TLDR
- Wall Street Zen upgraded Caterpillar from “hold” to “buy” after Q4 earnings beat expectations with $5.16 EPS versus $4.67 forecast and $19.13 billion revenue
- Stock jumped 7.1% following the upgrade with shares trading near 12-month high at $726.38 and current market cap of $339.93 billion
- Company reported record $51.2 billion backlog driven by AI data center infrastructure demand creating new revenue tailwind beyond traditional equipment cycles
- Insiders sold 120,747 shares worth $78.3 million last quarter including CFO Andrew Bonfield’s $5.75 million sale raising concerns about short-term pressure
- For 2026 management expects revenue growth near upper end of 5-7% target but operating margin near lower end due to tariff cost headwinds
Caterpillar shares surged 7.1% Friday after Wall Street Zen upgraded the stock from “hold” to “buy” following a strong fourth-quarter performance. The industrial equipment maker opened at $726.38, near its 12-month high of $727.40.
The company reported Q4 earnings of $5.16 per share, beating analyst expectations of $4.67 by $0.49. Revenue hit a quarterly record of $19.13 billion versus estimates of $17.81 billion. Year-over-year revenue climbed 17.9%.
Caterpillar ended the quarter with a record backlog of $51.2 billion. The backlog increased by $11.3 billion sequentially during Q4. Management says this provides clear visibility for near-term revenue.
The company posted a return on equity of 45.76% for the quarter. Net margin came in at 13.14%. Operating cash flow for full-year 2025 totaled $11.7 billion, down from $12.7 billion in 2024.
AI Data Center Demand Drives New Growth
Analysts point to growing demand from AI data center buildouts as a key catalyst. Power and energy infrastructure needs for these facilities are creating demand beyond traditional equipment cycles. HSBC raised its price target to $850 while maintaining a buy rating.
The data center boom is reshaping revenue projections for heavy equipment makers. Caterpillar is positioning itself to capture this emerging market. The company’s Power & Energy segment is seeing the strongest momentum from this trend.
Truist Financial lifted its target from $729 to $786. JPMorgan Chase raised its target from $740 to $765 with an “overweight” rating. CICC Research initiated coverage with an “outperform” rating.
Valuation Concerns and Insider Selling
The stock trades at a PE ratio of 38.60, well above historical averages. Shares have gained 86% over the past year, outpacing the S&P 500’s 15.6% rise. The rapid appreciation has some analysts questioning whether the valuation can be sustained.
Insiders sold 120,747 shares worth $78.3 million in the last quarter. CFO Andrew Bonfield sold 10,000 shares at $575.06 for $5.75 million on December 31st. Group President Bob De Lange offloaded 16,070 shares for $11.3 million on February 5th.
Jason Kaiser sold 10,707 shares in November for $6 million. The sales represent an 18.03% decrease in Bonfield’s holdings and a 55.32% decrease in Kaiser’s position. These transactions can signal profit-taking by executives.
MarketBeat data shows 16 analysts rate the stock “buy,” seven say “hold,” and one recommends “sell.” The average price target sits at $690.90. The consensus rating is “Moderate Buy.”
For 2026, management expects revenue growth near the upper end of its 5-7% long-term target. Operating margin is projected near the bottom of the company’s range. Tariff costs and manufacturing expenses are pressuring margins despite strong sales.
Adjusted operating margin narrowed to 15.6% in Q4 from 18.3% a year earlier. Cost of sales jumped 29% year-over-year due to higher manufacturing expenses. Tariffs accounted for a portion of the margin compression.
The company expects adjusted operating margins of 15-19% at $60 billion revenue levels. At $72 billion, margins should reach 18-22%. If revenue hits $100 billion, margins could be 21-25%.
Caterpillar returned $7.9 billion to shareholders through dividends and buybacks in 2025. The company ended the year with $10 billion in cash and equivalents, up from $6.9 billion in 2024. Free cash flow for 2026 is expected slightly lower than 2025 levels.
Earnings estimates have moved higher for both 2026 and 2027 over the past 60 days. The Zacks Consensus Estimate for 2026 points to 18.5% earnings growth. The 2027 estimate implies 21.8% growth.
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