CAT · Caterpillar
Conviction · Low · more likely to lag the S&P 500 over the next three months
Wrong if: a daily close above $738.45
Note written ·
Price against the kill line
18.7% clear of its kill line on the 13 November 2026 close.
How to read this
This note expects the shares to lag the market, so its kill line sits above the price: a close above the red mark would prove the view wrong. Prices run from low on the left to high on the right. The dot is where the stock closed on 13 November 2026, left of the mark while it is below the line; a dot right of the mark has closed through it.
The scale is stretched near the line, so close calls are easy to see. More than 8% from the line, the stock reads well clear, with a hollow dot to show the figure is off the drawn scale.
The kill line is the research note's own test. The portfolio sells on business facts, not on a price. How the portfolio decides
Three months against the kill line
Daily closes, to . Red: the kill line, a daily close above $738.45, on record since 11 November 2026. The shares are down 31.8% since the close; the S&P 500 is down 2.1% over the same sessions. Figures in the note can cover a different window.
Kill line
A daily close above $738.45, the highest close of the 20 sessions to 21 October 2026, which would show the shares leading the S&P 500; or a 2027 outlook that guides adjusted operating margin above the middle of the target range.
Research onlyNot in the portfolio.
Catalyst
Key figures from the filings · Industrials
Quarter to 30 September 2026, filed 4 November 2026; valuation at the 13 November 2026 close
- Revenue, latest quarter ($M)
- 20,682
- Revenue, change on a year (%)
- +17.3
- Gross margin (%)
- 35.5
- Operating margin (%)
- 20.4
- Free cash flow, four quarters ($M)
- 11,274
- Price to earnings (×)
- 23.2
- Free-cash-flow yield (%)
- 4.1
All filed numbers
What Caterpillar reports to the SEC in its quarterly and annual filings. Each group states its period and filing date once; a figure dated otherwise says so. Built from the filings known on .
| Quarter to | Revenue ($M) | On a year (%) | Gross margin (%) | Operating margin (%) |
|---|---|---|---|---|
| first filed | 20,682 | +17.3 | 35.5 | 20.4 |
| first filed | 20,543 | +24.0 | 37.8 | 20.9 |
| first filed | 17,415 | +22.2 | 35.1 | 17.7 |
| first filed | 19,133 | +18.0 | 30.5 | 13.9 |
| first filed | 17,638 | +9.5 | 33.8 | 17.3 |
| first filed | 16,569 | −0.7 | 34.8 | 17.3 |
| Pre-tax income ($M) | 4,220 |
| Net income ($M) four quarters: 11,828 | 3,286 |
| Diluted shares, change on a year (%) against the quarter to 30 September 2025 | −2.1 |
| Operating cash flow ($M) | 14,184 |
| Capital spending ($M) | 2,910 |
| Free cash flow ($M) | 11,274 |
| Cash and short-term investments ($M) | 7,929 |
| Debt ($M) | Not available |
| Net cash, cash less debt ($M) | Not available |
| Deferred revenue ($M) +96.8% on a year | 8,706 |
| Backlog, orders not yet delivered ($M) +119.6% on a year | 49,400 |
| Receivables ($M) | 13,440 |
| Inventory ($M) | 22,214 |
| Shareholders' equity ($M) including non-controlling interests | 21,482 |
| Market value ($M) | 274,648 |
| Enterprise value, market value plus net debt ($M) | Not available |
| Enterprise value to sales (×) | Not available |
| Enterprise value to operating income (×) | Not available |
| Price to earnings (×) | 23.2 |
| Price to book value (×) | 12.8 |
| Free-cash-flow yield (%) | 4.1 |
Short interest (FINRA, settled 15 October 2026, published 26 October 2026): 1.6% of shares outstanding sold short, 2.8 days of average trading to cover, −5.7% since the previous report.
| Window | Bought | Sold |
|---|---|---|
| 90 daysfrom | $829K | $26.2M |
| 12 monthsfrom | $1.0M | $224.8M |
This note mentions Anthropic, the company that makes Claude, the AI model that wrote it. The same method and sources apply as on every note. The conflict of interest, stated.
The thesis
Caterpillar's shares look more likely to lag the S&P 500 than lead it over the next three months. Political risk to data-center construction and margins guided near the bottom of the target range outweigh a record $78 billion backlog. The fourth-quarter report and 2027 outlook, expected around 2 February 2027, show whether margins recover and data-center power orders hold. Construction Industries President Rod Shurman's Bernstein fireside chat on 17 November 2026 comes first.
