Breaking Free: Is CAT Staging a Genuine Turnaround After Seven-Quarter Slump?

Caterpillar Inc. CAT may be signaling a real inflection point. After flatlining through six consecutive quarters, the equipment giant posted a 9.5% revenue jump in Q3 2025—and this time, it wasn’t just one division saving the day. Every single business unit registered volume gains, a feat unseen since mid-2023.

What’s particularly striking is the breadth of this recovery. The Construction Industries segment clawed back into positive territory after seven straight quarters of weakness. Resource Industries, dormant for eight quarters, finally showed a pulse. Volume additions of $1.5 billion accounted for roughly 10% of the overall revenue bump. Even the second quarter’s $237 million volume uptick—marked by a $326 million surge in the Energy & Transportation segment—pales in comparison to this broad-based momentum.

The road here was brutal. Dealer inventory purges, lackluster demand, and China’s real estate crunch hammered large excavator sales. Tariff anxiety and manufacturing contraction (the U.S. sector shrank for nine straight months through November) kept customers on the sidelines. Yet despite this headwind, CAT’s third-quarter numbers suggest something’s shifted.

How CAT Stacks Up Against the Competition

Terex Corp. TEX and Komatsu Ltd. KMTUY tell a different story. Terex is still stuck, logging seven consecutive quarters of negative organic growth in Material Processing and eight in Aerial. Komatsu’s construction and mining equipment volumes remained underwater through H1 fiscal 2025, with the company guiding for flat demand ahead.

CAT’s acceleration, by comparison, looks like genuine progress—not just a bounce.

The Stock’s Remarkable Run

CAT shares have surged 72.4% year-to-date, dwarfing the broader Industrial Products sector’s 6.5% gain and even outpacing the industry average of 67.3%. The S&P 500? Up just 6.8%.

Yet valuation isn’t cheap. Trading at 28.86X forward P/E versus the 26.12X industry median, CAT commands a premium.

Where the Numbers Point

Wall Street sees 2025 earnings declining 15.98% year-over-year, though revenues are expected to rise 2%. The real catalyst lives in 2026: consensus calls for 19.04% earnings growth and 8.23% revenue expansion. Recent momentum has lifted both 2025 and 2026 estimates over the past two months.

Currently rated Zacks Rank #3 (Hold), CAT’s valuation and forward guidance suggest investors are already pricing in much of the recovery story.

[This article originally published on Zacks Investment Research (zacks.com).]

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