CAT

The end of the earnings season is always a good time to take a step back and see who shined (and who didn’t). Let’s take a look at how heavy machinery stocks fared in Q2, starting with Caterpillar (NYSE:CAT). Automation that increases efficiencies and connected equipment that collects analyzable data have been trending, creating new demand for heavy machinery and equipment companies. The gradual transition to clean energy also allows companies to innovate around emissions, potentially spurring replacement cycles that can accelerate revenue growth. On the other hand, heavy machinery companies are at the whim of economic cycles. Interest rates, for example, can greatly impact the commercial and residential construction that drives demand for these companies’ offerings. The 20 heavy machinery stocks we track reported a satisfactory Q2. As a group, revenues beat analysts’ consensus estimates by 1.7% while next quarter’s revenue guidance was 1.2% above. While some heavy machinery stocks have fared somewhat better than others, they have collectively declined. On average, share prices are down 4.3% since the latest earnings results. With its iconic yellow machinery working on construction sites, Caterpillar (NYSE:CAT) manufactures construction equipment like bulldozers, excavators, and parts and maintenance services. Caterpillar reported revenues of $20.54 billion, up 24% year on year. This print exceeded analysts’ expectations by 8.4%. Overall, it was an incredible quarter for the company with a beat of analysts’ EPS estimates. "This is the first time in company history that we have generated over $20 billion in sales and revenues in a single quarter," said Caterpillar Chairman and CEO Joe Creed. Investor expectations, however, were likely higher than Wall Street’s published projections, leaving some wishing for even better results (analysts’ consensus estimates are those published by big banks and advisory firms, not the investors who make buy and sell decisions). The stock is down 4.8% since reporting and currently trades at $790.20. We think Caterpillar is a good business, but is it a buy today? Read our full report here, it’s free. With its first trailer reportedly built on two sawhorses, Wabash (NYSE:WNC) offers semi trailers, liquid transportation containers, truck bodies, and equipment for moving goods. Wabash reported revenues of $417.2 million, down 9.1% year on year, outperforming analysts’ expectations by 3.6%. The business had a stunning quarter with an impressive beat of analysts’ EBITDA estimates and revenue guidance for next quarter exceeding analysts’ expectations. Wabash delivered the highest guidance raise of the whole group. The market seems happy with the results as the stock is up 7.4% since reporting. It currently trades at $14.30. Is now the time to buy Wabash? Access our full analysis of the earnings results here, it’s free. With a history that features both organic growth and acquisitions, AGCO (NYSE:AGCO) designs, manufactures, and sells agricultural machinery and related technology. AGCO reported revenues of $2.61 billion, flat year on year, falling short of analysts’ expectations by 4.9%. It was a disappointing quarter as it posted full-year revenue guidance missing analysts’ expectations significantly and a significant miss of analysts’ EPS estimates. AGCO delivered the weakest full-year guidance update in the group. Interestingly, the stock is up 10.3% since the results and currently trades at $128.15. Read our full analysis of AGCO’s results here. Having designed the industry’s first double-decker railcar in the 1980s, Greenbrier (NYSE:GBX) supplies the freight rail transportation industry with railcars and related services. Greenbrier reported revenues of $576.5 million, down 31.6% year on year. This number missed analysts’ expectations by 5.9%. It was a disappointing quarter as it also produced full-year revenue guidance missing analysts’ expectations significantly and full-year EPS guidance missing analysts’ expectations significantly. Greenbrier had the weakest performance against analyst estimates and slowest revenue growth among its peers. The stock is down 10.7% since reporting and currently trades at $42.74. Read our full, actionable report on Greenbrier here, it’s free. Formed from a partnership between two distinct companies, CVG (NASDAQ:CVGI) offers various components used in vehicles and systems used in warehouses. Commercial Vehicle Group reported revenues of $195.2 million, up 13.5% year on year. This print surpassed analysts’ expectations by 13.8%. It was a strong quarter as it also recorded full-year EBITDA guidance exceeding analysts’ expectations and full-year revenue guidance exceeding analysts’ expectations. Commercial Vehicle Group scored the biggest analyst estimate beat and highest full-year guidance raise of the whole group. The stock is down 31.9% since reporting and currently trades at $3.13. Read our full, actionable report on Commercial Vehicle Group here, it’s free. Over the past year, investors have been forced to repeatedly answer the same question: what is the market’s biggest risk? The answer has changed several times, and each shift has reshaped market leadership. Late in 2025 and early 2026, artificial intelligence became the market’s primary uncertainty. Investors questioned whether AI would erode software pricing power and weaken competitive moats as AI made it easier to replicate once-differentiated products. By the spring, technology took a back seat to geopolitics. The U.S. conflict with Iran briefly became the market’s dominant narrative, raising concerns about oil prices, inflation, and global growth. But as energy markets remained orderly and fears of a prolonged supply disruption faded, investors quickly turned their focus back to fundamentals. Want to invest in winners with rock-solid fundamentals? Check out our Top 5 Quality Compounder Stocks and add them to your watchlist. These companies are poised for growth regardless of the political or macroeconomic climate.

A month has gone by since the last earnings report for Caterpillar (CAT). Shares have lost about 9.1% in that time frame, underperforming the S&P 500. Will the recent negative trend continue leading up to its next earnings release, or is Caterpillar due for a breakout? Well, first let's take a quick look at the most recent earnings report in order to get a better handle on the recent catalysts for Caterpillar Inc. before we dive into how investors and analysts have reacted as of late. Caterpillar reported adjusted earnings of $8.17 per share for the second quarter of 2026, up 73% year over year. The figure surpassed the Zacks Consensus Estimate of $6.25 by 30.72%. Higher sales volume and favorable price realization supported the performance.Including one-time items, Caterpillar’s earnings per share were $7.77 compared with $4.62 in the year-ago quarter. Sales and revenues increased 24% to $20.5 billion and topped the consensus estimate of $19.3 billion by 6.37%. The quarter marked Caterpillar’s first-ever revenue total above $20 billion. The increase primarily reflected $3.1 billion of higher sales volume and $595 million of favorable price realization. Currency movements added $199 million, while Financial Products revenues contributed another $67 million.Higher sales of equipment to end users drove the volume increase. Sales rose across all three primary operating segments and every geographic region. Caterpillar’s order backlog surged 92% year over year to a record $72 billion. Cost of goods sold rose 18% to $12.781 billion. Gross profit was up 34.7% to $7.76 billion from the prior-year quarter. The gross margin expanded 300 basis points to 37.8% from the year-ago quarter.Selling, general and administrative expenses increased 19% to $2 billion, while research and development expenses advanced 12% to $616 million. Operating profit increased 50% year over year to around $4.3 billion. The operating margin expanded to 20.9% from 17.3%, as the profit contribution from higher volume and pricing more than offset increased operating expenses.Adjusted operating profit climbed 54% to around $4.5 billion, while the adjusted operating margin improved to 21.9% from 17.6%. The quarter included $392 million of expected International Emergency Economic Powers Act (IEEPA) tariff recoveries. Total Machinery, Power & Energy (MP&E) sales rose 24.9% year over year to around $19.6 billion. Operating profit was around $4.2 billion, up 51% year over year. Construction Industries delivered the strongest segment sales growth. Revenues increased 35% to $8.3 billion, driven by $1.7 billion of higher volume and $309 million of favorable price realization. Segment profit advanced 57% to $1.9 billion, due to the higher sales volume. Margin widened to 23.3% from 20.1% in the prior-year quarter. Resource Industries sales rose 20% to $4.6 billion, mainly reflecting higher equipment sales to end users.  Segment profit increased 23% to $693 million. Margin edged up to 14.9% from 14.5%, as higher volume offset $158 million of unfavorable manufacturing costs.Power & Energy sales increased 17% year over year to $8.2 billion. The improvement reflected $736 million of higher volume, $212 million of favorable pricing and a $200 million increase in intersegment sales. The segment reported sales growth in Power Generation (29%), followed by 9% growth in Industrial and Oil and Gas sectors. Segment profit rose 30% to $2 billion and segment margin expanded 250 basis points to 24.6%. Volume and pricing benefits outweighed $149 million of unfavorable manufacturing costs, mainly related to higher period manufacturing expenses.Financial Products revenues advanced 10% to $1.1 billion on higher average earning assets. Segment profit increased 32% to $328 million, aided by earning-asset growth and improved Insurance Services results, partly offset by a higher provision for credit losses. Machinery, Power & Energy operating cash flow reached $5.7 billion, up 94% year over year. Free cash flow more than doubled to $5.1 billion. CAT returned $2.2 billion to shareholders through $1.5 billion of share repurchases and $700 million of dividends. Caterpillar ended the quarter with $6.7 billion in cash and equivalents. Looking to third-quarter 2026, management expects strong growth in sales and revenues compared with the year-ago period. Tariff costs are expected to be in line with the year-ago quarter. CAT anticipates the adjusted operating margin to be higher year over year in the third quarter. For context, the adjusted operating margin was 17.5% in the third quarter of 2025.For 2026, management expects sales and revenues to grow in the mid-to-high teens. Adjusted operating margin is projected near the bottom of its target range, excluding tariff recoveries. MP&E free cash flow is expected in the top half of the company’s target range. The company forecasts tariff costs of around $2.2 billion, excluding tariff recoveries. In the past month, investors have witnessed a upward trend in estimates revision. The consensus estimate has shifted 5.33% due to these changes. At this time, Caterpillar has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy. Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in. Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Caterpillar has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Caterpillar Inc. (CAT) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

On September 1, a caller mentioned that they do not know how to value Caterpillar Inc. (NYSE:CAT) amid the heavy artificial intelligence market hype and asked for a breakdown. Mad Money host Jim Cramer replied: Caterpillar Inc.’s (NYSE:CAT) performance highlights why many long-term investors remain firm despite the elevated valuation. The company recently delivered a blowout second-quarter earnings report, posting record quarterly revenue exceeding $20.5 billion and an adjusted EPS of $8.17 that comfortably beat Wall Street consensus estimates on both metrics. One of the primary catalysts behind this financial strength is the demand for power-generation equipment. Driven heavily by the rapid buildout of AI data centers requiring reliable backup and continuous power sources, the company’s power generation retail sales to users saw a staggering 72% year-over-year growth. In addition, the company showed an all-time high order backlog of $72 billion and 59% of it is expected to be delivered over the next 12 months (from its earnings release in August). This massive cushion provides exceptional revenue visibility, protecting the machinery giant against near-term macroeconomic volatility while continuing to reward shareholders through aggressive share buybacks and a raised quarterly dividend of $1.63 per share. The bear case can be pointed to the multiple expansion highlighted by Cramer. Historically accustomed to trading at a price-to-earnings multiple closer to 16, Caterpillar Inc.’s (NYSE:CAT) ascent toward 28 times earnings has triggered significant institutional friction. Skeptics argue that much of the cyclical upside is already priced in, leaving little room for error if macroeconomic conditions soften or if dealer inventory normalization continues to create choppy quarterly results. When institutional money managers experience a traditional heavy machinery manufacturer priced like a high-growth technology stock, the reflex action is often profit-taking. This explains why the stock experiences sharp pullbacks even after reporting record-breaking results. According to Insider Monkey's database tracking over 1,000 elite hedge funds, 84 hedge funds held positions in Caterpillar Inc. (NYSE:CAT) during the second quarter, down slightly from 87 in the previous quarter. On the short side, bearish positioning remains exceptionally low, with the short percentage of float sitting at 1.57%. Caterpillar Inc. (NYSE:CAT) is caught between its old identity as a traditional machinery maker and its new role powering the AI boom. While high valuations are making short-term traders nervous, the core business is performing brilliantly, leaving Wall Street to decide if this higher price tag is here to stay. While we acknowledge the potential of CAT as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock. READ NEXT: Jim Cramer Explains Mad Money Caller How to Handle Eton Pharmaceuticals (ETON) and Jim Cramer Says GE Vernova (GEV) Order Book Might Have Gotten Soft. Disclosure: None. Follow Insider Monkey on Google News.

