Caterpillar's (CAT) 2026 earnings outlook hinges on the performance of its construction segment, UBS Securities said in a note Wednesday.

While investors are debating whether the company's earnings per share will reach a bullish $22 to $23 or a bearish $17 to $18, analysts at UBS are taking a more "balanced" view, with construction identified as the "swing factor," the note said.

Caterpillar's 2026 performance will largely depend on construction, as mining and oil & gas remain stable and power generation faces capacity limits, UBS said, adding that the company's earnings will be more heavily weighted toward the second half of 2026, driven by a potential re-acceleration in US construction activity.

"Our model currently assumes a middle ground between bulls and bears," UBS said.

The balanced outlook reflects a neutral macroeconomic view and the cyclical pressures already observed in Caterpillar's construction segment, combined with optimism for a late 2026 rebound in US non-residential construction and ongoing power demand, according to UBS.

UBS has a neutral rating on Caterpillar with price target of $357, noting the current risk-reward profile is starting to skew slightly to the downside based on fundamentals and recent stock performance.

Shares of Caterpillar were up 2% in recent Wednesday trading.

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