Key Stats for Caterpillar Stock
- Past-30-Day Performance: 22%
- 52-Week Range: $267 to $790
- Valuation Model Target Price: $892
- Implied Upside: 15%
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What Happened?
Caterpillar stock is up about 22% in the last 30 days, recently trading near $774 per share as investors reacted to record fourth quarter results and accelerating demand in its Power and Energy segment.
Shares rallied after the company reported record Q4 sales of $19.1 billion, up 18% year over year, with adjusted EPS of $5.16 and a record backlog of $51 billion, up 71% from last year.
That backlog expansion, combined with 37% sales-to-users growth in Power and Energy and 44% growth in power generation driven by data center demand, signaled stronger multiyear revenue visibility.
CEO Joe Creed said, “we had a really, really strong quarter from an order standpoint,” reinforcing confidence that demand strength is structural rather than short-term.
Momentum was further supported by forward guidance. Management expects 2026 sales growth around the top end of its 5% to 7% long-term target, with volume growth across all three primary segments and roughly 2% favorable price realization.
Approximately 62% of the $51 billion backlog is expected to deliver within the next 12 months, providing clearer revenue visibility into 2026.
Institutional positioning also kept the stock in focus. Vanguard trimmed its stake slightly but continues to own 45,943,021 shares, or about 9.81% of the company, while Aberdeen Group increased its holdings.
The combination of record earnings, strong order momentum, backlog expansion, visible 2026 revenue growth, and sustained institutional ownership helped fuel the 22% rally over the past month.
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Is Caterpillar Undervalued?
Under valuation assumptions, the stock is modeled using:
- Revenue Growth (CAGR): 8.2%
- Operating Margins: 21.0%
- Exit P/E Multiple: 25.5x
Revenue growth reflects continued strength across infrastructure, mining, and power generation as Caterpillar converts its record $51 billion backlog into revenue.
Management expects 2026 sales growth near the top end of its 5% to 7% long-term range, supported by healthy end markets and improving price realization.
Power and Energy remains the primary growth driver. Sales to users in the segment rose 37% in the fourth quarter, with power generation up 44% driven by large generator sets and turbines supporting data center applications.
The company is expanding large engine and turbine capacity through 2027, which should allow it to meet elevated demand rather than face supply constraints.
Services revenue reached $24 billion in 2025, supported by an installed base of more than 1.6 million connected assets.
Recurring parts, maintenance, digital solutions, and autonomous technologies, including 827 autonomous haul trucks in operation at year-end, strengthen margin durability and long-term earnings visibility.
Caterpillar generated $9.5 billion of MP&E free cash flow in 2025 and returned $7.9 billion to shareholders through dividends and share repurchases.
That capital allocation strength enhances per-share earnings growth even in a higher tariff environment.
Based on these inputs, the model estimates a target price of $892, implying about 15% total upside over roughly 2.9 years. Because expected upside exceeds 6%, Caterpillar qualifies as undervalued under your framework.
At current levels near $774, Caterpillar appears undervalued, with future performance driven by backlog conversion, power generation growth, services expansion, mining capital investment, and disciplined capital allocation rather than multiple expansion alone.
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