Global data center energy usage is expected to rise 26% by 2026 to 565 terawatt-hours, while overall data center power demand will soar by 27% to 132 gigawatts. As grid capacity limits become the most significant bottleneck for hyperscalers, standby and prime continuous power generation systems have evolved into mission-critical equipment. For industrial titans Caterpillar Inc. (NYSE:CAT) and Cummins Inc. (NYSE:CMI), the steady demand for distributed power, along with strong North American construction expenditures, is driving record backlogs and prompting full-year guidance increases across the board. The convergence of infrastructure investment and AI power demand was clearly visible when Caterpillar Inc. (NYSE:CAT) released its second-quarter 2026 results on August 4. Total sales increased 24% year-over-year to $20.5 billion, while adjusted earnings per share hit $8.17, greatly exceeding the $6.20 analyst average expectation and igniting a 9% premarket stock rise. Operating margins increased to 20.9% from 17.3% the previous year, indicating a significant improvement in efficiency. Construction Industries led the way, growing 35% to $8.3 billion on a 50% increase in North American demand, while Power & Energy increased 17% to $8.2 billion. Trade difficulties also eased during the quarter. After incurring a $710 million negative manufacturing cost hit largely from tariffs in Q1, Caterpillar Inc. (NYSE:CAT) reduced its full-year tariff forecast to approximately $2.2 billion (down from $2.2-$2.6 billion) and won $392 million in tariff recoveries under the International Emergency Economic Powers Act (IEEPA). Cash generation was also strong, with operating cash flow of $4.4 billion. Management increased full-year revenue expectations to mid- to high-teens percentage growth (up from low-double-digits), while returning $2.2 billion to shareholders in Q2 alone, including $1.5 billion in share buybacks and $0.7 billion in cash dividends. In the same vein, Cummins Inc. (NYSE:CMI) told a very similar story of power-driven demand. The company reported record revenue of $9.5 billion, GAAP net income of $932 million, an EBITDA margin of 17.5%, and diluted earnings per share of $6.73. Synchronized demand from North American on-highway transport, Chinese construction activity, and high-performance generator sets for commercial data centers all helped operations. Cummins Inc. (NYSE:CMI) increased its full-year revenue guide for 2026 to 10-13% growth (up from 8-11%) and its full-year EBITDA margin forecast to 18.0-18.5% (up from 17.75-18.5%). The company also maintained a disciplined capital deployment strategy, returning $501 million to shareholders in the quarter through dividends and buybacks. Both companies are vulnerable to threats that might undermine the bullish narrative. Caterpillar Inc. (NYSE:CAT)'s results are largely related to North American construction and power-generation demand, both of which are cyclical, and the roughly $2.2 billion in estimated full-year tariff expenses, even after recent relief, is a significant drag that might re-escalate if trade policy swings again. Cummins Inc. (NYSE:CMI), on the other hand, has more diverse end markets, but this also implies more moving elements that may disappoint, including Chinese construction activity. Both companies also compete for a data-center power buildout that, while currently solid, is dependent on sustained hyperscaler capital spending. Any slowdown in AI infrastructure investment would directly impact the power-generation segment that both companies rely on for growth. Valuation trends show a wide pricing gap between the two industrial giants. Caterpillar Inc. (NYSE:CAT) is trading at a forward P/E multiple of 26.07x, the higher of the two, indicating optimism in the market for Caterpillar’s $4.4 billion in quarterly operating cash flow, expanding power-generation mix, and North American construction durability. Hedge fund support remains strong, with Insider Monkey’s Q1 2026 database showing that 87 funds owned stakes in Caterpillar Inc. (NYSE:CAT) at the end of the quarter. This compares to Cummins Inc. (NYSE:CMI), which trades at a relatively moderate forward P/E of 18.50x. According to Insider Monkey’s 13F data, hedge funds holdings increased from 67 funds in Q4 2025 to 79 funds in Q1 2026, indicating institutional interest in Cummins’ and power-generation exposure at a lower valuation. The valuation difference complicates the case for pursuing Caterpillar Inc. (NYSE:CAT) here. CAT investors are paying a premium for near-term momentum and lower tariff drag, leaving less room for error if construction demand slows or tariff relief turns out to be temporary. Cummins Inc. (NYSE:CMI) is a more appealing entry point on a relative basis, with double-digit revenue growth and improving margins, all at a lower multiple. Cummins Inc. (NYSE:CMI) may offer greater risk-adjusted value to investors wanting exposure to the power-generation theme, though Caterpillar Inc. (NYSE:CAT) appears to be better suited for existing holders than new capital until its valuation digests the recent surge. While we acknowledge the potential of CAT as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock. READ NEXT: 33 Stocks That Should Double in 3 Years and 15 Stocks That Will Make You Rich in 10 Years Disclosure: None. Follow Insider Monkey on Google News.

