Are You Overpaying For Caterpillar Stock Versus Its Rivals?

Caterpillar (CAT) stock costs 36.0 times its earnings, more than you would pay for most of the machinery and heavy equipment makers it is compared with. The stock has returned 74.4% over the past twelve months, the most in that group of six. A price like that can look stretched after such a run, yet Caterpillar is not the most expensive of them. So what are you paying for?

Caterpillar Is Expanding Twice As Quickly As Deere

You are paying for growth. Caterpillar’s sales rose 18.4% over the past twelve months, while sales at Deere rose 8.0%. Deere is classed as a farm machinery maker, and it trades at 37.8 times earnings, a little above Caterpillar. The two companies deliver nearly identical operating margins: 17.5% at Caterpillar and 17.6% at Deere. So with Deere you pay more for the same margin and less than half the growth.

The three cheaper stocks in the group are PACCAR, Cummins, and Oshkosh, and each of them had weaker sales growth than Caterpillar and earned a lower operating margin. Terex was the only company that grew faster, but an operating loss in Q1 2026 significantly depressed trailing earnings, leaving it with an elevated P/E of 43.4 that skews direct comparison.

Where Does Caterpillar’s Growth Come From?

It comes from all three of Caterpillar’s main businesses at once. In the second quarter of fiscal 2026, sales reached $20.5 billion, up 24% from a year earlier, and management said demand was strong in each of them. Sales at Construction Industries rose 35%, mainly on higher volume and higher prices, and sales at Resource Industries rose 20%.

Sales at Power & Energy rose 17%. Looking specifically at dealer retail sales to end users, the segment climbed 33%, led by a 72% surge in power generation equipment. Management put that down to demand for large generators and turbines used in data centers. Customers are ordering well ahead, too: Caterpillar’s backlog, the orders it has taken but not yet delivered, reached $72 billion, up 92% from a year earlier. Management expects to deliver 59% of it within twelve months.

What Is Caterpillar Forecasting For Full-Year Sales?

Caterpillar is forecasting sales growth in the mid to high teens for full-year 2026. Management raised that forecast on its second-quarter call in August, and it compares with growth of 4.3% in fiscal 2025. The 2026 figure is still a forecast and not a result.

The risk is that the growth does not reach profit, or does not last. Caterpillar’s operating margin over the past twelve months was 17.5%, down from 18.2% a year earlier, so over that period faster sales did not lift it. Management also expects tariffs to cost about $2.2 billion in 2026, the low end of the range it gave earlier. On the August call, management was asked whether data center demand could fade in later years. Management answered that no customer is slowing down at the moment.

Caterpillar’s price appears to assume that the company keeps growing well ahead of its cheaper rivals without giving up margin. Over the past twelve months Caterpillar has delivered the growth but not the margin, and its full-year 2026 results will show whether that has changed. Sales growth in the mid-teens or better, with an operating margin back above the 18.2% of a year earlier, would show Caterpillar turning its growth into profit.

How To Act On CAT?

Now you know CAT better. And that’s our purpose: to make you informed before you invest your money. However, making a bet on a single stock carries its own risks.

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