The shares closed at $605.28 on 12 November 2026, up from $553.64 on 5 November 2026, the day of the post-election sell-off. They remain 43.6% below the intraday 52-week high of $1,073.46 set on 30 June 2026 and are down 29.2% over three months on adjusted daily closes. The rebound has tracked the market: Benzinga reported all 11 sectors higher on 9 November 2026, all 11 lower on 10 November 2026 and cyclicals leading on 11 November 2026, and Caterpillar's closes moved with each session.
At $605.28, the market prices a sharp slowdown in data-center power orders and margin pressure into 2027, even though third-quarter power generation sales rose 30%. That discount is why the call is close. The rating is Low because the next company-specific test of margins and orders is about three months away, while the political risk to data-center building is live now.
Bullish and bearish views on Caterpillar Inc.
The bull case on Caterpillar Inc. (CAT), in brief: the order book is still a record. The bear case: politics now threatens data-center construction.
Bull case
- The order book is still a record. Caterpillar reported a backlog of $78 billion at the end of the third quarter, up 96% from a year earlier, per Benzinga's 29 October 2026 report. The 10-Q filed on 4 November 2026 shows $49.4 billion of unsatisfied obligations on contracts longer than one year, about one-third expected to turn into revenue within 12 months.
- A large AI buyer now holds the generator orders. The Financial Times reported on 8 November 2026 that Anthropic agreed a deal worth about $3.4 billion to take over roughly 1.7 gigawatts of Caterpillar generator orders placed by OnePWR Solutions, per The Next Web and DCD. A better-funded buyer lowers the risk that those units are cancelled.
- Data-center power sales are still growing. Power generation sales rose 30% to $3.421 billion in the third quarter, mainly turbines and large engines for data centers, per the 29 October 2026 earnings release. Power & Energy segment profit rose 31% to $2.143 billion.
- Cash keeps going back to shareholders. The third-quarter 10-Q shows 2,174,443 shares repurchased in the quarter at a cost of $2.148 billion, and $7.745 billion paid for stock in the first nine months of 2026.
- Insiders and most analysts lean positive. Director James C. Fish Jr. bought 1,000 shares at $620.39 on 2 November 2026, per his SEC Form 4 filed 3 November 2026. Evercore ISI kept Outperform on 10 November 2026 with a target lowered to $833, per Benzinga, and MarketBeat put the consensus target at $898.25 on 5 November 2026.
Bear case
- Politics now threatens data-center construction. Democrats won both chambers of Congress in the 3 November 2026 midterms, and Senator Bernie Sanders has called for a national data-center moratorium, CNBC reported on 5 November 2026. The S&P 500 fell 4.36% that session and Caterpillar fell about 6%.
- Margins are guided to the low end. Management expects the full-year adjusted operating margin, excluding tariff recoveries, near the bottom of its target range, per MarketBeat's 30 October 2026 call summary. Full-year 2026 tariff costs are expected at about $2.2 billion.
- Fourth-quarter construction sales stall. Caterpillar guided to flat fourth-quarter Construction Industries sales as dealers cut inventory by about $1.6 billion, per MarketBeat's call summary. Zacks wrote on Yahoo Finance that the stock fell after the company held its 2026 guidance instead of raising it.
- Target cuts kept coming after the report. DA Davidson cut its target to $685 from $882 on 2 November 2026, keeping Neutral, and Rothschild & Co Redburn cut to $700 from $950. Fiscal.ai reported on 4 November 2026 that another analyst kept Hold and cut to $664 from $749, and Evercore's 10 November 2026 cut to $833 extended the run.
- Prominent short sellers profited from the fall. Benzinga reported on 10 November 2026 that Michael Burry reportedly made a 300% gain on Caterpillar put options after the shares' 45% drop from their high. Benzinga framed the move as the AI "picks and shovels" trade caving in after the election.
Price setup
The shares closed at $553.64 on 5 November 2026 and $558.63 on 6 November 2026, the lowest closes of the recent decline. They then closed at $598.88 on 9 November 2026, $584.57 on 10 November 2026, $601.61 on 11 November 2026 and $605.28 on 12 November 2026. The 52-week closing low is $546.13, set on 20 November 2025, so the November 2026 lows sit just above it.