Stratasys SSYS reported second-quarter 2026 non-GAAP earnings of 3 cents per share, flat year over year. The figure beat the Zacks Consensus Estimate by 200%. Revenues declined 0.4% year over year but grew 3.7% sequentially to $137.61 million. However, it missed the consensus mark by 1.7%. Record consumables revenues supported results, while weaker system sales weighed on the top line. Aerospace and defense revenues increased 17% year over year, reflecting growing adoption of Stratasys’ additive manufacturing platforms for production applications. Product revenues declined 2.2% year over year to $92.7 million. Within products, system revenues fell 13.7% to $26.4 million, reflecting continued variability as the company shifts toward larger manufacturing-oriented deals. Consumables revenues increased 3.3% to a record $66.3 million, driven by manufacturing materials. Stratasys, Ltd. price-consensus-eps-surprise-chart | Stratasys, Ltd. Quote Services revenues rose 3.7% year over year to $44.9 million. Customer support revenues decreased 1% to $29.9 million, while Stratasys Direct recorded 12.1% year-over-year growth. Non-GAAP gross margin contracted 50 basis points year over year to 47.2% from 47.7%. The strong Israeli shekel pressured profitability, partially offsetting the benefit from higher-margin consumables. The margin nevertheless improved from 46.3% in the first quarter.Non-GAAP operating expenses were $64.8 million, or 47.1% of revenues, compared with $64.7 million, or 46.9%, a year earlier. Adjusted EBITDA declined to $5.3 million from $6.1 million. Management said EBITDA would have been $8.2 million excluding the $2.9 million adverse currency impact. Non-GAAP operating income declined 90.9% year over year to $0.1 million from $1.1 million in the year-ago quarter. Aerospace and defense, Stratasys' largest vertical, grew 17% year over year. Management highlighted the expansion of U.S. Air Force adoption of F900 systems for sustainment and the production of flightworthy parts, with orders increasing across larger, ongoing programs.Stratasys also expanded its relationship with Quickparts through an agreement to purchase 12 Neo800+ systems, in addition to six existing units. The company was also awarded a two-year, $7.8 million America Makes program to advance in-situ monitoring capabilities for its F900 and F3300 platforms. Automotive activity included FANUC's adoption of Stratasys industrial solutions and an agreement with FAW Group to purchase 12 F900 systems by year-end. Two of those systems were shipped during the second quarter. FAW already operates five F900 systems and eight other Stratasys systems.The pending Markforged acquisition is expected to broaden Stratasys' production offering with continuous carbon fiber technology, materials and software. The $42.5 million all-cash transaction involves a business that generated roughly $70 million in 2025 revenues. Stratasys expects the deal to close by the end of 2026 and contribute positively to EBITDA within the first year. Stratasys ended June 30, 2026, with $212.5 million in cash, cash equivalents and short-term deposits, down from $237.8 million at the end of the first quarter. The company remained debt-free, providing financial flexibility for technology development and inorganic growth initiatives.Operating activities used $18.7 million of cash during the quarter compared with $1.1 million used a year earlier. Management attributed the elevated cash usage mainly to non-routine items, including legal expenses related to protecting intellectual property. Stratasys reaffirmed its 2026 revenue outlook of $565-$575 million and continues to expect sequential revenue growth through the year. Non-GAAP gross margin is projected to be in the range of 46.7-47.1%, while non-GAAP operating margin is expected to be between 0.7% and 1.5%.The company maintained its non-GAAP earnings guidance of 9-14 cents per share and adjusted EBITDA forecast of $25-$30 million. Capital expenditures are projected to be in the range of $20-$25 million. However, Stratasys no longer expects positive operating cash flow for the full year following first-half cash usage, although it expects operating cash flow to turn positive in the second half of 2026. Currently, Stratasys carries a Zacks Rank #2 (Buy). Caterpillar CAT, Generac Holdings GNRC, and Schneider Electric SBGSY are stocks worth considering in the broader Zacks Industrial Products sector. While Caterpillar and Generac Holdings sport a Zacks Rank #1 (Strong Buy), Schneider Electric currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here. The long-term earnings growth rates for Caterpillar, Generac Holdings, and Schneider Electric are 21.07%, 12%, and 17.18%, respectively. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Stratasys, Ltd. (SSYS) : Free Stock Analysis Report Caterpillar Inc. (CAT) : Free Stock Analysis Report Schneider Electric SE (SBGSY) : Free Stock Analysis Report Generac Holdings Inc. (GNRC) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Trimble TRMB reported second-quarter 2026 non-GAAP earnings of 86 cents per share, beating the Zacks Consensus Estimate by 7.5%. Earnings rose 21.1% year over year. Revenues of $972 million increased 11% year over year and up 10% on an organic basis. The company also surpassed the Zacks Consensus Estimate by 2.2%. The quarter benefited from organic execution in AECO and Field Systems. Annualized recurring revenue (ARR) reached a record $2.51 billion, up 14% year over year and 12% organically. Subscription and services revenues were $640.6 million, up 9.9% year over year, while product revenues advanced 13.2% to $331.4 million. Subscription and services accounted for 65.9% of total revenues, keeping recurring streams central to the business mix.Management said recurring revenue growth supported stronger gross and operating profitability. The Connect & Scale strategy remains focused on linking data and workflows across Trimble’s software and hardware ecosystem. Trimble Inc. price-consensus-eps-surprise-chart | Trimble Inc. Quote AECO revenues were $388.5 million, with organic growth of 9%. Segment ARR reached a record $1.57 billion and increased 14% organically. Trimble Construction One bundles, cross-sell activity and the Document Crunch acquisition supported bookings momentum.The segment's operating income margin was 30.6%, up 20 basis points year over year. Management said AECO remains on track for an operating margin of about 35% in 2026, while new AI tools are being deployed across estimating, job costing, and contract-risk workflows. Field Systems generated $442.5 million in revenues, with 12% organic growth. ARR was $399 million, also up 12% organically. Demand was strongest in Civil Construction and Geospatial, led by data centers, utilities, and energy infrastructure.Tariff refunds reduced revenues by $14 million, creating a three-percentage-point drag on growth, but had no impact on operating income. The segment's operating margin expanded 210 basis points to 32.9%, helped by recurring revenue growth and scale. Transportation & Logistics revenues were $141 million, up 5% organically, while ARR increased 7% to $533 million. Transporeon delivered mid-teens growth, and management cited healthy bookings despite a still-constrained freight market.Operating margin improved 240 basis points to 24%. Trimble also began a strategic review of the T&L business after receiving inbound interest from multiple parties, with management emphasizing that there is no predetermined outcome or timeline. Non-GAAP gross margin increased 120 basis points year over year to 71.8%.Adjusted EBITDA reached $278 million, with margin expanding 120 basis points to 28.6%. GAAP results included a $562 million goodwill impairment related to T&L, which drove a GAAP net loss of $471.7 million.Non-GAAP operating income was $260.6 million, translating to a 26.8% margin, up 140 basis points. TRMB ended the quarter with $214.4 million in cash and equivalents and total debt of $1.459 billion.Through the first two quarters of 2026, operating cash flow was $515 million. Free cash flow totaled $501.8 million for the first half. The board authorized a new $1 billion share repurchase program, replacing the prior authorization, while share repurchases totaled $329 million through the first two quarters. Trimble raised its 2026 revenue outlook in the range of $3.90-$3.95 billion and non-GAAP earnings of $3.60-$3.70 per share. Organic ARR growth is expected to be between 12% and 14%, with non-GAAP operating margin projected to be 28.2%-28.6% and adjusted EBITDA margin to be 29.7%-30.1%.For the third quarter, TRMB expects revenues of $953-$978 million and non-GAAP earnings of 83-88 cents per share. Organic ARR growth is projected to be in the range of 11%-13%. Field Systems ARR growth is expected to face a 400-500 basis-point headwind for several quarters from replacing a low-margin white-label product with an internally developed solution. Currently, Trimble carries a Zacks Rank #2 (Buy). Caterpillar CAT, Generac Holdings GNRC, and Schneider Electric SBGSY are stocks worth considering in the broader Zacks Industrial Products sector. While Caterpillar and Generac Holdings sport a Zacks Rank #1 (Strong Buy), Schneider Electric currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here. The long-term earnings growth rates for Caterpillar, Generac Holdings, and Schneider Electric are 21.07%, 12%, and 17.18%, respectively. Shares of Caterpillar, Generac Holdings, and Schneider Electric have appreciated 49.3%, 62.7%, and 30.2%, respectively. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Trimble Inc. (TRMB) : Free Stock Analysis Report Caterpillar Inc. (CAT) : Free Stock Analysis Report Schneider Electric SE (SBGSY) : Free Stock Analysis Report Generac Holdings Inc. (GNRC) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Image source: The Motley Fool. Tuesday, Aug. 4, 2026 at 8:30 a.m. ET Vice President of Investor Relations - Alex Kapper Chairman and Chief Executive Officer - Joseph Creed Chief Financial Officer - Kyle Epley Senior Vice President of the Global Finance Services Division - Stephanie Baughman Senior Director of Investor Relations - Ryan Coleman Operator: Welcome to the Second Quarter 2026 Caterpillar Earnings Conference Call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Alex Kapper. Thank you. Please go ahead. Alex Kapper: Thank you, Audra. Good morning, everyone, and welcome to Caterpillar's second quarter of 2026 earnings call. I'm Alex Kapper, Vice President of Investor Relations. Joining me today are Joe Creed, Chairman and CEO; Kyle Epley, Chief Financial Officer; Stephanie Baughman, Senior Vice President of the Global Finance Services Division; and Ryan Coleman, Senior Director of IR. During our call, we'll be discussing the second quarter earnings release we issued earlier today. You can find our slides, the news release and a webcast recap at investors.caterpillar.com under Events & Presentations. The content of this call is protected by U.S. and international copyright law. Any rebroadcast, retransmission, reproduction or distribution of all or part of this content without Caterpillar's prior written permission is prohibited. Moving to Slide 2. During our call today, we'll make forward-looking statements, which are subject to risks and uncertainties. We'll also make assumptions that could cause our actual results to be different than the information we're sharing with you on this call. Please refer to our recent SEC filings and the forward-looking statements reminder in the news release for details on factors that individually or in aggregate could cause our actual results to vary materially from our forecast. A detailed discussion of the many factors that we believe may have a material effect on our business on an ongoing basis is contained in our SEC filings. On today's call, we'll also refer to non-GAAP numbers. For a reconciliation of any non-GAAP numbers to the appropriate U.S. GAAP numbers, please see the appendix of the earnings call slides. For today's agenda, Joe will begin by sharing his perspectives about our results and highlighting initiatives across our segments. Then he'll discuss our full year outlook and insights about our end markets followed by strategy highlights. Kyle will provide a detailed overview of results, and we'll share key assumptions looking forward. We will conclude by taking your questions. Now let's advance to Slide 3 and turn the call over to Joe Creed. Joseph Creed: All right. Thanks, Alex, and good morning, everyone. Thanks for joining us today. In the second quarter, sales and revenues were better than expected at $20.5 billion, up 24% versus the prior year, driven by strong end market demand in all 3 of our primary segments. This is the first time in company history that we generated over $20 billion of sales and revenues in a single quarter. This milestone