The Caterpillar story

What drives the business

• Caterpillar’s position as the world’s leading manufacturer of construction and mining equipment rests on a broad machinery portfolio, an independent global dealer network and customer financing through Cat Financial.
• Construction Industries serves infrastructure, building, rental and quarry customers, with sales rising 35% to $8.346 billion in the quarter to June 2026, primarily from higher equipment sales to end users.
• Power & Energy supplies engines, generators and turbines for power generation, oil and gas and industrial applications, with sales rising 17% to $8.238 billion in the quarter to June 2026 as data center applications drove growth in large engines and turbines.
• Resource Industries supplies mining machinery, autonomous capabilities and fleet management services, and its sales reached $4.648 billion in the quarter to June 2026, up 20%, with higher equipment demand and international locomotive deliveries contributing.
• Cat Financial supports equipment purchases and dealer inventories through loans and leases, while the broader Financial Products segment earned $328 million in segment profit in the quarter to June 2026.

What the price assumes

At $819.95 per share, the reverse DCF assumes free cash flow after stock pay grows 15.9% a year for ten years using a 10.2% discount rate.

Caterpillar delivered 4.7% annual growth on that measure over the last 10 years, while the TenQ check sets a 4.3% bar by slowing that record halfway toward 4%.

The implied pace therefore requires a sustained acceleration beyond Caterpillar’s historical cash growth, while its free cash flow yield is 2.8%.

Value CAT on your own assumptions

What could change the story

• Revenue growth of 18.4% over the last twelve months contrasts with a 4.4% annual pace over the last three years, which trails the sector comparison of 9.6% and leaves the durability of the acceleration unproven.
• Operating profit in the quarter to June 2026 included $392 million of expected IEEPA tariff recoveries, so the 20.9% operating margin reflects more than equipment demand and pricing alone.
• Higher manufacturing costs partly offset volume gains in Power & Energy and Resource Industries, including $149 million and $158 million of unfavorable costs, respectively, in the quarter to June 2026.
• Consolidated debt of $36.2 billion and cash and short-term investments of $6.7 billion accompany failed TenQ liquidity and leverage checks, although the consolidated balance sheet includes the financing business.
• Cat Financial’s provision for credit losses increased by $22 million in the quarter to June 2026, even as past dues improved to 1.31% from 1.62% at the end of the quarter to June 2025.

What to watch next

• The August 2026 earnings release gave no numerical guidance, leaving management’s description of strong order rates and a growing backlog to be tested against subsequent sales to end users and dealer inventory changes.
• Power generation sales growth of 29% and Construction Industries sales growth of 35% in the quarter to June 2026 provide concrete comparisons for whether demand remains broad.
• Subsequent margin disclosures can show whether volume and pricing continue to offset manufacturing costs without the same contribution from expected tariff recoveries.
• Caterpillar’s stated plan to return substantially all Machinery, Power & Energy free cash flow over time makes cash generation and distributions important follow-ups to the $2.2 billion returned through repurchases and dividends in the quarter to June 2026.

Sources

• Caterpillar's earnings release, filed with the SEC
• Its latest 10-Q or 10-K, for the risk factors
• The CAT stock report, for every figure and check