Al Root

Wall Street appears to be feeling better about Caterpillar stock after the heavy machinery maker's event for analysts and investors.

The event, held in in Arlington, Texas, on Tuesday, included a tour of Caterpillar's Solar Turbines facility, which manufactures industrial, natural-gas-powered turbines for power generation applications. Interest in turbines is high these days, with hyperscalers such as Amazon.com, Alphabet, and Microsoft looking for electricity to run all of their power-hungry artificial-intelligence data centers.

Along with product demonstration, Caterpillar management provided 2030 financial targets. Management said it can grow sales by about 6% a year on average, up from 4% a year between 2019 and 2024. Profit margins can improve by two to five percentage points, compared with 2019 to 2024 levels.

Caterpillar guides for margins based on sales ranges, a sensible strategy given the cyclical nature of mining and construction markets. Operating profit margins should land between 15% and 19% with sales in the $60 billion range. They should land between 21% and 25% with sales in the $100 billion range.

Operating profit margins averaged 16% between 2019 and 2024.

JPMorgan analyst Tami Zakaria called the outlook conservative in a Wednesday report. She sees a "re-rating" coming for Cat stock. That's when investors change how they value a company as the business changes.

Between 2019 and 2025, Caterpillar shares typically traded for about 17 times next year's estimated earnings, a discount to the S&P 500's 20 times multiple.

"The most pivotal opportunity in the medium term....for Cat is a multi-industry re-rating and attracting long-term investors who historically only looked to own Cat at the start of a construction or mining upcycle," wrote Zakaria.

If Cat can deliver consistent sales growth and less volatile earnings, valuation multiples should expand, she says.

Data center growth is one way for sales growth to become more stable.

Baird analyst Mig Dobre called Caterpillar one of his "best ideas" following the event.

The "investor day outlined a very realistic....growth path to 2030 with implied earnings power in the $40 per share range," he wrote Wednesday. "Growth will be a function of more than just datacenters, all three segments, [mining, construction, and power], have tailwinds."

Zakaria rates Cat stock Buy and has a $730 price target for shares. Dobre rates shares Buy and has a $680 price target for shares. The average analyst price target for Cat shares is about $564, according to FactSet, up $6 since the event.

The average analyst target price for Cat stock started the year at about $387 a share. Wall Street has moved targets up with sales estimates for 2026, which bottomed out at about $66 billion in April. Now, analysts project almost $72 billion in 2026 sales for Cat, according to FactSet.

Overall, 43% of analysts covering Cat stock rate shares Buy. The average Buy-rating ratio for stocks in the S&P 500 is about 55%. One reason for the below-average rating is valuation. Cat stock trades for about 25 times estimated 2026 earnings, compared with 22 times for the S&P 500. Cat shares, again, typically trade at a discount to the market, although the stock's price-to-earnings ratio tends to be highest before its cyclical earnings inflect higher.

Cat stock was 2.7% in early trading Wednesday, while the S&P 500 and Dow Jones Industrial Average were up 0.3% and 0.2%, respectively.

Coming into Wednesday trading, Cat's stock was up 51% year to date. Most of that gain came recently, with shares adding 69% over the past six months.

Write to Al Root at allen.root@dowjones.com

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November 05, 2025 10:57 ET (15:57 GMT)

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