underscores both the essential work our customers do every day and the dedication of Caterpillar employees worldwide to solving our customers' toughest challenges. We delivered adjusted profit per share of $8.17, an increase of 73% versus last year. Our backlog grew sequentially by $9 billion to $72 billion. This is an increase of approximately $35 billion or 92% compared to second quarter last year. All 3 primary segments contributed to both the year-over-year and sequential backlog growth. Strong order rates and a growing backlog reflect broadening momentum across our business. In the quarter, we generated robust MP&E free cash flow of $5.1 billion and deployed $2.2 billion to shareholders through share repurchases and dividends. Now I'll discuss second quarter results in more detail. As I mentioned, sales and revenues were $20.5 billion, and the increase versus prior year was primarily driven by strong growth in sales volume from higher sales to users in all 3 primary segments and favorable price realization. Second quarter sales and revenues were better than expected due to strong sales volume growth in Construction Industries and Resource Industries, while Power & Energy was broadly in line with our expectations. Adjusted operating profit margin was 21.9%. Second quarter adjusted operating profit margin was better than we anticipated, primarily due to IEEPA tariff recoveries of $392 million and lower-than-expected tariff costs. The margin benefit from better-than-expected sales volume was mostly offset by higher SG&A and R&D expense. For tariffs introduced since the beginning of 2025, excluding IEEPA recoveries, costs were about $400 million in the quarter. This was lower than the estimate we provided in April due to favorable adjustments to the computation of tariffs previously incurred. Kyle will explain in more detail in a moment, including the impact to each segment. Now I'll review second quarter retail statistics. Sales to users grew in all 3 of our primary segments. In Power & Energy, sales to users grew a robust 33%. Power generation grew 72%, driven by very strong demand for large gensets and turbines used in data center applications. Sales to users in oil and gas increased 6% and were driven by reciprocating engines, turbines and turbine-related services sold into gas compression applications. Industrial sales to users were down due to a decline in engines sold in the marine application. Construction Industries total sales to users grew for the sixth consecutive quarter, up 22%. Increases in North America were better than we anticipated as the growth was driven by very strong rental fleet loading and equipment sold into nonresidential and residential construction. Dealers rental revenue continues to grow in North America, requiring more investment in their equipment fleets. This quarter, rental loading was a positive contributor to sales to user growth as compared to second quarter last year when rental loading was a headwind. Sales to users increased in EAME due to strength in Europe and Africa, but were lower than we anticipated due to softness in the Middle East. In Asia Pacific, growth was driven by China, but softness outside of China kept the overall region below our expectations. Latin America grew as we anticipated. For Resource Industries, second quarter sales to users increased 17%, which was in line with our expectations. Sales to users were higher year-over-year in mining as well as heavy construction and quarry and aggregates. Rail growth was driven by international locomotive deliveries. Turning to Slide 4. I'll cover a few highlights since our last earnings call, starting with Power & Energy. To support the demand growth in power generation and oil and gas applications, we're excited to resume production of our 10-megawatt medium-speed gas reciprocating engine platform. This highly efficient platform is well suited for prime power generation and its power rating fits between our high-speed gas reciprocating engines and industrial gas turbines. In 2022, we stopped manufacturing this product and focused on supporting aftermarket sales and services given the limited industry opportunity at that time. And now without significant investment, we're able to restart production by leveraging our existing supply base along with our internal capacity and capability. We plan to bring about 1.5 gigawatts of capacity back online, and shipments are expected to begin in the fourth quarter. This is a clear example of how our agility and diverse portfolio help us stay ahead of customer needs, respond quickly and turn opportunities into profitable growth. Moving on to Construction Industries. In the second quarter, we delivered our first units to Major Projects, which is a specialized fully Cat dealer-owned rental joint venture focused on supporting customers with multibillion-dollar projects across North America. Major Projects will serve customers developing large-scale infrastructure, including transportation, energy, manufacturing and data center builds. It's a supplemental national rental solution to help deliver larger size class construction equipment and capabilities where existing individual dealer rental fleets aren't sufficient to execute at scale. We believe Major Projects will expand our presence in the rental industry and make it easier for large contractors to do business with us and our dealers. And finally, Resource Industries completed the acquisition of Skycatch in July, further enhancing our capabilities following the recent acquisition of RPMGlobal. Skycatch's technology captures high-frequency, high-precision, large-scale spatial data and pairs it with a suite of AI capabilities. That allows customers to identify, measure and interact with the data, resulting in improved decision-making, reduced delays and greater confidence in daily operations. This is another example of investment in technology-enabled growth that will help our mining customers operate more efficiently and achieve better outcomes. Now on Slide 5, I'll provide an update on our outlook. We continue to see strong momentum in our end markets despite ongoing uncertainty due to geopolitical events. We are increasing our full year 2026 sales and revenues expectations to mid- to high teens growth based on the healthy demand we are seeing across all 3 of our primary segments. We are also progressing on our capacity expansion plans, and we expect to increase our throughput in the second half of the year. As a result, we anticipate stronger full year growth across all 3 primary segments compared to the outlook we gave in April. Services revenues are also expected to grow at a higher rate for the full year compared to our previous outlook. The improved outlook is also supported by the breadth and duration of our record backlog. As I mentioned, all 3 of our primary segments contributed to backlog growth. Power & Energy customers continue planning with us by sharing their long-term forecasts, and some are placing orders as far out as 2030. Currently, 59% of our $72 billion backlog is expected to be delivered over the next 12 months. This percentage has been fairly stable over the past 3 quarters, which demonstrates the momentum in all 3 primary segments. Moving on to adjusted operating profit margin. We expect the full year adjusted operating profit margin to be higher than we expected during our last earnings call, reflecting the improved sales and revenues outlook. Excluding the favorable impact from our IEEPA tariff recoveries in the second quarter, we expect full year adjusted operating profit margin to be near the bottom of the target range. Our full year margin expectation reflects the strategic investments we are making to execute our growth strategy as well as the ongoing impact of tariffs. While the situation around tariffs remain fluid, we continue to execute our mitigation plans. Kyle will provide more detail on our revised full year estimate for tariffs in a moment. I'm confident that we'll manage the impact of tariffs over time as we aim to operate around the midpoint of our adjusted operating profit margin target range. We are also increasing our MP&E free cash flow expectations to be in the top half of our annual target range, reflecting our improved outlook. I'll now discuss our key end markets, starting with Power & Energy. Our positive outlook for 2026 continues to reflect strong demand in power generation and oil and gas. Strong second quarter performance has set a solid foundation for continued growth for the remainder of the year. We continue to anticipate full year growth in power generation for both Cat reciprocating engines and Solar Turbines driven by increasing energy demand to support data center build-out related to cloud computing and generative AI. Additionally, prime power demand continues to trend higher as customers look to Caterpillar's turbine and reciprocating engine products and services to support their need for power solutions. After a record year for sales in 2025, oil and gas is expected to grow moderately again this year. Reciprocating engine sales are anticipated to increase driven by strong demand in gas compression applications. We also see continued momentum in demand for reciprocating engine aftermarket parts. Solar Turbines oil and gas sales are expected to grow while the backlog remains healthy, as we continue to see solid order and inquiry activity. Demand for products in industrial applications is expected to grow moderately in 2026. For Construction Industries, we continue to expect full year sales to users growth, supported by strong order rates. Overall, the outlook for North America remains positive as sales to users are anticipated to grow versus last year. Construction spending remains at healthy levels, supported by the IIJA with the remaining funds to be spent over the next few years. Nonresidential investment in critical infrastructure programs, heavy construction and data centers is contributing to overall construction spending levels. We expect dealer rental fleet loading will continue to grow including additional fleet loading for Major Projects in the third quarter. In EAME, Europe is expected to remain stable, supported by nonresidential construction, and construction activity in Africa is projected to remain strong. While the Middle East continues to be challenged, we currently anticipate only a limited impact on EAME sales to users. In Asia Pacific outside of China, softer economic conditions are expected. In China, we anticipate moderate conditions with full year growth in the above 10-ton excavator industry off of low levels of activity. We expect full year growth in Latin America. We're seeing continued positive momentum in Resource Industries with robust order rates and strong backlog growth. For 2026, sales to users are expected to increase, primarily driven by rising demand for copper and gold and positive dynamics in heavy construction and quarry and aggregates. Most key commodities remain above investment thresholds. Customer product utilization is high and the age of the fleet remains elevated. While some commodity prices have increased recently, customers remain focused on the long term. We now expect rebuild activity to increase moderately compared to last year. Rail services and locomotive deliveries are both anticipated to grow for the year. Now let's turn to Slide 6 for a strategy highlight. Our refreshed enterprise strategy was built on our strong foundation of operational excellence, and we continue to operate under the discipline of the operating and execution model. As we invest in our capacity to meet customers' increasing needs, we're finding creative ways to reallocate resources and optimize our operations as we grow to record levels. Let me share an example. Last November, we announced an increase in our new turbine capacity of 2.5x 2024 levels. This capacity will serve oil and gas and power generation applications and be leveraged to provide rebuild and services for our growing installed base for decades to come. To help bring some of this capacity online sooner, we were able to repurpose an existing 250,000 square foot facility in Wamego, Kansas, which previously produced work tools for Cat construction equipment. We converted the facility in under 12 months or substantially less than building a new factory. From Wamego, we now package and ship our PGM130, a product that is popular for data center power generation. This is one of many examples of how we are continuing to manage our business with discipline and maximize the use of our existing footprint to serve our customers and grow profitably. With that, I'll turn it over to Kyle. Kyle Epley: Thank you, Joe. Good morning, everyone. I'm going to take a few minutes to walk you through our overall second quarter results, including details about segment performance as well as the balance sheet and cash flow. I