On adjusted daily closes as of 12 November 2026, the 50-day moving average is $743.41 and the 200-day is $804.67. The price sits well below both, and the 50-day average is falling toward the 200-day. A move back to the 50-day average would retrace about a third of the fall from the 30 June 2026 high of $1,073.46.
Fish's 2 November 2026 purchase at $620.39 sits just above the 12 November 2026 close. The only open-market insider transactions on SEC Form 4 since August are that purchase and Chief Executive Joseph Creed's 28 August 2026 sale of 32,401 shares at an average $808.98, after exercising options.
Catalysts ahead
- 17 November 2026: Construction Industries Group President Rod Shurman at a Bernstein fireside chat. Tests the flat fourth-quarter construction guidance and shows whether dealer destocking is easing.
- ~17 November 2026 (est.): Nvidia quarterly report. Caterpillar has traded with AI-infrastructure stocks; a weak reaction to AI spending would weigh on the shares regardless of Caterpillar's own orders.
- 7 December 2026: Comment deadline for the FTC and USDA inquiry into agricultural equipment. Formal action after the deadline would add regulatory risk to the farm-equipment business.
- ~2 February 2027 (est.): Fourth-quarter 2026 results and 2027 outlook. Shows whether margins recover from the bottom of the target range, whether tariff costs ease and whether the $78 billion backlog held.
What would change the view
A daily close above $738.45, the highest close of the 20 sessions to 21 October 2026, which would show the shares leading the S&P 500; or a 2027 outlook that guides adjusted operating margin above the middle of the target range.
What it trades with
Caterpillar now moves with AI-infrastructure stocks on the big days. It fell about 6% on 5 November 2026 when the S&P 500 fell 4.36% on data-center fears, per CNBC, and rose on 9 November 2026 when chip stocks led a rebound, per Benzinga. Benzinga's 10 November 2026 piece grouped it with Corning as an AI supplier hit by the election result. Nvidia's next report and any data-center legislation are shared drivers for the group.
The older cyclical exposure still matters. Construction Industries sales depend on dealer inventory and construction activity; Caterpillar launched a Cat Compact distribution sub-brand for smaller contractors on 10 November 2026. The farm-equipment business faces the FTC and USDA inquiry. Those drivers move with the industrial economy more than with AI spending.
The evidence, claim by claim (8)
- Third-quarter 2026 sales and revenues rose 17% to $20.7 billion; adjusted profit per share was $7.20 against $4.95 a year earlier; adjusted operating margin was 20.6% against 17.5%. Caterpillar 3Q 2026 earnings release (8-K Exhibit 99.1) · as of
- Backlog was $78 billion at the end of the third quarter of 2026, up 96% year over year. Benzinga 3Q 2026 results report · as of
- Unsatisfied performance obligations on contracts longer than one year were $49.4 billion, about one-third expected to be recognized within 12 months. Caterpillar 3Q 2026 Form 10-Q, filed 4 November 2026 · as of
- Power generation sales rose 30% to $3.421 billion, mainly data-center turbines and large engines; Power & Energy segment profit rose 31% to $2.143 billion. Caterpillar 3Q 2026 earnings release (8-K Exhibit 99.1) · as of
- Anthropic agreed a deal worth about $3.4 billion to take over roughly 1.7 gigawatts of Caterpillar generator orders placed by OnePWR Solutions. Financial Times, via The Next Web and DCD · as of
- Management expects the full-year adjusted operating margin, excluding tariff recoveries, near the bottom of its target range, and flat fourth-quarter Construction Industries sales. MarketBeat summary of 3Q 2026 earnings call · as of
- Director James C. Fish Jr. bought 1,000 shares in the open market at $620.39. SEC Form 4 filed 3 November 2026 · as of
- Evercore ISI kept an Outperform rating on Caterpillar and lowered its price target to $833. Benzinga analyst headline 10 November 2026 · as of
Sources
- CATERPILLAR INC - Form 10-Q - FY2026 · sec.gov
- Anthropic buys $3.4bn of gas generators for its data centres, FT reports · thenextweb.com ·
- Anthropic signs $3.4bn gas generator deal to support 1.7GW of data center power · datacenterdynamics.com
- Dow drops 1,800 points; Nasdaq tumbles into correction territory on AI tech wreck: Live updates · cnbc.com ·
- Caterpillar (NYSE:CAT) Stock Falls 6.5% - Here's What Happened · marketbeat.com ·
- CAT Shares Fall Despite Q3 Earnings Beat: How to Play the Stock? · finance.yahoo.com
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