Caterpillar Climbs Above 50-Day SMA: Time to Buy the Stock?

Caterpillar Inc. CAT has approached a key support level, making it technically appealing for investors. Yesterday, the stock broke through its 50-day simple moving average (SMA), signaling a potential short-term bullish trend.

The 50-day SMA is a widely followed indicator that often acts as both support and resistance, helping signal the early phases of trend reversals. Earlier this year, CAT traded above this level but dropped below it on March 18. After a period of volatility, the stock has now regained strength above the 50-day SMA, pointing to improving market sentiment.

CAT Breaks Out Above the 50-Day Moving Average

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CAT Stock Outperforms Industry & Sector, Peers

CAT shares are up 23.6% year to date, slightly ahead of the manufacturing - construction and mining industry’s 23.4% growth. The Zacks Industrial Products sector gained 8% while the S&P500 declined 4.9% in the same period. Peers Komatsu KMTUY and Terex Corporation TEX have lagged CAT during this period, as shown in the chart below.

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Is this the right time to buy CAT shares to gain from the potential upside? Let us delve deeper into its recent results and evaluate the stock’s fundamentals to find out.

CAT Q4 Highlights: Record Revenues, Earnings Growth Resumed

Caterpillar reported revenues of $19.1 billion in the fourth quarter of 2025, an all-time quarterly record. Revenues were up 18% year over year, led by higher volumes across all segments. Backlog also hit a record $51.2 billion.

However, the cost of sales climbed 29% year over year due to higher manufacturing expenses, mainly due to tariffs. Adjusted operating profit declined 9% to $2.66 billion. Despite tariff pressures, earnings per share inched up 0.4% year over year to $5.16. Even though modest, this marked a return to positive earnings growth for Caterpillar following five quarters of declines.

Caterpillar’s FY26 Revenues to Grow, Tariffs to Hurt Margins

For 2026, the company expects year-over-year revenue growth near the upper end of its long-term 5-7% CAGR target. Adjusted operating margin is, however, expected near the bottom of the targeted range, considering a tariff headwind of around $2.6 billion.

The company projects adjusted operating margins of 15–19% at revenue levels of around $60 billion. If revenues reach $72 billion, operating margins are expected to be 18–22%, while revenues of $100 billion could support margins in the range of 21–25%.

Caterpillar’s Earnings Estimates Trend Upward

The Zacks Consensus Estimate for CAT’s 2026 earnings indicates year-over-year growth of around 19.2%. The consensus mark for 2026 revenues suggests growth of 9.3%. Earnings estimates for 2027 suggest 21.8% growth, with revenues rising 8.9%.

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Earnings estimates for Caterpillar for both 2026 and 2027 have moved up over the past 90 days.

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CAT Offers Attractive Returns

Caterpillar’s return on equity (ROE) is 45.76%, higher than the industry’s average of 45.10% and the S&P 500’s 32.67%.

Caterpillar Trades at a Premium

Caterpillar stock is currently trading at a forward price-to-earnings ratio of 29.57, slightly above the industry’s 28.39. Komatsu and Terex are trading lower at 17.21 and 11.62, respectively.

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Caterpillar Poised for Long-Term Growth

Caterpillar is targeting revenue growth at a CAGR of 5–7% through 2030, with MP&E free cash flow projected in the $6-$15 billion range. The company plans to return substantially all MP&E free cash flow to shareholders over time and aims to grow its dividend at a high-single-digit rate.

Operational targets include increasing Construction Industries’ sales to users by 1.25 times by 2030 (from 2024 levels), tripling autonomous trucks in Resource Industries and doubling Power Generation sales. Connected assets are expected to rise from more than 1.6 million to 2 million, while e-commerce sales per business day are projected to jump from 4% to more than 50% by 2030.

The company’s long-term outlook is supported by rising U.S. infrastructure spending, growing demand for mining equipment tied to the energy transition and increased adoption of autonomous solutions to improve productivity and safety. In Power & Energy, sustainability initiatives and data-center investments are driving demand.

Caterpillar is also expanding its high-margin aftermarket business, with service revenues targeted to increase from $24 billion in 2025 to $30 billion by 2030.

Our Final Take on Caterpillar Stock

Caterpillar combines solid end-market demand, improving earnings momentum and a resilient services-driven business model. While tariff-related cost pressures may cap near-term margin expansion, the company’s strong backlog, favorable macro trends and consistent estimate upgrades reinforce its growth outlook. Overall, CAT appears well-positioned to sustain its upward trajectory, making it a compelling choice for investors despite its premium valuation. CAT currently carries a Zacks Rank #2 (Buy).

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Caterpillar Inc. (CAT): Free Stock Analysis Report

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Komatsu Ltd. (KMTUY): Free Stock Analysis Report

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

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