TLDR
- Caterpillar stock climbed 7.1% to $726.38 Friday after Wall Street Zen upgraded shares from hold to buy following strong Q4 results
- Company beat estimates with $5.16 EPS versus $4.67 expected and posted record $19.13 billion quarterly revenue
- Record $51.2 billion backlog driven by AI data center infrastructure demand provides multi-year revenue visibility
- Analysts raised price targets with HSBC hitting $850 as 16 firms now rate stock buy versus seven holds
- Insiders sold $78.3 million in shares last quarter while tariff pressures squeeze margins despite revenue growth
Caterpillar stock surged 7.1% Friday following a Wall Street Zen upgrade to buy and fourth-quarter earnings that crushed analyst expectations. Shares opened at $726.38, approaching the 12-month high of $727.40.
The heavy equipment maker reported Q4 earnings of $5.16 per share, beating the $4.67 consensus by $0.49. Revenue hit a quarterly record of $19.13 billion versus analyst forecasts of $17.81 billion. The top line grew 17.9% year-over-year.
Fourth-quarter results marked Caterpillar’s return to positive earnings growth after five consecutive quarters of declines. The company posted a 45.76% return on equity for the period. Net margin registered 13.14%.
Record Backlog Points to Strong Pipeline
Caterpillar ended Q4 with a record $51.2 billion backlog. The backlog jumped $11.3 billion sequentially during the quarter. Management says this provides clear near-term revenue visibility.
AI data center buildouts are driving new demand for power and infrastructure equipment. This creates a revenue tailwind beyond traditional equipment cycles. The Power & Energy segment is seeing the strongest momentum from data center growth.
HSBC raised its price target to $850 while maintaining a buy rating. Truist Financial lifted its target from $729 to $786. JPMorgan Chase increased its target from $740 to $765 with an overweight rating.
MarketBeat data shows 16 buy ratings, seven holds, and one sell. The average analyst price target stands at $690.90. The consensus rating is moderate buy.
Margin Pressure and Insider Sales
Operating margin compressed to 15.6% in Q4 from 18.3% a year earlier. Cost of sales jumped 29% due to higher manufacturing expenses and tariffs. These pressures offset strong volume growth.
For 2026, management expects revenue growth near the upper end of its 5-7% long-term target. However, operating margin is projected near the lower end of the company’s range due to continued tariff headwinds.
The stock trades at a PE ratio of 38.60. Shares have rallied 86% over the past year, well ahead of the S&P 500’s 15.6% gain. The rapid run-up has sparked valuation debates among analysts.
Insiders sold 120,747 shares worth $78.3 million last quarter. CFO Andrew Bonfield sold 10,000 shares for $5.75 million on December 31st. Group President Bob De Lange offloaded 16,070 shares for $11.3 million on February 5th.
Operating cash flow totaled $11.7 billion for full-year 2025, down from $12.7 billion in 2024. The company returned $7.9 billion to shareholders through dividends and buybacks. Caterpillar ended 2025 with $10 billion in cash, up from $6.9 billion at year-end 2024.
Earnings estimates have moved higher for both 2026 and 2027 over the past 60 days. The Zacks Consensus Estimate for 2026 implies 18.5% earnings growth. The 2027 estimate suggests 21.8% growth.
