Key Stats
- Current price: ~$890 (April 30, 2026)
- Q1 2026 revenue: $17.4B, up 22% YoY (from $14.3B in Q1 2025)
- Q1 2026 adjusted EPS: $5.54, up 30% YoY (from $4.25 in Q1 2025)
- Full-year 2026 revenue guidance: low double-digit growth (raised from prior outlook)
- Full-year 2026 adjusted operating profit margin: near the bottom of the target range (higher than January expectation)
- Full-year 2026 MP&E free cash flow: higher than $9.5B (raised)
- TIKR model price target: ~$1,180
- Implied upside: ~33%
Caterpillar Stock Delivers a Record-Backlog Quarter
Caterpillar stock (CAT) surged nearly 10% on April 30 after the company reported Q1 2026 revenue of $17.4B, up 22% year over year from $14.3B, and adjusted EPS of $5.54, up 30% from $4.25 in Q1 2025.
Power and Energy drove the quarter, with segment sales of $7B, up 22% year over year.
Power generation grew 48%, according to CEO Joe Creed on the Q1 2026 earnings call, fueled by demand for large generator sets and turbines in data center applications, with a growing share tied to prime power use.
Construction Industries posted the sharpest segment revenue growth, with sales rising 38% to $7.2B, driven largely by a $1.5B seasonal dealer inventory build that compared favorably to a slight decline in the year-ago period.
Construction Industries also posted an operating margin of 21.4%, up 160 basis points year over year.
Resource Industries was the one soft spot: sales grew 4% to $3.8B, and operating profit fell 39% to $378M, with a segment margin of 10%, down 700 basis points year over year.
Resource Industries tariff costs accounted for about 500 basis points of that decline, according to CFO Andrew Bonfield on the Q1 2026 earnings call.
Companywide, tariff costs tied to levies implemented since early 2025 totaled approximately $600M in Q1, favorable to the $800M estimate provided in January.
Caterpillar deployed $5.7B to shareholders in the quarter, including approximately $5B in share repurchases and a $4.5B accelerated share repurchase program.
Management raised the full-year revenue growth outlook to low double digits, up from the prior guidance, citing resilient end markets and Power and Energy tracking ahead of capacity expansion plans.
Backlog reached a record $63B at quarter end, up 79% year over year and growing sequentially across all three primary segments.
Caterpillar also announced an expansion of large reciprocating engine capacity from 2x to nearly 3x its 2024 production levels, with the additional build primarily occurring between 2027 and 2029.
The company updated its 2030 enterprise revenue CAGR target to 6% to 9%, up from the 6% midpoint set at its November 2025 Investor Day, with power generation sales now targeted at more than 3x the 2024 baseline.
Caterpillar Stock Financials: Gross Margin Rebounds Sharply
The Q1 2026 income statement shows a revenue recovery arc translating directly into margin expansion, with gross margin rebounding sharply as volume and price leverage kicked in.
Total revenues grew 22.2% year over year to $17.4B in Q1 2026, accelerating from 18% YoY growth in Q4 2025 and 9.5% in Q3 2025, marking the strongest YoY growth rate since the revenue cycle troughed at a 9.8% decline in Q1 2025.
Gross margin reached 33.1% in Q1 2026, its highest in the eight quarters shown, up from 31.3% in Q1 2025 and well above the 26% trough in Q4 2025.
Gross profit grew 29% year over year to $5.76B, up from $4.46B in Q1 2025.
Operating income was $3.09B in Q1 2026, up 17% year over year from $2.63B in Q1 2025.
Operating margin was 17.7%, down from 18.5% in Q1 2025, though up sharply from 16% in Q4 2025.
The 30 basis point operating margin decline year over year occurred despite approximately $600M in tariff costs, according to CFO Andrew Bonfield on the Q1 2026 earnings call, who noted that excluding tariffs, Q1 margin would have been significantly higher than the prior year on the strength of volume and favorable price realization.
What Does the Valuation Model Say?
The TIKR model prices Caterpillar stock at approximately $1,180, implying about 33% upside from the current price near $890.
The mid-case model assumes a revenue CAGR of 5.6% and a net income margin expanding to approximately 19.3%, alongside EPS growth of roughly 10% per year through the forecast period.
This quarter strengthens the investment case: record backlog, a guidance raise, and EPS that beat the prior estimate by roughly 30% all support the mid-case trajectory.
The key risk to the model is tariff cost absorption. Management now guides for $2.2B to $2.4B in full-year tariff costs, a reduction from the $2.6B estimate provided in January, but still a substantial drag that keeps the operating margin near the bottom of the company’s progressive target range.
Caterpillar stock at current levels prices in solid execution but not the full upside of the capacity expansion cycle.
At $890, the stock appears reasonably valued against the mid-case; the high-case scenario targets approximately $1,785 by 2035.
Near-Term vs. Long-Term: The tension in Caterpillar stock is whether today’s record backlog and tariff headwinds resolve into a durable margin re-rating, or whether the CapEx cycle required to meet 3x engine capacity suppresses returns through the end of the decade.
Near-Term (2026 to 2027):
- Full-year 2026 tariff costs of $2.2B to $2.4B will keep the adjusted operating margin near the bottom of the progressive target range, despite higher revenue
- Resource Industries margin fell to 10% in Q1 with a 700 basis point YoY decline, and Q2 guidance indicates further pressure from elevated SG&A and technology investment
- Q2 tariff costs are guided at ~$700M, above the ~$400M incurred in Q2 2025, keeping the year-over-year margin comparison negative through at least mid-year
- CapEx is guided at ~$3.5B for 2026, with additional large-engine capacity spend running from 2027 through 2029, keeping capital intensity elevated
Long-Term (2028 to 2030):
- Large reciprocating engine capacity expanding to nearly 3x 2024 levels adds an estimated 15 gigawatts of annual capacity, supporting the updated power generation target of more than 3x 2024 sales by 2030
- The record $63B backlog, up 79% YoY, gives multi-year revenue visibility across all three segments, with some customer orders committed well into 2028
- Power generation sales to users grew 48% in Q1, and prime power mix is increasing, which management indicated drives higher long-term services and aftermarket revenue
- The TIKR high-case model implies a total return of approximately 101% to $1,785 if net income margins reach 20.3% and revenue CAGR comes in at 6.2%
Should You Invest in Caterpillar Inc.?
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