Caterpillar (CAT) Last Update 4/29/24
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Potential upside & downside to trefis price

Caterpillar Company


  1. Construction Industries constitute 43% of the Trefis price estimate for Caterpillar's stock.
  2. Energy & Transportation constitutes 36% of the Trefis price estimate for Caterpillar's stock.
  3. Resource Industries constitute 21% of the Trefis price estimate for Caterpillar's stock.


  1. CAT Stock Performance

CAT stock has seen extremely strong gains of 90% from levels of $180 in early January 2021 to around $345 (end of April 2024), vs. an increase of about 35% for the S&P 500 over this roughly three-year period.

CAT is one of a handful of stocks that have increased their value in each of the last 3 years, but that still wasn't enough for it to consistently beat the market. Returns for the stock were 14% in 2021, 16% in 2022, and 23% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023 — indicating that CAT underperformed the S&P in 2021 and 2023.

  1. Q1 2024 Performance
Caterpillar reported sales of $15.8 billion, reflecting a 0.4% y-o-y decline. This can be attributed to lower volumes, partly offset by a better price realization. Looking at segments, the Construction Industries revenue was down 5%, Resource Industries sales were down 7%, while Energy & Transportation revenue was up 7%. Caterpillar saw its adjusted operating margin expand by 110 bps to 22.2% in Q1'24. The company's bottom line stood at $5.60, compared to $4.91 in the prior-year quarter.

  1. Impact of Coronavirus Crisis On Caterpillar Stock

Caterpillar stock lost almost 40%, dropping from $150 at the beginning of 2020 to below $92 in late March 2020. It then spiked 3.75x to around $345 now (end of April 2024). That means it is well above the pre-pandemic levels.

Why? While the Covid-19 outbreak and associated lockdowns resulted in an uncertain outlook for the broader markets, the multi-billion-dollar Fed stimulus announced in late March 2020 helped the markets stage a strong recovery.

With a rise in vaccination rates globally, global economies saw a rebound in 2021. The demand for Caterpillar's products has recovered over the last couple of years or so. The company also reported better-than-expected results over the past few quarters.

With the volatility in oil prices in 2020, its production in the U.S. was impacted, resulting in lower dealer inventory levels for Caterpillar. Note that roughly half of the company's total sales are generated from the North American region. Moreover, the coronavirus outbreak resulted in a reduction in mining as well as construction activities in 2020, but the demand saw a strong rebound in 2021.

With higher inflation, the company undertook pricing actions in 2022, which resulted in better price realization, aiding its top-line growth.


Caterpillar (CAT) is a leading manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives. Its engines and turbines are primarily focused on power generation, oil drilling, and other industrial applications.

The company also sells financial products in the form of financing options of leases and loans and insurance, primarily to drive sales growth of its products. CAT sells its products through a worldwide network of dealers.


Below are key drivers of Caterpillar's value that present opportunities for upside or downside to the current Trefis price estimate for Caterpillar:

  • Caterpillar's Construction Industry Revenues: Caterpillar's construction industry revenues started to decline after 2014 due to weak global demand and slowdown in China, economic concerns in Europe following the Brexit vote, and low government spending on infrastructure projects in the United States. Caterpillar's construction industry revenues declined by nearly 25% between 2014 and 2016 and stood at approximately $15.6 billion in 2016.
    This figure increased to about $19.2 billion in 2017 before jumping to $22.5 billion in 2019 as a result of improved end-user demand. However, the Covid-19 pandemic resulted in lower demand for the company's products, and the segment revenues plunged 25% to $16.9 billion. 2021 marked a rebound in demand and the segment sales surged 20% to $20.3 billion. We forecast the figure to reach about $29 billion by 2028. However, in case Caterpillar's revenues grow at a faster rate and reach $38 billion instead, there could be a 10% upside to Caterpillar's current price estimate.

  • Caterpillar's Resource Industries Revenues: Caterpillar's resource industry revenues were $9.2 billion in 2021. We currently forecast the figure to gradually rise to over $15 billion by the end of our forecast period, driven by improvements in commodity prices, long-term fundamentals of increasing population, urbanization, and energy consumption. If however, the company's resource industry revenues fail to recover in the long run and hover under the $10 billion mark, there could be a potential downside of around 10% to the price estimate.


Resource Energy & Transportation division

Caterpillar's Energy & Transportation division accounts for nearly 31% of the company's value. This division includes the design, manufacture, marketing, and sales of engines, turbines, and related parts. Although Caterpillar's market share is relatively modest, the overall market size for these products is huge. This division accounted for about 38% of Caterpillar's Industrial business revenue and EBITDA in 2021.

Increasing presence in emerging economies

Caterpillar continues to increase its presence in the emerging markets of China, India, and Brazil. It has been expanding into these markets for higher product sales and set up manufacturing facilities. Future economic recovery in these markets presents the company with a potential opportunity to drive high top-line growth for its shareholders.


Impact of Coronavirus & Oil Price Crisis

The 2020 oil price war resulted in lower production in the U.S., which, in turn, led to lower dealer inventory levels for Caterpillar. Note that roughly half of the company's total sales are generated from the North American region. Moreover, the coronavirus outbreak resulted in a reduction in mining activities, again impacting Caterpillar's business. However, oil prices, in particular, surged over 2x in 2021, as the global economies saw a rebound with vaccination programs for various countries, boding well for Caterpillar's business. That said, high inflation and rising interest rates may result in a slowdown in economic growth in 2023.

Rising population and prosperity driving demand for energy, resources, and infrastructure

The rising population and prosperity in developing nations are driving the demand for energy. This is likely to drive growth in demand for engines and turbines used in electric power generation units. Several developing nations such as India are increasing their spending on infrastructure and housing to support their rising urban populations. The increased infrastructure spending may drive growth in construction equipment sales.

People migration from rural to urban areas increasing

Several countries, particularly developing ones, are witnessing large-scale migration of people from rural to urban areas, leading to increased infrastructure spending on roads, bridges, and buildings. This is likely to drive growth in demand for engines used in industrial applications.

Emerging economies outside of China and Brazil are large potential markets

Emerging economies will be leading sources of mining, construction, and power-related equipment demand. This presents opportunities for several manufacturers, including Caterpillar.

Other developing areas to exhibit above-average growth

Eastern Europe, with extensive mineable resources, is projected to exhibit an above-average growth in mining equipment demand along with the developing areas of Asia, the Africa/Mideast region, and Latin America, with the mature markets of Western Europe and North America trailing.

Rise in interest rates may moderate the growth of market size

Many of the developing countries are facing high inflation after a strong rebound in consumer demand in 2021, post-pandemic. Central banks often resort to raising interest rates to control inflation, a trend seen in the U.S. over the past year. The Fed raised interest rates in 2022 and is continuing to do so in 2023, which might lead to reduced spending on housing because the rate hike gets included in the mortgage interest rates. The same rate hike might cause a deterioration in overall economic activity, too. Higher interest rates, in turn, increase borrowing costs for companies leading to an increase in the price of their products. This dampens demand, moderating the growth in market size.