Key Takeaways
- Caterpillar director David MacLennan bought 350 shares on Nov. 12 at an average of $596.10, about $209,000 in all, with the stock 44% below its June high.
- The stock fell after a weaker fourth-quarter outlook and on fears that a Democratic Congress will slow data-center building, even though the backlog reached a record $78 billion.
- The selloff took Caterpillar’s forward P/E from 42x in June to about 20x, close to its five-year average, while analysts’ earnings estimates barely moved.
- At that price the numbers back the buy, though it only added 4% to his stake. Fourth-quarter results in late January are the next test.
Caterpillar (CAT) has given back 44% since its June 30 high, and one of its directors just bought into the drop.
David MacLennan, who chairs Caterpillar’s audit committee, bought 350 shares on Nov. 12 at an average of $596.10. That’s about $209,000 in all, according to a Form 4 filed the next day.
Record orders, falling stock
At the June 30 peak, investors were paying 42x forward earnings for Caterpillar, mostly for its engines and turbines that power AI data centers. The third quarter, reported Oct. 29, showed that demand is real. Sales rose 17% to $20.7 billion, and adjusted EPS jumped 45% to $7.20. The backlog hit a record $78 billion, up 96% in a year. CEO Joe Creed said on the third-quarter call that Caterpillar is “now taking some large reciprocating orders as far out as 2029 and turbine orders into 2030.”
The outlook was the problem. Management expects only moderate sales growth in the fourth quarter, with Construction Industries’ sales flat as dealers cut about $1.6 billion of inventory. Then Democrats won both houses of Congress on Nov. 3, and AI infrastructure stocks sold off on fears of tighter rules for data centers. Caterpillar fell with them.
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A modest top-up from the audit chair
MacLennan, the former chair and CEO of Cargill, has been on Caterpillar’s board since 2021. The buy took his holding to 8,773 shares, 4% more than he held before. At the price he paid, that stake is worth about $5.2 million, so this was a modest addition. Still, it’s the kind of buy worth tracking: a director’s own money, at the same price anyone else pays.
Does $596 a share add up?
Analysts still expect Caterpillar’s earnings to climb steeply from 2025’s $19.06 a share:
The consensus is $27.11 for this year, $32.25 for 2027 and $38.69 for 2028. Those 2026 and 2027 estimates have barely moved in three months, while the stock fell 30% over the same stretch. That makes Caterpillar far cheaper on those earnings than it was in June:
Caterpillar traded at about 20x forward earnings on Nov. 12. That’s less than half its June 30 peak of 42x and right around its five-year average of 19x.
Analysts have trimmed their price targets, but by much less than the stock has fallen:
The consensus target of $823 is down from a peak of $979 in August, after a string of cuts following the third quarter: Morgan Stanley went to $675 from $915, and JPMorgan to $1,000 from $1,100. It’s still about 37% above today’s price, and 30 analysts cover the stock.
The numbers back him
The risk is the economic cycle. Caterpillar’s forward P/E bottomed at 11x in October 2023, and a slower construction market or a pause in data-center building would hurt both the estimates and the multiple.
At $596, MacLennan paid about an average multiple for earnings that analysts expect to grow 19% next year, and I think the numbers back him. Still, one director’s $209,000 can’t carry the case alone. Fourth-quarter results in late January will give the first look at 2027. Watch whether construction sales to end users hold up while dealers cut inventory.
So what is Caterpillar stock actually worth?
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Disclaimer:
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