Backlog and mid-teens 2026 sales support earnings, yet $816 asks for 30 times 2027 profit. A 25 times multiple on $27 of earnings points to $680 in a year.
Key points
- $72.1 billion firm backlog at June 30, with $29.2 billion beyond twelve months, led by Power & Energy.
- Mid-to-high teens 2026 revenue growth is management’s raised outlook; first-half sales were already up 23%.
- 35 times trailing earnings at $816 versus a 25 times year-ahead multiple that still needs $27 of 2027 EPS.
The call
The stock requires about 30 times 2027 earnings of $27, or else 2027 profit near $33 a share at a 25 times multiple. That path needs high-teens sales growth to persist into 2028 after a 17% 2026 lift, with operating margin holding near 18.5% after tariff noise.
I expect 2026 sales near $79 billion and 2027 sales near $86 billion, 8% growth as construction inventory and rental loading fade and power capacity ramps. That yields about $27 of 2027 EPS on 450 million shares. A 25 times multiple, closer to a late-cycle industrial, produces $680.
Revenue and operating marginSEC filings through Q2 2026; 2026-27E are the author's forecasts
Valuation
| Item | Figure |
|---|
| 2026E revenue | $79.4 billion |
| 2027E revenue | $85.8 billion |
| 2027E operating margin | 18.5% |
| 2027E EPS | $27.15 |
| Multiple | 25 times |
| 12-month target | $680 |
Twenty-five times is still rich versus Caterpillar’s own history of mid-teens multiples in prior expansions, but it credits a larger power mix. Downside if growth is only mid-single digits is larger than upside if the multiple holds at 28 times, which is why the rating is sell, not hold.
From today's price to the 12-month targetAuthor arithmetic, October 8 2026
Risks
- Power delivery schedules into 2028, 29 could keep 2027 growth above 12% and justify a higher multiple.
- Tariff refunds or a lower $2.2 billion cost run-rate could lift 2026, 27 margins above 19%.
- Faster buybacks than the first-half $6.5 billion cash pace could cut the share count below 445 million.
What would change my mind
A 2026 year-end backlog still above $70 billion with Power & Energy deliveries not slipping would force a higher 2027 growth rate.