggressive volume growth.
Based on these inputs, the valuation model estimates a target price of about $822, implying roughly 18.8% total upside over the next 2.9 years, or about 6.1% per year, indicating the stock appears undervalued at current prices.
Results over the next year hinge on execution across several higher-impact areas. Backlog monetization remains central, as delivery timing directly affects revenue visibility and working capital efficiency.
At the same time, pricing discipline and aftermarket penetration help support margin stability as equipment demand normalizes.
Additional upside comes from Caterpillar’s expanding exposure to power generation and data center infrastructure, where demand is driven by long-term grid upgrades and AI-related power needs rather than short-term industrial cycles.
At current levels, Caterpillar appears undervalued, with future performance driven by margin execution, backlog conversion, aftermarket growth, and energy and data center exposure rather than chasing peak-cycle volumes.
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