What Could Lift Caterpillar Stock?
Caterpillar (CAT) stock returned 75% over the past twelve months, against 16.0% for the S&P 500. The shares now cost 35.1 times the past year’s profit, a ratio known as the P/E. The average P/E at the last twelve quarter-ends, leaving out readings above 100, was 22.0. With the P/E that far above its own average, where would any further gain come from?
From Higher Sales At Caterpillar
Higher sales are what could lift the stock. Caterpillar sells construction equipment and the large gensets and turbines that data centers use for power. Based on following assumptions, the stock would be worth 32.6% more in three years. Here are today’s figures beside that scenario, which is arithmetic and not a forecast.
| Today | In three years (scenario) | |
|---|---|---|
| Revenue | $74.7 billion | $115.5 billion |
| Net margin | 14.5% | 14.7% |
| Earnings | $10.8 billion | $16.9 billion |
| P/E | 35.1 | 29.8 |
| Share price | $826.35 | $1,095.66 |
Sales growth is the source of that gain. The net margin, profit as a share of sales, barely moves. The P/E is assumed to fall, because today’s is well above its own three-year average. With the lower P/E Trefis assumes, the stock gains less than it would from higher sales alone.
The scenario assumes sales grow 15.6% a year for three years. Caterpillar’s sales grew 18.4% in the twelve months to fiscal Q2 2026. Trefis sets the assumed pace below that latest reading.
How Large Is Caterpillar’s Backlog Of Orders?
Caterpillar’s backlog of unfilled orders was $72 billion in fiscal Q2 2026, up 92% from a year earlier. Management expects 59% of that backlog to be delivered within twelve months. Management also raised its fiscal 2026 sales growth outlook to mid- to high teens, close to the scenario’s pace.
Some Power & Energy customers are placing orders as far out as 2030, management said. Within Power & Energy, power generation sales to users grew 72% in fiscal Q2 2026. Management said that growth came from demand for large gensets and turbines used in data centers.
The next reading on orders comes with fiscal Q3 2026 results, expected on or around October 27, 2026. Management’s outlook covers one fiscal year, though. The scenario assumes three years of growth.
Caterpillar’s Upside If Sales Slow Or The P/E Holds
The upside shrinks if sales grow more slowly. The upside is larger if the P/E holds at today’s level. Here is the three-year upside when one assumption changes at a time.
| If instead | Three-year upside |
|---|---|
| Nothing changes (the scenario) | 32.6% |
| Revenue grows two points a year slower | 25.8% |
| The margin returns to its three-year average | 35.6% |
| The P/E stays where it is today | 56.0% |
| Five years at the same pace instead of three | 77.2% |
Sales are growing much faster than their three-year pace, and the backlog is far larger than a year ago. The fiscal Q3 2026 report will show whether the backlog is still growing from $72 billion. If the backlog shrinks instead, Caterpillar becomes a riskier bet that relies more on Power & Energy orders placed years ahead.
Does This Mean You Should Act On CAT?
Our purpose is to inform you with unique data so you make the right investment decisions. That said, betting on a single stock is always risky, no matter which direction you choose.
There is a smarter approach. Since its inception, the Trefis High Quality (HQ) Portfolio has returned 105%, beating the benchmark that combines the three major indices – the S&P 500, S&P Mid-cap, and Russell 2000. And it did so without taking the concentrated risk that comes with do-it-yourself stock picking. If that is how you want to invest, the HQ Portfolio is the place to start.