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Caterpillar Q2 2026 Earnings Analysis · Beta Finch - Caterpillar - CAT - EN

• 0:08
  Speaker 1: Hey everyone, welcome back to Beta Finch. I'm Alex, joined
• 0:12
  Speaker 1: as always by Jordan. And today we're digging into Caterpillar's
• 0:16
  Speaker 1: second quarter 2026 results. And folks, this is a big one.
• 0:20
  Speaker 1: But before we dive in, quick reminder, this podcast is
• 0:24
  Speaker 1: AI-generated content for educational and entertainment purposes only. Nothing we
• 0:28
  Speaker 1: discuss should be considered investment advice. Always do your own
• 0:32
  Speaker 1: research and consult a qualified financial advisor before making any
• 0:36
  Speaker 1: investment decisions.
• 0:38
  Speaker 2: And it's a good quarter to have that disclaimer front
• 0:40
  Speaker 2: and center. Alex, because the numbers here are eye-popping. Caterpillar
• 0:45
  Speaker 2: just posted $ 20. 5 billion in sales and revenues, up 24%
• 0:50
  Speaker 2: year over year. That's the first time in company history
• 0:53
  Speaker 2: they've cracked $ 20 billion in a single quarter.
• 0:57
  Speaker 1: A genuine milestone. And it wasn't just the top line.
• 1:01
  Speaker 1: Adjusted profit per share came in at $ 8. 17, up 73%
• 1:03
  Speaker 1: from last year. CEO Joe Creed called it out as
• 1:10
  Speaker 1: a record, and honestly, the whole print beat expectations across
• 1:14
  Speaker 1: the board.
• 1:15
  Speaker 2: What really stands out to me is the backlog. It
• 1:17
  Speaker 2: grew sequentially by $ 9 billion to $ 72 billion total. That's
• 1:23
  Speaker 2: up 92% versus a year ago. And all three primary segments,
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  Speaker 2: construction industries, resource industries, and power and energy, contributed to
• 1:33
  Speaker 2: that growth. This isn't a one-segment story.
• 1:37
  Speaker 1: Right, and that power and energy segment is the one
• 1:40
  Speaker 1: everyone's buzzing about because of the AI and data center angle.
• 1:43
  Speaker 1: Sales to users in power generation grew 72%, driven by
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  Speaker 1: demand for large gen sets and turbines going into data centers.
• 1:53
  Speaker 2: It's wild. They're literally restarting a discontinued product line for this.
• 1:58
  Speaker 2: They stopped making their 10-megawatt medium-speed gas reciprocating engine back
• 2:03
  Speaker 2: in 2022 and And now they're bringing back about 1.5
• 2:07
  Speaker 2: gigawatts of capacity because customers are asking for more units.
• 2:11
  Speaker 2: Shipments start in fourth quarter.
• 2:13
  Speaker 1: And on the call, an analyst pushed Creed on whether
• 2:16
  Speaker 1: that demand has real staying power out to 2028, 2029, 2030,
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  Speaker 1: given how much AI capex speculation is out there. Creed's
• 2:26
  Speaker 1: answer was pretty direct. No one is slowing down at
• 2:29
  Speaker 1: the moment. In fact, if we can get more units out,
• 2:33
  Speaker 1: they're asking us to give them more units. They're already
• 2:36
  Speaker 1: taking orders into 2029 and 2030.
• 2:39
  Speaker 2: And it's not just data centers propping this up. That's
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  Speaker 2: the part one found reassuring. Oil and gas backlog is
• 2:47
  Speaker 2: nearly double what it was a year ago, mostly gas
• 2:49
  Speaker 2: compression demand. So even if the AI narrative cools at
• 2:53
  Speaker 2: some point, there's a broader base under this power and
• 2:56
  Speaker 2: energy growth story.
• 2:58
  Speaker 1: Let's talk construction industries, too. because that segment had its
• 3:02
  Speaker 1: own headline moment, sales up 35% to $ 8. 3 billion, sixth
• 3:07
  Speaker 1: straight quarter of sales-to-users growth. A lot of that was
• 3:11
  Speaker 1: rental fleet loading, including this new major projects joint venture
• 3:14
  Speaker 1: with dealers, basically a national rental fleet aimed at massive
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  Speaker 1: infrastructure and data center builds.
• 3:21
  Speaker 2: Margins there were strong, too. 23.3%, up 320 basis points.
