CAT, Caterpillar Inc
Caterpillar continues to operate through five operating segments, four of which are reportable segments and are described below.
Read top to bottom, the owner's questions in the order an owner asks them: what the business is, whether the record holds, whether it survives and is any good, and what you would be paying. New to the questions? Start with the Method.
The business in brief
read the 10-K →What this business is and what moves its needle, read from the numbers in its filings. The quantitative detail is in the sections below; the verdict is left to you.
- What it is
- Revenue is Machinery, Power & Energy (95%) and Financial Products (5%).
- What moves the needle
- How hard the assets work, and what the inputs cost. What decides it: utilization, how much of the capex merely keeps the assets running, and what a downturn does to a heavy fixed-cost base.
- Is it a good business?
- Return on capital has run in the teens (median 17%, above 15% in 7 of 10 years). Owner earnings agree: roughly 12% of revenue reaches owners as cash, consistently. Returns like these are solid but short of clear franchise economics; whether they hold is what the 10-K settles, not the multiple.
Every line here is arithmetic from the company's own filings, not a model's opinion, and each figure appears in full in the sections below.
Where the money comes from
read the 10-K →Machinery, Power & Energy is 95% of revenue, so this is largely a single-line business.
- Machinery, Power & Energy95%$64.0B
- Financial Products5%$3.6B
From the segment footnote of the company's own 10-K. Shares are of total revenue; the profit bar shows each segment's share of segment operating profit, before unallocated corporate costs.
The record, 2016–2025
realized figures from each filing, no estimates| 2016’16 | 2017’17 | 2018’18 | 2019’19 | 2020’20 | 2021’21 | 2022’22 | 2023’23 | 2024’24 | 2025’25 | TTMTTMMar 2026 | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| RevenueRevenue | $38.5B | $45.5B | $54.7B | $53.8B | $41.7B | $51.0B | $59.4B | $67.1B | $64.8B | $67.6B | $70.8B |
| Operating marginOp. mgn | 3.0% | 9.8% | 15.2% | 15.4% | 10.9% | 13.5% | 13.3% | 19.3% | 20.2% | 16.5% | 16.5% |
| Net incomeNet inc. | ($67M) | $754M | $6.1B | $6.1B | $3.0B | $6.5B | $6.7B | $10.3B | $10.8B | $8.9B | $9.4B |
| EPS (diluted)EPS | $-0.11 | $1.26 | $10.26 | $10.74 | $5.46 | $11.83 | $12.64 | $20.12 | $22.05 | $18.81 | $20.24 |
| Owner earningsOwner earn. | — | $4.8B | $5.3B | $5.9B | $5.3B | $6.1B | $6.5B | $11.3B | $10.0B | $8.9B | $9.5B |
| ROICROIC | 2% | 8% | 21% | 20% | 11% | 16% | 17% | 28% | 26% | 20% | 20% |
| CapexCapex | $1.1B | $898M | $1.3B | $1.1B | $978M | $1.1B | $1.3B | $1.6B | $2.0B | $2.8B | $2.8B |
| Capex / revenueCapex/rev | 2.9% | 2.0% | 2.3% | 2.0% | 2.3% | 2.1% | 2.2% | 2.4% | 3.1% | 4.2% | 4.0% |
| Capex vs depreciationCapex/dep | 0.37× | 0.31× | 0.46× | 0.41× | 0.40× | 0.46× | 0.58× | 0.74× | 0.92× | 1.25× | 1.23× |
| Total debtDebt | $22.8B | $23.8B | $25.0B | $26.3B | $26.0B | $26.0B | $25.7B | $24.5B | $27.4B | $30.7B | $30.7B |
| Cash & investmentsCash+inv | $7.2B | $8.3B | $7.9B | $8.3B | $9.4B | $9.3B | $7.0B | $7.0B | $6.9B | $10.0B | $4.5B |
| Net debt / (cash)Net debt | $15.7B | $15.6B | $17.1B | $18.0B | $16.6B | $16.8B | $18.7B | $17.5B | $20.5B | $20.7B | $26.2B |
Owner’s Scorecard
Will it survive?
- No meaningful interest burdenLittle or no interest expense reported
Little or no interest expense reported, the business isn't leaning on lenders to operate.
