Caterpillar’s Profit Rose as Segment Margins and Regional Sales Diverged

Caterpillar’s third-quarter results showed different rates of growth across its industrial businesses. Power & Energy and Construction Industries each expanded their profit margins by 2.5 percentage points from a year earlier, while Resource Industries increased both sales and profit at slower rates.

Consolidated operating profit rose 38% to $4.214 billion, while sales and revenues increased 17% to $20.682 billion, according to Caterpillar’s earnings release. The operating margin climbed to 20.4% from 17.3%.

Caterpillar shares fell 9.3% on October 29, the day the company reported results, while the S&P 500 slipped 0.3%, according to Trefis. From the close before the release through November 5, the stock lost 22.4%, compared with a 5.0% decline for the index.

Third-quarter sales of $20.7 billion were just below analysts’ $20.8 billion forecast, while adjusted profit per share of $7.20 was slightly above the $7.16 projection, Trefis reported.

Power and construction margins each rose 2.5 points

Power & Energy generated $8.784 billion in third-quarter sales, up 18% from $7.463 billion a year earlier. Segment profit increased 31% to $2.143 billion, lifting the margin to 24.4% from 21.9%, according to Caterpillar.

Within the segment, power-generation sales rose 30% to $3.421 billion. Caterpillar attributed the increase mainly to turbines and related services and to large reciprocating engines, primarily for data center applications. Oil and gas sales rose 13% to $2.236 billion, with gains in engine aftermarket parts and engines used in gas compression, as well as turbines and related services.

Construction Industries matched Power & Energy’s 18% sales growth rate, reaching $7.983 billion. Its profit rose 33% to $1.831 billion, and its margin increased to 22.9% from 20.4%. Caterpillar identified higher sales volume and favorable pricing as the main contributors to revenue growth, with higher equipment sales to end users driving much of the volume increase.

Resource Industries followed a different pattern. Its sales rose 15% to $4.615 billion, while segment profit increased 14% to $622 million, according to Caterpillar’s data.

At the company level, Caterpillar attributed most of the operating-profit increase to higher sales volume. Operating profit also included $128 million in tariff recoveries. Higher volume added $2.2 billion to consolidated revenue, while favorable price realization added $663 million.

Profit per share rose to $7.13 from $4.88 in the third quarter of 2025. Adjusted profit per share increased to $7.20 from $4.95; the adjusted figures for both periods excluded restructuring costs. Enterprise operating cash flow was $4.4 billion, and Caterpillar ended the quarter with $7.9 billion in enterprise cash. The company spent $1.2 billion on share repurchases and $0.7 billion on dividends during the quarter.

Asia-Pacific sales fell as North America grew 24%

Caterpillar’s geographic results were uneven. North America produced $12.017 billion in sales and revenues, up 24% from a year earlier. Latin America and the region covering Europe, Africa and the Middle East each grew 15%, according to the company’s earnings release.

Asia-Pacific moved in the opposite direction: its consolidated sales and revenues declined 2% to $2.813 billion. Within the region, Construction Industries posted a 2% sales increase, but Power & Energy fell 4% and Resource Industries fell 6%, according to Caterpillar’s segment data.

Construction sales increased across all four reported regions. The company attributed the North American gain to higher volume and favorable pricing, while sales in Latin America rose mainly because of higher volume associated with changes in dealer inventories.

Record backlog and engine capacity plans extend beyond 2026

Caterpillar entered the final quarter with a record order backlog of $78 billion, approximately 96% above its year-earlier level, according to Trefis. The backlog consists of orders customers have placed that Caterpillar has not yet filled.

Management estimated that 58% of the backlog would become sales within 12 months, compared with 59% in its estimate a quarter earlier. Management also said the company was taking some large-engine orders for as far out as 2029.

Trefis put third-quarter year-over-year revenue growth at 17.3%, down from 24.0% in the second quarter. Over the past 12 months, revenue rose 20.3%, following a 1.5% decline in the preceding 12 months, Trefis reported. Management said third-quarter sales matched its expectations and identified additional capacity as the main constraint on growth in Power & Energy.

Caterpillar plans to use part of its Winston-Salem, North Carolina, plant, which currently makes locomotive engines, as a second assembly and testing site for a large engine, according to Trefis. The project is part of a plan to nearly triple large-engine capacity by 2030 compared with 2024. Management also reported operational challenges and inefficiencies during the expansion.

Caterpillar is due to report fourth-quarter results in January 2027. Management expects moderate sales growth from a year earlier against what it called a strong fourth quarter of 2025, and plans to discuss 2027 in more detail in January, Trefis reported.