Caterpillar Inc. CAT framed its second-quarter call around broadening demand, record backlog and capacity expansion. Management raised its 2026 sales outlook after stronger activity across all three primary segments.
The central message was that demand remains ahead of production in key power markets, while construction and resource businesses are also gaining momentum.
CAT Raises Its 2026 Sales Outlook
Chairman and chief executive officer Joe Creed said Caterpillar now expects 2026 sales and revenues to grow in the mid- to high teens, above its April view. Strong orders, healthy end markets and higher second-half throughput support the increase.
Backlog reached $72 billion, up $9 billion sequentially and about 92% year over year. Creed said 59% is scheduled for delivery within 12 months, while some Power & Energy customers are ordering through 2030.
Chief financial officer Kyle Epley expects another quarter of strong year-over-year sales growth in the third quarter, with higher volume and favorable price realization across all three primary segments.
Caterpillar Delivers Broad-Based Growth
Second-quarter sales and revenues rose 24% to $20.54 billion, the company’s first quarter above $20 billion. Revenues surpassed the Zacks Consensus Estimate of $19.31 billion. Adjusted earnings of $8.17 per share topped the Zacks Consensus Estimate of $6.25.
Caterpillar Inc. Price, Consensus and EPS Surprise
Caterpillar Inc. price-consensus-eps-surprise-chart | Caterpillar Inc. Quote
The increase reflected $3.1 billion of higher sales volume and $595 million of favorable price realization. Construction Industries sales rose 35%, Power & Energy advanced 17%, and Resource Industries increased 20%.
Adjusted operating margin reached 21.9%. Epley attributed the upside to $392 million of expected IEEPA tariff recoveries and lower-than-expected tariff costs, partly offset by higher SG&A and R&D spending.
CAT Adds Power Capacity for Demand
Creed said Power Generation sales to users grew 72%, driven by large generator sets and turbines for data center applications. Oil and gas demand also remained strong, particularly in gas compression.
Caterpillar is restarting production of a 10-megawatt gas reciprocating engine platform and plans to restore about 1.5 gigawatts of capacity. Shipments are expected to begin in the fourth quarter, followed by an 18-month ramp.
A BofA Securities analyst asked about long-dated AI demand. Creed said customers had not slowed orders, the capacity was additive to Caterpillar’s prior 65-gigawatt target, and demand also spans oil and gas, mining, marine and aftermarket uses.
Caterpillar Expands Its Rental Strategy
Construction Industries sales to users increased 22%, marking a sixth consecutive quarter of growth. North American demand benefited from rental fleet loading and sales into nonresidential, residential and infrastructure projects.
Creed highlighted Major Projects, a dealer-owned rental venture for large transportation, energy, manufacturing and data center developments. Caterpillar delivered its first units during the quarter.
Jefferies and Wells Fargo analysts pressed management on rental growth. Creed said fleet loading should remain meaningful and described the national Major Projects fleet as a way to support individual dealers on large, multiyear jobs.
CAT Builds Mining and Services Opportunities
Resource Industries benefited from higher mining, heavy construction and quarry demand. Creed cited robust orders, elevated fleet age, high equipment utilization and investment support from copper and gold markets.
The July acquisition of Skycatch added spatial data and artificial intelligence (AI) capabilities for mining customers. Creed positioned the deal alongside RPMGlobal as part of Caterpillar’s technology growth strategy.
Management also expects the expanding Power & Energy installed base to create longer-term service demand. Creed said the largest overhaul opportunity from new prime-power deployments should emerge beyond 2030.
Caterpillar Maintains Cash and Margin Discipline
Second-quarter MP&E free cash flow reached a record $5.1 billion. Caterpillar returned $2.2 billion through repurchases and dividends, and Epley raised the full-year cash-flow expectation to the top half of the $6 billion to $15 billion target range.
Management remained focused on adding capacity without abandoning margin discipline. Full-year tariff costs are expected to be about $2.2 billion, excluding second-quarter recoveries, while planned capital spending remains approximately $3.5 billion.
Zacks Signals Point to a Balanced Setup
CAT carries a Zacks Rank #3 (Hold), a neutral near-term signal based on earnings-estimate revisions. Its Growth Score of B and Momentum Score of B indicate favorable characteristics for those styles, while the Value Score of D is less supportive.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The VGM Score of C reflects a middle-range combined profile rather than the A or B scores that pair most favorably with a top Zacks Rank. The Zacks Rank can change as analysts revise estimates following the newly reported results.
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Caterpillar Inc. (CAT): Free Stock Analysis Report
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