Key Takeaways
- Caterpillar shares fell 12% today after third-quarter adjusted EPS of $7.20 beat estimates, while revenue of $20.7 billion only matched them.
- Management guided to “moderate sales growth” in the fourth quarter, against a $21.42 billion consensus.
- Caterpillar trades well above its usual multiple, while GE Vernova and Vertiv both raised guidance yesterday.
- Analysts’ sales estimates already outrun management’s long-term target, and January’s 2027 outlook is the next test.
Caterpillar (CAT) beat on earnings and grew sales 17% this morning. The stock still fell 12% today.
The reason? Fellow AI power names GE Vernova (GEV) and Vertiv (VRT) raised their 2026 guidance yesterday. Caterpillar’s outlook didn’t come close.
What exactly happened
The quarter was strong:
- Sales and revenues rose 17% to $20.7 billion, in line with the $20.69 billion consensus.
- Adjusted EPS was $7.20, ahead of the $7.03 consensus.
- Power generation sales rose 30%, and sales to end users jumped 75%.
Caterpillar expects “moderate sales growth” in the fourth quarter. The $21.42 billion consensus called for about 12% growth on last year’s $19.1 billion fourth quarter.
Management had already flagged a dealer inventory cut of more than $1 billion for the quarter.
Priced for a raise
Caterpillar came into today after surging 75% over the year to late September on AI power demand. Its forward P/E stood at 25x at yesterday’s close, well above its five-year average of 19x:
GE Vernova and Vertiv cleared that bar yesterday. GE Vernova’s orders rose 96% organically to $29 billion. Vertiv’s sales rose 61%, its organic orders more than doubled, and it lifted its full-year sales guidance by $650 million.
They also trade at bigger premiums: 38x forward earnings for GE Vernova and 28x for Vertiv at yesterday’s close. My read: investors will keep paying up for AI power as long as guidance rises, and these two have even less room for an in-line quarter. Vertiv has guided to 50% organic growth in the fourth quarter.
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
What’s next
Caterpillar’s fourth-quarter results and first look at 2027 are due in late January. Analysts expect revenue to reach $98.5 billion by 2028:
That’s about 11% a year from 2024, faster than management’s own 6% to 9% a year target through 2030. A destock flagged in advance shouldn’t move those numbers much.
My take: nothing in this quarter says the power story is cracking, and at a lower multiple, Caterpillar looks more reasonable than it did yesterday.
Of course, if January’s 2027 outlook sounds as moderate as this quarter’s, those estimates could start coming down.
So what is Caterpillar stock actually worth?
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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!
