Is CAT Finally Turning the Corner With Return to Revenue Growth in Q3?

Caterpillar Inc. CAT returned to revenue growth in the third quarter of 2025, posting a 9.5% increase after six consecutive quarters of declines. Higher volumes drove the major part of this improvement, contributing $1.5 billion (or 10%) to the revenue gain. Importantly, all business segments recorded volume growth during the quarter, a combination last seen in the second quarter of 2023. 

This momentum builds on the second quarter’s $237 million volume increase, which marked Caterpillar’s first positive volume movement after six straight quarters of contraction. That rebound had been supported by a $326 million surge in the Energy & Transportation (E&T) segment, which offset declines in Construction Industries and Resource Industries. The broad-based volume growth in the third quarter is particularly notable, as Construction Industries returned to positive volumes after seven quarters of decline, while Resource Industries emerged from an eight-quarter slump.

Caterpillar’s prior volume and revenue declines were driven by weak demand and sizable drawdowns in dealer inventories. China’s ongoing real estate downturn also weighed heavily on the sales of large excavators, a key product in the Construction Industries segment. 

Macroeconomic uncertainty and tariff-related pressures further dampened the demand outlook. In November, the U.S. manufacturing sector contracted for the ninth straight month, while the New Orders Index fell for three months in a row.

Despite this environment, Caterpillar’s return to positive volume trends is encouraging. The company expects stronger year-over-year sales growth in the fourth quarter, supported by improved volumes across all three segments.

Industry peers like Terex Corp. TEX and Komatsu Ltd. KMTUY have also been navigating these challenges. Terex has seen seven straight quarters of negative organic growth in its Material Processing segment due to subdued demand. The company expects this trend to reflect on its 2025 results. Terex’s Aerial segment has seen eight straight quarters of negative organic growth.

Komatsu experienced a decline in volumes within its Construction, Mining & Utility Equipment segment during fiscal 2024, which persisted in the first half of fiscal 2025 (ended Sept. 30, 2025). Komatsu expects demand for construction, mining and utility equipment in fiscal 2025 to remain flat compared with the fiscal 2024 level.

CAT’s Price Performance, Valuation & Estimates

CAT shares have gained 72.4% so far this year compared with the industry’s 67.3% growth. In comparison, the Zacks Industrial Products sector has gained 6.5%. The S&P 500 has moved up 6.8% in the same time frame.

Caterpillar is currently trading at a forward 12-month price/earnings (P/E) ratio of 28.86X compared with the industry average of 26.12X.

The Zacks Consensus Estimate for CAT’s 2025 earnings indicates a year-over-year decline of 15.98%. The consensus mark for revenues implies an increase of 2% for the year. The earnings estimate for 2026 indicates 19.04% growth, with revenues rising 8.23%.

Earnings estimates for Caterpillar for both 2025 and 2026 have moved up over the past 60 days, as shown in the chart below.

Caterpillar stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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

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