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  Speaker 2: Resource industries also chipped in with 20% sales growth, helped
• 3:32
  Speaker 2: by mining demand for copper and gold. Plus, they closed
• 3:35
  Speaker 2: the Skycatch acquisition in July. That's AI-powered spatial data tech
• 3:40
  Speaker 2: for mining operations.
• 3:42
  Speaker 1: Now, we can't ignore tariffs. They came up a lot
• 3:44
  Speaker 1: on this call. CFO Kyle Epley said the company got
• 3:48
  Speaker 1: a $ 392 million benefit from IEPA tariff recoveries this quarter,
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  Speaker 1: and actual tariff costs came in lower than expected. around
• 3:57
  Speaker 1: $ 400 million versus the $ 700 million they'd guided to in April.
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  Speaker 1: For the full year, they now expect about $ 2. 2 billion
• 4:06
  Speaker 1: in tariff costs, the low end of their prior range.
• 4:10
  Speaker 2: That's a meaningful swing, and it's part of why margins beat.
• 4:15
  Speaker 2: Adjusted operating profit margin hit 21.9%, up 430 basis points
• 4:20
  Speaker 2: year over year. Management was clear, though, that some of
• 4:24
  Speaker 2: that tariff favorability was was a one-time computational adjustment, not
• 4:29
  Speaker 2: something to extrapolate forward.
• 4:31
  Speaker 1: On guidance, this is probably the headline for investors. Caterpillar
• 4:36
  Speaker 1: raised full-year 2026 sales growth guidance to mid-to-high teens, up
• 4:41
  Speaker 1: from their prior outlook. They also bumped free cash flow
• 4:44
  Speaker 1: guidance to the top half of their $ 6 to $ 15
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  Speaker 1: billion target range.
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  Speaker 2: And cash returns were solid too. $ 2. 2 billion deployed to
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  Speaker 2: shareholders in the quarter. split between $ 1. 5 billion in buybacks
• 4:58
  Speaker 2: and dividends. They also just announced an 8% dividend increase,
• 5:03
  Speaker 2: six straight year of high single-digit dividend growth.
• 5:07
  Speaker 1: One thing worth flagging for listeners, management did note some
• 5:11
  Speaker 1: softening pockets. Middle East demand was weaker than expected, and
• 5:15
  Speaker 1: areas outside China and Asia Pacific stayed soft. So it's
• 5:19
  Speaker 1: not universally rosy everywhere.
• 5:22
  Speaker 2: Right, and There was a good exchange about lead times.
• 5:26
  Speaker 2: Creed said gas prime power orders are booked out in
• 5:28
  Speaker 2: the late 2028, turbines even further. That's both a sign
• 5:33
  Speaker 2: of strong demand and a real constraint. They're capacity limited,
• 5:37
  Speaker 2: not demand limited right now, which is a different kind
• 5:40
  Speaker 2: of problem to manage.
• 5:42
  Speaker 1: So stepping back, what's the story here for investors to
• 5:45
  Speaker 1: watch going forward?
• 5:47
  Speaker 2: I'd say three things. First, whether power and energy capacity
• 5:51
  Speaker 2: additions can keep pace with this backlog without demand cooling. Second,
• 5:56
  Speaker 2: how construction industry's dealer inventory normalizes in the back half.
• 6:00
  Speaker 2: They're expecting a typical fourth quarter drawdown that could be
• 6:03
  Speaker 2: a headwind. And third, whether tariff costs stay contained near
• 6:08
  Speaker 2: that $ 2. 2 billion full year estimate.
• 6:12
  Speaker 1: Definitely a quarter that shifted the narrative more bullish. Before
• 6:16
  Speaker 1: we wrap, One more required note from Jordan.
• 6:20
  Speaker 2: Everything discussed is AI-generated analysis for educational purposes. Past performance
• 6:27
  Speaker 2: doesn't guarantee future results. Please do your own due diligence.
• 6:31
  Speaker 1: With backlog at record highs and capacity coming online through
• 6:35
  Speaker 1: the back half of the year, Caterpillar heads into third
• 6:38
  Speaker 1: quarter with a lot of momentum behind it. We'll be
• 6:41
  Speaker 1: watching how that inventory dynamic and tariff picture play out
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  Speaker 1: next quarter.
• 6:46
  Speaker 2: Thanks for tuning in to Beta Finch. We'll catch you
• 6:48
  Speaker 2: next time. See you then.