will then conclude with remarks on our expectations for the remainder of the year, including third quarter and current full year assumptions. Beginning on Slide 7. Sales and revenues were $20.5 billion, up 24% versus the prior year, which was better than our expectations. Adjusted operating profit was $4.5 billion, and our adjusted operating profit margin was 21.9%, both better than we anticipated. Moving to Slide 8. The 24% increase in sales and revenues compared to the second quarter of 2025 was primarily driven by strong growth in sales volume and favorable price realization. The stronger sales volume was mainly driven by higher sales of equipment to end users across all 3 primary segments. Dealer inventory increased by $400 million in Construction Industries compared to a decrease in the second quarter of 2025. The increase was higher than we originally anticipated, supported by our expectation of stronger sales to users for the rest of the year, which reflects strong end market demand. Sales and revenues were above our expectations, mainly driven by stronger-than-expected sales volume in Construction Industries and Resource Industries. Power & Energy was generally in line with expectations. Moving to operating profit on Slide 9. Operating profit in the second quarter increased by 50% to $4.3 billion. Adjusted operating profit of $4.5 billion increased by 54% versus the prior year, mainly due to the profit impact of higher sales volume. The adjusted operating profit margin was 21.9%, which was a 430 basis point increase compared to the prior year. Margin was better than we anticipated, primarily due to expected IEEPA tariff recoveries and lower-than-expected tariff costs. The margin benefit from better-than-expected sales volume was mostly offset by higher SG&A and R&D expense. In the quarter, we recognized $392 million in expected IEEPA tariff recoveries with the majority of this amount reflected in corporate items. For the tariffs introduced since the beginning of 2025, excluding IEEPA recoveries, the second quarter tariff costs were approximately $400 million. And this was favorable compared to the $700 million estimate we provided in April. This favorability was primarily driven by adjustments to the computation of tariffs previously incurred. The $400 million of tariff costs were recognized within the segments and corporate items. Segment margins were impacted by 90 basis points in Power & Energy, 340 basis points within Construction Industries and 260 basis points in Resource Industries. Within corporate items, there was a favorable adjustment for tariffs. Moving to Slide 10. Profit per share was $7.77 in the quarter. Adjusted profit per share was higher than we had anticipated at $8.17. Restructuring costs in the quarter were $0.40 versus $0.10 last year. Excluding discrete items, the provision for income tax in the second quarter of 2026 reflected a global estimated annual effective tax rate of 23%. Finally, the year-over-year impact from the reduction in the average number of shares outstanding due to share repurchases resulted in a favorable impact on adjusted profit per share of approximately $0.15 compared to the second quarter of 2025. On Slide 11, I will now review the second quarter performance of the segments, starting with Power & Energy. For Power & Energy, sales of $8.2 billion increased by 17% versus the prior year, which was generally in line with our expectations. The sales increase versus the prior year was mainly due to higher sales volume and favorable price realization. Second quarter profit for Power & Energy increased by 30% versus the prior year to $2 billion. The segment's margin of 24.6% was an increase of 250 basis points versus the prior year. The increase was mainly due to the profit impact of higher sales volume and favorable price realization, which was partially offset by unfavorable manufacturing costs. Higher manufacturing costs were impacted by spend related to our capacity expansion, including a higher depreciation. Segment margin was higher than anticipated, primarily due to lower-than-expected manufacturing costs, including tariffs. Now moving to Slide 12. Construction Industries sales increased by 35% in the second quarter to $8.3 billion, primarily due to higher sales volume and favorable price realization. Higher sales volume was mainly driven by higher sales of equipment to end users. The $400 million of dealer inventory increase and services revenue growth resulted in sales volume to be better than we expected. Second quarter profit for Construction Industries was $1.9 billion, a 57% increase versus the prior year. The segment's margin of 23.3% was an increase of 320 basis points versus the prior year, mainly driven by the profit of higher sales volume. Price was also favorable in the quarter. Segment margin was higher than anticipated, primarily due to the profit impact of stronger sales volume, partially offset by higher manufacturing costs, including freight. Turning to Slide 13. Resource Industries sales increased by 20% in the second quarter to $4.6 billion, primarily driven by higher sales volume. Price was also favorable versus the prior year. Sales were better than we anticipated due to higher sales volume, driven by favorable services revenues growth. Second quarter profit for Resource Industries increased by 23% versus the prior year to $693 million. The segment's margin of 14.9% was an increase of 40 basis points versus the prior year. This was mainly driven by the profit impact of higher sales volume, partially offset by unfavorable manufacturing costs. Segment margin was higher than anticipated, primarily due to the higher sales volume. Moving to Slide 14. Financial Products revenues increased by 10% versus the prior year to $1.1 billion, mainly due to higher average earning assets across all regions. Segment profit increased by 32% to $328 million. The increase was primarily due to higher average earning assets and favorable impacts from equity securities and margins at insurance services partially offset by a higher provision for credit losses at Cat Financial. Our customers' financial health remains strong. Past dues were 1.31% in the quarter, down 31 basis points versus the prior year, the lowest we have recorded since 1998. The allowance rate of 0.84% surpassing the first quarter of 2026 as our lowest level ever reported in any quarter. Business activity at Cat Financial remains healthy. Retail new business volume grew by 9% versus the prior year. In addition, used equipment inventory levels continue to remain low and conversion rates remain above historical averages as customers choose to convert their leases into buying the equipment at the end of their lease term. Moving to Slide 15. MP&E free cash flow was a record at $5.1 billion in the second quarter. This was about $2.8 billion increase versus the prior year, mainly driven by stronger profit. CapEx spend was about $600 million in the quarter. Moving to capital deployment. We deployed $2.2 billion to shareholders in the second quarter. Share repurchases accounted for about $1.5 billion, with the remainder reflecting our quarterly dividend payment. In June, we announced an 8% dividend increase, our sixth consecutive year with a high single-digit quarterly increase. Our balance sheet remains strong. We have ample liquidity with an enterprise cash balance of $6.7 billion. In addition, there is a $1.5 billion in slightly longer-dated liquid marketable securities to improve yields on that cash. Now let's go through our outlook assumptions. Turning to Slide 16. I will start with the third quarter. We are continuing to monitor the environment as geopolitical conditions remain fluid and complex. Based on what we see today for the third quarter, we anticipate another strong quarter of sales growth versus the prior year. We expect volume increases and favorable price realization in each of our 3 primary segments. We anticipate volume growth will be driven by higher sales to users across all 3 primary segments versus the prior year. If we look at the segments, we anticipate strong sales growth in Power & Energy in the third quarter versus the prior year, driven by continued strength in power generation and in oil and gas, modest growth in industrial applications as it continues to recover and favorable price realization. In Construction Industries, we expect strong sales growth in the third quarter versus the prior year mainly due to higher sales volume on strong sales to users and favorable price realization. We expect a slight increase in dealer inventory in the third quarter, but modestly lower than last year. As a result, the year-over-year impact from dealer inventory is expected to be a modest headwind to sales volume in the quarter. In Resource Industries, we also expect strong sales growth in the third quarter versus the prior year primarily due to higher sales to users and services growth. We also anticipate favorable price realization, but to a lesser extent than the second quarter. Now I will provide some color on our third quarter margin expectations versus the prior year. We expect higher adjusted operating profit margin at the enterprise level versus prior year, primarily due to favorable price realization and higher sales volume, partially offset by unfavorable manufacturing cost including depreciation expense and freight, along with higher SG&A and R&D expenses due to the continued investment in strategic investments aligned with our 2030 goals that we rolled out at our last year's Investor Day. We anticipate tariff costs of around $600 million, which is similar to what we incurred in the third quarter of 2025. We expect about 50% of the tariffs to be incurred in Construction Industries and 25% in both Power & Energy and Resource Industries. Now on the third quarter margin by segment. In Power & Energy, we anticipate a higher margin percentage compared to the prior year on stronger volume and favorable price realization. This is partially offset by higher manufacturing costs including depreciation and expenses related to our capacity expansion projects. SG&A and R&D expenses are also expected to be higher. In Construction Industries, we anticipate a higher margin percentage compared to the prior year, primarily due to favorable price realization and higher sales volume. This is partially offset by higher manufacturing costs, including tariff and freight costs. Strategic investments related to technology are expected to increase SG&A and R&D expenses versus prior year. In Resource Industries, we anticipate a similar margin percentage compared to the prior year due to higher sales volume and favorable price realization, partially offset by higher manufacturing costs, including tariff costs and SG&A and R&D expenses. Higher compensation expense and strategic investments related to technology, including autonomy, are driving the higher SG&A and R&D expenses versus prior year. Now on Slide 17. Let me provide a few comments on the full year. As Joe mentioned, we now anticipate sales and revenues growth in the mid- to high teens for the full year of 2026. This is an increase versus our expectations from last quarter. The increase in our full year sales and revenue expectations is supported by strong sales to users growth across all 3 primary segments driven by healthy end markets, strong order rates across all 3 primary segments driving backlog growth and increased throughput from our capacity expansion plans in the second half. We expect strong sales growth across each of our primary segments, mainly driven by volume and price. For the enterprise, we typically see higher sales and revenues in the second half as compared to the first, and we expect to follow that trend this year. We also expect a more typical reduction in Construction Industries dealer inventory of over $1 billion in the fourth quarter. We plan to end the year higher than last year in anticipation of future end market growth. As a result, the year-over-year impact from dealer inventory is expected to be a headwind to Construction Industries sales volume in the second half of the year. Now on to adjusted operating profit margin for the full year. Due to the increased sales and revenues outlook, full year adjusted operating profit margin will be higher than we expected in April. Excluding the expected IEEPA tariff recoveries, our full year adjusted operating margin would be near the bottom of the range at the higher sales level. Compared to last year, higher adjusted operating profit margin will reflect favorable price realization, higher sales volume, partially offset by higher manufacturing costs, including tariffs, depreciation expense and freight and higher SG&A and R&D, driven by compensation expense and strategic investments spend. Excluding the expected IEEPA tariff recoveries of approximately $400 million reported in the second quarter, we