Key Takeaways
- Caterpillar stock has fallen 10% in a month ahead of its third-quarter report on Thursday, Oct. 29.
- The drop looks like a sentiment problem, since analysts’ earnings estimates held up and even rose while the stock fell.
- The quarter needs an operating margin near 19% without the one-time tariff refunds that helped the second quarter.
- Even after the drop, Caterpillar trades at 25x forward earnings against a five-year average of 19x, so the 2027 estimate of $32.59 a share has to hold.
Caterpillar (CAT) has dropped 10% in the past month (through [day]’s close). That includes a near-5% fall alongside other power-equipment stocks a week before its report. Plenty of investors bought it as a data-center power play, and they just watched it slide with the rest of the group.
On Thursday, Oct. 29, before the open, Caterpillar reports its third quarter. It’s the first hard look at whether anything changed in the business, or only in the mood around it.
The estimates didn’t follow the stock down
Analysts haven’t cut their numbers. They expect normalized EPS to climb from $19.06 in 2025 to $32.59 in 2027 and $39.21 in 2028.
The 2026 consensus of $27.33 is up 11% since June 30, and it edged up from $27.19 at Sept. 30 even as the stock fell. The 2027 figure comes from 27 analysts, and it’s the one to watch after the call. If it holds, the slide left the earnings right where they were.
TIKR tracks 30 analysts on Caterpillar. How many say “Buy”?
See the full breakdown of Buy, Hold, and Sell ratings on Caterpillar, along with Wall Street’s revenue and earnings estimates, all in one place. More than 500,000 investors use TIKR to research stocks like this one. See Caterpillar’s Analyst Ratings
Margins have to stand on their own
Thursday’s report has to keep Caterpillar’s quarterly revenue and operating margin moving the same way.
The second quarter set a record, with $20.5 billion of revenue, up 24%. The adjusted operating margin was 21.9%, against 17.6% a year earlier. But $392 million of tariff refunds helped, and without them the margin was 20.0%.
For the third quarter, analysts expect about $20.45 billion of revenue and an operating margin near 19%. A year ago the quarter brought $17.6 billion of sales and a 17.5% adjusted margin. Management has guided to a higher margin than last year’s, with about $600 million of tariff costs in the quarter. A margin at or above 19% with no refunds in it would show the gains are real.
Power & Energy is where the data-center story shows up. Its margin was 24.6% in the second quarter, up from 22.1%, and power generation sales rose 29% to $3.1 billion. A margin near that level says the demand is still there.
Watch the backlog, too
Caterpillar’s stock tends to move more on the backlog and management’s outlook than on the quarter’s revenue. The backlog stood at $72 billion at June 30, up 92% in a year, with 59% due within 12 months. A bigger number on Thursday would mean orders are still coming in faster than Caterpillar can ship them.
The price still assumes a recovery
Even after the drop, Caterpillar trades at 25x forward earnings. That’s well below its 42x peak on June 30 but still above its five-year average of 19x.
My take: the slide looks like sentiment. Estimates went up while the multiple came down, so the drop left a cheaper stock on the same earnings.
But 25x still isn’t cheap for Caterpillar. The report has to clear a real bar: a margin near 19% without refund help, a backlog above $72 billion, and a 2027 estimate that holds at $32.59. If it misses on those, the multiple has room to fall toward its average.
Of course, management’s first full look at 2027 isn’t due until fourth-quarter results in late January, and that could move the stock more than Thursday does.
So what is Caterpillar stock actually worth?
TIKR lets you forecast the future price of any stock in less than a minute. Just enter a few assumptions into TIKR’s valuation model and see what Caterpillar could be worth. Start from Wall Street consensus estimates, or adjust the inputs to reflect your own view of the business. It’s free to use.
Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
