Caterpillar Inc

Caterpillar's business strengthened again in the third quarter of 2026. Sales rose 17% to $20.7 billion and operating margin rose to 20.4% from 17.3%. Firm orders on hand (backlog) reached $78.1 billion at September 30, about $6.0 billion more than at June 30.

The margin gain is smaller than the headline. Excluding $128 million of refunds of tariffs the Supreme Court struck down, Q3 margin was about 19.8% (my calculation). Management places the full-year margin excluding refunds near the bottom of its target range.

Factory capacity, not demand, sets the pace. Operating cash and the existing cash balance are paying for expansion, buybacks and two acquisitions.

• Q3 versus Q3 2025:
• Sales $20.682B vs $17.638B (+17%).
• Operating profit $4.214B vs $3.052B (+38%).
• Diluted profit per share $7.13 vs $4.88.
• Guidance:
• Full-year sales growth in the "mid-to-high teens", kept.
• Capital spending cut to about $3.3B from about $3.5B, and restructuring to about $300M from $300–350M.
• Tariff costs excluding refunds about $2.2B, kept.
• Orders: backlog $78.1B, of which $32.6B is not expected to ship within twelve months.
• Cash returned: $1.2B of buybacks and $0.7B of dividends in Q3. The quarterly dividend was kept at $1.63.
• Events:
• $11.5B of bank credit lines renewed August 27, now expiring 2027, 2029 and 2031.
• Derrick York took over Resource Industries November 1.
• Dealer John Fabick Tractor bought October 31 for $1.24B cash at closing plus about $165M later.

Its findings, each with the evidence, the strongest counterpoint and what would prove it wrong:

• Orders keep outrunning shipments, and factory capacity sets the pace
• Margins rose about 2.5 points on volume and price while costs climb
• Construction's surge leans partly on dealer stocking and rental fleets
• Resource Industries is the weak link: costs outrun price

Then its finances, the quality of its earnings, its management, the case for and against, and what to watch, its claims cited to the filings and checked against them.

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