now expect full year 2026 tariff costs of around $2.2 billion or at the low end of the range we previously provided. Our outlook does not include any additional IEEPA tariff recoveries in the second half of the year. As we lap incremental tariff costs, the tariff impact to the second half adjusted operating profit and margins is expected to be -- is not expected to be significant. Moving on. We continue to expect restructuring costs of approximately $300 million to $350 million in 2026. Our estimated global annual effective tax rate remains approximately 23% for 2026 excluding discrete items. With the improved sales and revenues and adjusted operating margin outlook, we now expect MP&E free cash flow to be in the top half of our annual target range of $6 billion to $15 billion. We expect second half MP&E free cash flow to be slightly higher than the first half despite higher CapEx spend. Our CapEx spend for 2026 is anticipated to be approximately $3.5 billion similar to our previous expectations. Now turning to Slide 18. To summarize. We delivered a strong first half with better-than-expected sales and revenues and earnings. In this dynamic operating environment, we now anticipate mid- to high-teens sales and revenues growth in 2026 and anticipate adjusted operating profit margin and MP&E free cash flow to be better than we had previously expected. We remain disciplined and committed to operational excellence and the O&E model. We will continue to look for ways to optimize our footprint and invest efficiently. We are maintaining a strong balance sheet, and we will continue to return substantially all of our MP&E free cash flow to our shareholders through dividends and share repurchases over time. Finally, we will continue to execute our strategy for profitable growth. With that, we will take your questions. Michael Feniger: Quick clarification. The 10-megawatt recip that you're bringing back online and can ramp to 1.5 gigawatts. Is that part of the 65 gigawatt target by 2030? Or is this additive? And Joe, my core question is that there is a concern on AI and data center demand in the out years. When we think of that 65 gigawatt capacity target by Cat by 2030, are you more or less confident today on the visibility that there will be enough demand in the out years? Even within the P&E segment, are you seeing order rates for engines and turbines outside of data centers like pipelines and gas compression, move higher, the demand broadening out, what are you hearing in recent conversations that shaping your view on the staying power through 2028, 2029 and 2030? Joseph Creed: Mike, thanks for the questions. Maybe I'll take the first one, pretty quickly. The 65 megawatts is a round number. It will move around a little bit on mix, but -- or gigawatts, sorry, the 10-megawatt unit, that's our old MaK business that we -- it was primarily marine focused in the past and wasn't performing the way after many years with low industry demand, but it's well suited, and we did the gas engine development for power generation, and we've been able to bring that back. So it was not included in the 65. But again, it's a lower volume. They're well suited for this application and kind of fits nicely between the top end of our high-speed reciprocating offering and the low end of our industrial turbine offering. So that's how you should think about that. And we were able to bring it back quickly because we just stopped production just a few years ago. There is a lot of discussion around AI demand. We have constant discussions with our customers. And all I can tell you is what our discussions with them is no one is slowing down at the moment. In fact, if we can get more units out, they're asking us to give them more units but I think what you also point out is really important, I think, and maybe a little different for us is we took a broad view when we analyzed putting this capacity in and took a measured approach. We said last time we'll have cash payback by the end of this decade. And as I mentioned, we're starting to take orders into '29 and '30 already. And we did this not just based on data center demand. That's obviously a big driver of it, but we have aftermarket growth objectives to take care of our growing installed base on large engines and turbines. These are used, as you pointed out, also in oil and gas. And remember, oil and gas had a record year last year, and we expect it to be -- we're on track for another increase this year. And when you look at the backlog, our oil and gas at the end of the second quarter backlog compared to where it was a year ago, second quarter a year ago, was not quite, but nearly 2x bigger. So we are seeing great demand for oil and gas particularly around gas compression. I think we're going to move a lot of natural gas in the next few years. And then our large engines are also used in our mining equipment and marine applications as well. So we feel pretty good where we sit today. And we haven't seen any customers back off of demand. And in fact, we're starting to get even more extended when you look at the backlog. Tami Zakaria: So a question on your sales to end users up about 20% for the first half. What do you expect for the full year in terms of [indiscernible]? I know you're guiding to mid- to high-teens revenue growth for the year. Do you plan to produce to retail demand this year? Or how should we think about channel restocking as it relates to the back half of this year? Joseph Creed: Yes. I think -- we expect STU growth momentum, and I think that's reflected by both strong orders in RI and CI. And also in the second quarter, we mentioned dealer inventory was a little higher than we expected, and that's really due to the momentum we continue to see in STU growth. When it comes to dealer inventory, we do think we'll have a more normal seasonal pattern. We'll have a drawdown in the fourth quarter on CI dealer inventory. Last year, we didn't quite see as big of a drawdown, which was a little bit unusual. So we'll have those dynamics when you look at the back half of this year compared to the back half of last year. But when it comes -- we're seeing strong STUs in all 3 segments. I think that's a good thing. We've also seen services continue to increase so -- where we sit today and the backlog increasing. And you rightly also point out when it comes to the backlog, particularly in RI and CI, the backlog growth is great to see, but we're not in a constrained environment there. So the backlog really there is somewhat of a function of us being able to produce to demand. So I'd like to see us produce more and keep up with STUs, and when we can get that production in line with STUs, you would see some of that backlog actually come in. And I think that's a good thing as long as we continue to see positive sales to users. So we're pretty bullish on the back half of this year. David Raso: I'm just trying to think through construction versus power in the sense of just given we've kind of gone through the inventory swing from destock to restock a bit in construction. It looks like the volume growth there understandably from these high levels was better than I would have thought in 2Q will slow. But the power volume was a little less than I would have thought. And with the capacity coming on, you would think that might be able to ramp up. So can you just take us through your thoughts when you look out the next two, three, four quarters, the construction volume growth slowing and can P&E volume growth pick up? Because, I mean, they're roughly now the same size external sales, even the margins are pretty similar. So just that sort of trade-off a little bit. Joseph Creed: Yes, David, I think you have to look at the seasonality of those two. Segments is much different. So as I mentioned, the inventory drawdown that we expect to see in the fourth quarter. We do expect dealer inventory. Right now, our planning assumption is that we'll end this year higher than it ended last year because as you point out, we have strong momentum here, but the base keeps getting higher on the growth. So we'll keep an eye on that. Power & Energy continues to ramp. I'm really pleased with the way that teams continue to get more production out of our existing asset base as well as bringing the capacity online. So I think it's not -- the capacity not coming online in massive cliff events. We're trying to get as many units out as we can. So we've been a little bit ahead of schedule. We think we'll be able to get more -- increase our production moving forward. But the percentage of increase in Power & Energy, as you rightly state, it's not a demand issue right now. It's just going to be a matter of how fast we can continue to increase production. Kyle Epley: And David, this is Kyle. Just one reminder on the CI perspective, we kind of had a slow start to the first half of 2025, and then it started picking up in the back half of 2025 into the first half of this year. And so that will be part of your comparison when you start looking at the second half of CI compared to the second half of 2025. Jamie Cook: Congrats on a nice quarter. Joe, I was just hoping if you could talk through the composition of the backlog growth in the quarter, which was fairly impressive. How much of it was like large, chunky, big awards like PROPWR versus broad-based? And then just a follow-up question is the incremental margins in Power & Energy were fairly impressive, given we're adding capacity, I think, at like 39%. So is that reflective of pricing or capacity coming on quicker? I'm just trying to think of the setup for incremental margins in Power & Energy, just given how strong they are with everything we have going on with capacity additions. Joseph Creed: Yes. Thanks, Jamie. I think we'll -- I'll start with kind of the first part. One of the things we were really happy about with the backlog was seeing an increase in all 3 segments. And you guys -- we don't really kind of talk about the specifics in there. But as you look at the percentage delivery in the next 12 months, Power & Energy is much more extended. So it kind of shows on a percentage basis, they continue to increase. As I mentioned, inside Power & Energy as well, we saw continued strong demand for oil and gas come in, in orders that are also contributing to the backlog. And as far as -- when it comes to the machine side of the business, CI is definitely much more broad-based. As you know, when we take orders, RI can come in a little bit lumpy and also the way deliveries work for RI, that can move around the backlog. And in Power & Energy, the industrial side continues to come in, in a pretty steady basis, but most of the growth was in oil and gas and power generation. And in power generation, they tend to be big orders when they come in. And you see a difference kind of when these prime power orders come in, can move it. But we have a lot of customers asking for power and the months have been pretty consistent for us. As far as the margins on your other question, I think tariffs were a little better than maybe we expected. So you would expect that to continue. We might see a little pressure on freight in the back half and some of the costs, just everything going on in the world. But we're also installing capacity that puts pressure on depreciation and maybe some of the efficiencies we see, but we are seeing great operating leverage and the P&E team continues to perform really well. Robert Wertheimer: You've seen obviously some power gen providers being sold out and you touched on taking orders in the '29 and '30. And some folks are maybe even sold out that far. And I guess, I'm not sure if you're willing to say whether you are sold out for 2027 and '28. But my question is also how you're approaching it strategically as maybe gas recip becomes more attractive for either prime, flex power, but maybe backup as tight as well and you could do backup with gas, it could flex the prime. How are you approaching, are you saving any slots? Do you have slots open for the next couple of years? And maybe you could just talk generally about the mood towards gas recip prime, how it's evolving. Joseph Creed: Yes. Thanks, Rob. We've seen, obviously, lead times start to extend here. When it comes to gas prime, we're pretty extended. I mean, we're towards the back half of 2028 and into 2029. On turbines, maybe just a little bit farther than that. A little less on maybe diesel standby. But we're constantly working with customers. And again, one of the things I think that we've been able to do is the closer we plan with customers, getting them the power they need when they need it and making sure we schedule deliveries appropriately, allows us to take care of the maximum number of customers. And so we're moving schedules around occasionally where we can to help customers. We do try to protect our long-time oil and gas customers who don't necessarily have the same level of planning horizon, we are trying to plan farther out with them, but making sure that we take care of that customer base that's been with us for a really long time. So we have some flexibility. But as you state, I mean, I think particularly large engines, we're into '28 in gas prime, late '28 for sure, and then turbines a little bit longer than that. Stephen Volkmann: I'm wondering if we can talk a little bit about CI. Joe, I think you talked about rental fleet loading in these Major Projects that you're doing as well. Just trying to see if I can think about breakdown sort of between what's going out to end users and what's going into the various rental fleets and sort of how you think about that going forward? Joseph Creed: We've seen strong STUs. And this has been the momentum we've had for, I think, we said, the sixth quarter in a row of really strong STUs for CI. So I'm really pleased with the way that team is performing and our dealers are performing in CI, particularly in North America, but we have other regions we're doing really well as well. The rental fleet loading has really picked up this year as opposed to last year. So it was a stronger portion of our STU growth in the second quarter. I expect it to be a pretty healthy piece of STU growth in the third quarter as we really just started loading the Major Projects fleet. And that will continue to grow, and we'll see how many projects we can get lined up with that -- with the new dealer JV and Major Projects. So rental loading has definitely become a bigger piece of the STU growth for the moment. But we have great momentum. Started early last year when we put the merchandising programs in, we've been able to outperform the industry, and we just carried that momentum through the first half of this year. Kristen Owen: Just a follow-up on that last one. Since you talked about the rental loading and the mega projects, those tend to go hand in hand. So could you help us understand what's happening in the rest of the construction backdrop, maybe private nonres, resi? Like what's still lingering out there? And any sign of improvement in those pockets of construction? Joseph Creed: I mean, and Kyle can comment maybe on the second quarter, what's driving it, but we continue to see large infrastructure projects drive some of the growth. Obviously, data center demand as well drives -- has ancillary effect on CI. But the rental fleet loading, we think will continue, particularly with Major Projects. And as you said, you have a little bit of line of sight to Major Projects as they get rolled out. But one of the things as well, it's not -- one of the positives here is when you get to residential and other parts of CI, they aren't particularly strong. So to me, that provide some potential upside for us into the future. So right now, it's pretty heavily focused on nonresidential and major infrastructure projects. Kyle Epley: Kristen, just to add some color, it's Kyle, just by region, we talked about North America continues to be strong and Joe talked about it from a construction spend standpoint and non-resi investment. EAME is strong, especially in Africa. So that's been a real positive for us, and we expect that to continue. And even in other parts of the globe, Latin America has been strong and even in China off low levels, but China, we continue to see growth now for quite a few quarters in China above the 10-ton excavator off low levels. So really, as Joe mentioned, a really positive across the board from a CI perspective on sales to users growth. Mircea Dobre: I'm curious if you'd be willing to comment at all in Power & Energy on the service and aftermarket component of that business. Not only sort of maybe where we currently are from a mix standpoint or sizing this business specifically, but as we look at the significant backlog and the deliveries that you have kind of stretching now into 2029-plus, how do you think this portion of the business, the aftermarket, the service component of the business will scale up over time? Joseph Creed: Yes, I think we -- Power & Energy generally has had a stronger services component to it than maybe Construction Industries where we have a lot of opportunity to grow services and continue to work on it and -- but as you think about the way this is evolving and the prime power opportunities that are coming online, those will continue to create services growth opportunities for us. By the time those get in place, you go through top end overhauls, you get to in-frames and overhauls and major overhauls, that's going to be mostly 2030, beyond 2030 growth opportunities for us in services. So that's how we think about it. Oil and gas is, we don't have the sort of prime and standby type of nomenclature when we talk about oil and gas, but it all functions more like prime, it's heavy-duty applications, drives great services opportunities for us. So as we grow the installed base, it definitely gives us great services growth opportunities. There will be some between now and 2030, but the lion's share of that will be beyond 2030, which is why having this capacity in place is also a good thing. The capacity is not just for full assembly and finished turbines and gensets and engines. A lot of that capacity goes into supply base as well as our internal component manufacturing and machining that allows us to support that aftermarket growth that we expect. Angel Castillo Malpica: Just wanted to go back to the orders. So you mentioned 4Q deliveries of the 10-megawatt recip engine. I assume that means you already have some orders for this product. Just could you talk about the magnitude of that and just also any kind of incremental costs in delivering or getting this capacity ramped up? And then just more broadly, you also talked about diesel engine orders out to '28 or nat gas recip orders out to, I think, late '28 and turbines beyond that, '29 and '30. Just any color on how the pricing backdrop on orders out that far is kind of shaping up and kind of evolving just given against supply and capacity additions from others. Joseph Creed: Yes. Thanks, Angel. So the 10-megawatt units, we have taken our first orders on that, and we wanted to make sure we had orders before we actually made the decision to bring that engine platform back online because, as I mentioned, we had made the decision to sort of shut that production down and really just support customers in the aftermarket. So we do have our first orders. We expect to deliver here in the fourth quarter. We'll ramp over the next 18 months to that 1.5 sort of gigawatt number. But we're pretty confident that we're going to have the orders in those, at least in the next couple of years or we wouldn't have made the decision to bring it back online and the investment to do it given we are supporting customers in the aftermarket, key components we've had available, the supply base is available, and we've been able to use our existing internal capability and capacity to get that product back online, which I'm really excited about. So pretty minimal investment really in the rounding to do that, which has sort of made it an easy decision once customers were willing to commit. As far as the extended orders, each one of them is a little bit different, but we do typically have price escalators on those and they can be tied to economic indicators. And so we feel like pricing will be in line with kind of how we've been pricing in the past, but we do have escalators for those orders that are farther out. Kyle Menges: Great. I wanted to focus on the diesel standby business and there's been some debate out there on the redundancy needed for training versus inference data centers. And then also if you're using behind-the-meter power versus grid connection. And I'm curious what you're seeing as far as redundancy between those different applications and prime power infrastructures. And then also just a quick follow-up. Are lead times also increasing for the diesel gensets? Joseph Creed: Yes. I mean our diesel gensets are extended as well. I mean we're taking orders out into '28, well into '28 on diesel gensets. In fact, when it comes to diesel standby, we're actually seeing some customers ask us to inquire about moving down to the C32 platform, which is a bit of a smaller unit just because of the -- we have product availability there. So each data center is a little bit different, particularly now when you're moving to behind the meter, we're not hearing a whole lot of customers tell us they're just going to go to no backup or no redundancy. How they choose to do that? I mean traditional hookups to the grid and data centers are still moving heavily down the diesel recip for backup. Demand continues to grow for that. When you go behind the meter with gas solutions, sometimes they can still have gas recips also have some redundancy there. And it really just depends on the project. Alex Kapper: Hi, Audra, we have time for one more question. Jerry Revich: Joe, I'm wondering if you could just talk about your vision for Cat Rental. We're hearing from your dealers plans to double the fleet over the next 5 years. They have 30% to 50% mix of alliance products. How do you see it playing out longer term in terms of the mix of business going forward? Do you see their mix looking more like the national rental companies that we see? Just talk a little bit about where you envision the service offering for Cat Rental 5-plus years out and the opportunity from a market share standpoint since, obviously, it's been a smaller part of the mix for you folks historically? Joseph Creed: Yes. I mean it's one of the keys to our CI growth strategy is to be successful in rental with our dealers. I think our dealers are a great asset and great partners for us to help grow in the rental business. There are disparities in performance between some dealers or some regions, but our goal is to continue to work with them to capture a lot of this rental opportunity, our rental -- our dealer rental revenues continue to grow, and we're confident they can continue to grow that. That will lead to more fleet loading. If they're going to be successful in rental, they're going to have to have the full suite of equipment to support customers. Customers, I don't think, are going to rush to Cat dealers for our equipment if they can't also get the other rental equipment that they need. So that will be -- continue to be part of the mix for our dealers and part of that strategy. Major Projects fleet really allows us -- it's a national fleet and allows us to move that fleet around to really supplement dealers where if a dealer has a major project -- infrastructure project in their territory for a couple of years or 3 years, it's tough for them to invest in the fleet, that size to keep up at that scale or knowing that job may be somewhere else a few years from now in this rental. Major Projects fleet is going to really help us supplement the dealers, which should allow them also to grow because they'll be the ones that are working on that project in a local territory, and then we'll use the Major Projects fleet to supplement their existing fleet. So rental is a great opportunity for us, and we're going to continue to push forward with the strategy. So with that, thank you all for joining us, and I really appreciate your questions. I'm really proud of our team and the record performance this quarter. In particular, the sales and revenues milestone we achieved the first time in our company history to exceed $20 billion in the quarter. With broadening momentum across all 3 of our primary segments, we'll remain focused on operational excellence and delivering for our customers to create long-term value for our shareholders. With that, I'll turn it back to Alex. Alex Kapper: Thank you, Joe, Kyle, Stephanie and everyone who joined us today. A replay of our call will be available online later this morning. We'll also post a transcript on our Investor Relations website as soon as it is available. You'll also find a second quarter results video with our CFO and an SEC filing of our sales to users data. Visit investors.caterpillar.com and then click on Financials to view those materials. If you have any questions, please reach out to me or Ryan Coleman. The Investor Relations phone number is (309) 675-4549. Now let's turn it back to Audra to conclude our call. Operator: Thank you. That concludes our call. We thank you for joining. You may all now disconnect. Before you buy stock in Caterpillar, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Caterpillar wasn’t one of them. The 10 stocks that made the cut are built for long-term growth and could produce monster returns in the coming years. 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As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has positions in and recommends Caterpillar. The Motley Fool has a disclosure policy. Caterpillar (CAT) Q2 2026 Earnings Call Transcript was originally published by The Motley Fool

Construction equipment company Caterpillar (NYSE:CAT) announced better-than-expected revenue in Q2 CY2026, with sales up 24% year on year to $20.54 billion. Its non-GAAP profit of $8.17 per share was 31.8% above analysts’ consensus estimates. Is now the time to buy CAT? Find out in our full research report (it’s free). Revenue: $20.54 billion vs analyst estimates of $18.95 billion (24% year-on-year growth, 8.4% beat) Adjusted EPS: $8.17 vs analyst estimates of $6.20 (31.8% beat) Operating Margin: 20.9%, up from 17.3% in the same quarter last year Market Capitalization: $393.9 billion Caterpillar’s second quarter results were well received by the market, reflecting stronger-than-anticipated demand across all core business segments. Management attributed the outperformance to higher sales volumes, particularly in Construction Industries and Resource Industries, as well as positive price realization. CEO Joseph Creed emphasized, “This is the first time in company history that we generated over $20 billion of sales and revenues in a single quarter,” citing broad-based end market strength and increased dealer rental fleet loading in North America as major contributors. Looking ahead, Caterpillar’s growth outlook is shaped by continued strength in its order backlog and capacity expansion initiatives. Management expects ongoing momentum in Power & Energy, supported by robust demand for power generation equipment tied to data center construction and energy infrastructure. Creed commented that, “We continue to anticipate full year growth in power generation for both Cat reciprocating engines and Solar Turbines driven by increasing energy demand to support data center build-out related to cloud computing and generative AI.” The company also highlighted the opportunity for services revenue growth and the positive impact of large infrastructure investments in North America. Management pointed to operational agility and strategic investments as key drivers behind Caterpillar’s sales and margin gains in the second quarter, with several new product and market initiatives also supporting performance. Surge in Construction Equipment Demand: The North American market saw heightened demand for construction equipment, propelled by strong rental fleet loading and new infrastructure projects, including the launch of Major Projects, a dealer-owned joint venture targeting large-scale builds. Power & Energy Segment Momentum: Power & Energy sales benefited from high demand for large generators and turbines, especially for data center applications. Management noted that power generation sales to users grew 72%, supported by ongoing energy transition trends and the restart of the 10-megawatt gas reciprocating engine platform. Resource Industries Gains: Mining and heavy construction equipment experienced sales growth, with particular strength in orders for copper and gold mining and increased rebuild activity, reflecting continued commodity demand and fleet age. Backlog Expansion: Caterpillar’s backlog grew sequentially by $9 billion, now totaling $72 billion, with orders stretching well into 2029 and 2030. Management cited robust order activity in both equipment and aftermarket services, particularly in Power & Energy and Resource Industries. Tariff Mitigation and Margin Management: Operating margins rose due to favorable tariff recoveries and lower-than-anticipated tariff costs, even as the company continued to invest in capacity and strategic R&D to support future growth. Caterpillar’s outlook for the remainder of the year centers on sustained end market demand, capacity ramp-up, and strategic positioning in high-growth sectors like data centers and energy infrastructure. Capacity Expansion Initiatives: Management plans to increase throughput in the second half of the year by leveraging existing facilities and restarting production of key platforms, aiming to meet rising demand in power generation and oil and gas. These expansions are expected to support both equipment sales and future services revenue. Infrastructure and Data Center Demand: The outlook is underpinned by ongoing investment in critical infrastructure projects in North America, with management citing continued spending under the Infrastructure Investment and Jobs Act (IIJA) and robust demand for equipment supporting data center build-outs driven by cloud and artificial intelligence trends. Tariff and Cost Pressures: While Caterpillar expects continued margin benefits from favorable price realization and sales volume, management acknowledged ongoing risks from tariff costs, higher manufacturing expenses, and increased R&D investment, which could weigh on operating margins if external conditions shift. Over the coming quarters, our analysts will be monitoring (1) the pace at which capacity expansions translate into actual shipments and on-time deliveries, (2) the durability of demand for power generation equipment, particularly from data center and infrastructure projects, and (3) the impact of tariff and manufacturing cost fluctuations on margins. Progress in services revenue and successful integration of recent technology acquisitions will also be key markers for Caterpillar’s execution. Caterpillar currently trades at $844.55, up from $830.03 just before the earnings. In the wake of this quarter, is it a buy or sell? 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Caterpillar Inc. CAT delivered a strong second-quarter 2026 performance, with revenues and earnings increasing year over year and beating the Zacks Consensus Estimate. Sales exceeded $20 billion for the first time in the company’s history, while its backlog reached a record $72 billion. The strong results and raised 2026 outlook pushed CAT shares up 6% following the earnings release. In a year, CAT stock has gained 102.9%, outperforming the industry’s 86.3% growth, the Zacks Industrial Products sector’s 22.3% gain and the S&P 500’s 22.8% increase. It has also outperformed peers Komatsu KMTUY, Terex Corporation TEX and Astec Industries ASTE, as shown in the chart below. Image Source: Zacks Investment Research Before addressing how investors should position themselves in CAT stock, let’s take a closer look at the company’s quarterly performance and underlying fundamentals. Caterpillar reported second-quarter 2026 sales and revenues of approximately $20.5 billion, up 24% year over year. The increase was driven primarily by a $3.1 billion improvement in sales volume across segments. Pricing contributed another $595 million, while favorable currency movements and higher Financial Products revenues provided additional support. Sales increased across all three primary operating segments and every geographic region. The order backlog surged 92% year over year to a record $72 billion, highlighting strong demand visibility. Cost of sales rose 18% year over year, reflecting higher manufacturing expenses, including tariff-related costs. SG&A and R&D expenses increased 19% and 12%, respectively. However, adjusted operating margin expanded to 21.9% from 17.4% in the year-ago quarter, as higher volumes and pricing more than offset cost pressures. Operating cash flow was around $5.7 billion, up 94% year over year, while free cash flow more than doubled to $5.1 billion. Caterpillar ended the quarter with cash and equivalents of around $6.7 billion. Caterpillar now expects 2026 sales and revenues to increase in the mid-to-high teens, up from its previous low-double-digit growth forecast. The revised outlook reflects healthy demand across all three primary segments. The company stated that 59% of its $72 billion backlog is expected to be delivered over the next 12 months. The ratio has remained relatively stable over the past three quarters, underscoring continued demand momentum. Adjusted operating margin is projected near the bottom of its target range, excluding tariff recoveries. Caterpillar maintains its adjusted operating margins of 15–19% at revenue levels of around $60 billion. If revenues reach $72 billion, operating margins are expected to be 18–22%, while revenues of $100 billion could support margins in the range of 21–25%. This is shown in the chart below. Image Source: Caterpillar Inc. Full-year Machinery, Power & Energy (MP&E) free cash flow is expected to land in the upper half of the company’s $6-$15 billion target range. Following the upbeat earnings, analysts have raised earnings estimates for CAT for both 2026 and 2027 over the past seven days. Over the course of the past 60 days, the estimate for 2026 has moved up 6.5% while the same for 2027 has moved up 4.7%. Image Source: Zacks Investment Research The Zacks Consensus Estimate for 2026 currently projects earnings growth of 38%, followed by 21.8% growth in 2027. The upward revisions indicate improving confidence in CAT’s earnings trajectory. Image Source: Zacks Investment Research Komatsu reported earnings per share of 67 cents for the quarter ended June 30, 2026, surpassing the Zacks Consensus Estimate of 59 cents. However, earnings declined 3% year over year. Revenues rose 4% to approximately $6.54 billion. Construction, Mining & Utility Equipment sales increased 14.4%, while Industrial Machinery & Others sales rose 21.7%. Terex reported second-quarter EPS of $1.37, topping the Zacks Consensus Estimate of $1.25 but declining 8% year over year. Revenues jumped 51% to $2.24 billion, exceeding the consensus estimate of $2.14 billion. Astec reported adjusted EPS of 94 cents, up 4.4% year over year but 10.5% below the Zacks Consensus Estimate of $1.05. Revenues increased 23.6% to $408.1 million. CAT is currently trading at a forward 12-month P/E of 28.11X, above the industry average of 26.55X. Meanwhile, Komatsu, Terex and Astec are cheaper options, trading at a forward 12-month P/E of 16.89X, 11.95X and 11.78X, respectively. Image Source: Zacks Investment Research Caterpillar is positioned to benefit from several long-term growth drivers, including U.S. infrastructure spending, mining demand tied to the energy transition, automation, data center construction and power generation. To capitalize on rising power-generation and oil-and-gas demand, CAT will restart production of its 10-megawatt gas engine platform, which was discontinued in 2022. It plans to bring about 1.5 gigawatts of capacity back online, with shipments to begin in the fourth quarter. It is also expanding turbine capacity and has repurposed a 250,000-square-foot facility in Wamego, KS. It is currently shipping PGM130 from the facility, a product that is popular for data center power generation.  Caterpillar has agreed to supply PROPWR with up to 2.1 gigawatts of large gas generator sets for data centers, oil and gas and industrial applications over the next five years. This marks the company’s sixth agreement involving at least one gigawatt of equipment for prime-power applications. In the second quarter, the Construction Industries segment delivered first units to Major Projects, a specialized fully CAT dealer-owned rental joint venture focused on supporting customers with multibillion-dollar projects across North America. Major Projects is expected to help expand Caterpillar’s presence in the rental industry. In July, Caterpillar acquired Skycatch, a provider of spatial data capture, processing and analytics solutions for the mining industry. The deal follows its February 2026 acquisition of Australian mining software company RPMGlobal. Integrating Skycatch’s technology with RPM and CAT MineStar is expected to improve mining safety, productivity and operational predictability. Caterpillar is simultaneously investing in services, e-commerce, sustainability, electrification and other digital initiatives. It expects service revenues to increase from $24 billion in 2025 to $30 billion by 2030, providing an additional source of recurring, higher-margin growth. Record quarterly sales, a $72 billion backlog, expanding margins, robust cash flow and higher earnings estimates provide strong visibility into future performance. The company is also benefiting from several structural growth opportunities spanning infrastructure, mining, data centers, power generation and services. Overall, the strong operating momentum and favorable long-term demand outlook outweigh the valuation risk at this stage. The recent upward revisions to earnings estimates further support the bullish case. Caterpillar currently sports a Zacks Rank #1 (Strong Buy), which supports our thesis. You can see the complete list of today’s Zacks #1 Rank stocks here. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Caterpillar Inc. (CAT) : Free Stock Analysis Report Astec Industries, Inc. (ASTE) : Free Stock Analysis Report Terex Corporation (TEX) : Free Stock Analysis Report Komatsu Ltd. (KMTUY) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research