- ModerateTotal debt $30.7B ÷ operating income $11.2B
Years of operating profit it would take to repay all debt. A first read, not a credit rating: it's gross debt (not netted against cash) over EBIT (not EBITDA), and a cyclical year distorts it.
- Debt, net of cash $20.7BModest net debtCash $10.0B − debt $30.7B
Netting $10.0B of cash and short-term investments against $30.7B of debt leaves $20.7B owed, about 1.9× a year's operating profit, versus the gross figure above. Net debt is the leverage figure that matters; the gross ratio above ignores the cash already set against it. Strategic or illiquid investments aren't counted here.
- How long is cash tied up? 68344dCapital-hungryDSO 59 + DIO 135087 − DPO 66802 days
Days cash is tied up between paying suppliers and collecting from customers. Lower is better; a long cycle means growth itself eats cash.
Is it a good business?
- HighNOPAT $8.5B ÷ invested capital $42.0B (debt + equity − cash)
The rate the business earns on the money tied up in it, Buffett's north star, because over time a stock tracks the ROIC beneath it. Above ~15% sustained hints at a moat; below ~8% the company may destroy value as it grows. Asset-light businesses (R&D expensed, little capital) read artificially high, pair this with Owner Earnings.
- SolidOwner Earnings $8.9B = operating cash $11.7B − capex $2.8B
What an owner could take out without starving the business. That's 13% of revenue. Honest caveat: capex here blends maintenance and growth, so steady-state Owner Earnings may run higher (see capex vs. depreciation).
- Cash-backedCash from ops $11.7B ÷ net income $8.9B
How much of reported profit showed up as operating cash. Above 1× is reassuring; well below suggests earnings lean on accruals. One year is noisy, growth and working-capital swings distort it, and this is operating cash, not free cash. Watch the multi-year trend.
How is the cash used?
- Returns about halfDividends + buybacks $7.9B ÷ Owner Earnings $8.9B
Of $8.9B Owner Earnings, $7.9B (89%) went back to shareholders, $2.7B dividends, $5.2B buybacks. Returning most of it signals a mature cash machine; reinvesting most could mean a long runway, or empire-building. The split doesn't say which; the return earned on it (see ROIC) does.
- Investing or harvesting? 1.25×ExpandingCapex $2.8B ÷ depreciation $2.3B
Descriptive, not a grade. Above ~1× means investing faster than assets wear out (growth, or, sustained for years, today's earnings carrying less depreciation than tomorrow's will). Below means spending less than it's wearing out (efficiency, or a melting asset base). The ratio won't tell you which; the filings will.
Durability & moat, 2016–2025
A moat is a high return that doesn’t fade, reinvested at high returns. Here is what the record says, judgments, not another chart of the numbers.
- Profitable years 9 of 10
Lost money in 1 year(s), look at what happened there before trusting the average.
- Return on capital ≥ 15% 7 of 10 yrs
A moat shows up as a high return on invested capital that holds year after year, not one good vintage.
- Operating margin 3% (FY2016) → 16% (FY2025)
Margins widened over the record, pricing power intact or improving.
- Reinvestment, incremental ROIC 67%
Every extra dollar the company reinvested earned a high return, it is still compounding, not coasting on an old moat.
- Owner earnings growth +7%/yr
Free cash to owners grew about 7% a year over the record.
- Worst year 2016 · 3.0% op. margin
Stayed profitable even in its hardest year, the resilience that survives recessions.
- Share count −2.3%/yr
The share count is shrinking, buybacks are quietly growing your slice of the business.
- Dividend record rising
Paid and raised the dividend across the record, the continuity Graham prized.
Solvent is not the same as cheap; growing is not the same as good. These are vital signs, not a verdict, the judgment is yours, and the filing is one click away.
How the cash was used, 2017–2025
Over the record, the business generated $77.1B of operating cash, and how management split it is, as Buffett insists, the job that matters most. Here it reads as a mature cash machine, most of what it earns goes straight back to owners.
- Reinvested$13.0B · 17%
- Dividends$20.9B · 27%
- Buybacks$33.7B · 44%
- Retained (debt / cash)$9.5B · 12%
It reinvested $13.0B (17%) back into the business and returned $54.6B (71%) to owners, $20.9B in dividends, $33.7B in buybacks. Total debt rose $6.8B across the span.
Buybacks are gross of stock issued to employees; net of that, the real return to owners is lower (see Management & pay). And the mix alone doesn't grade management, what matters is the return earned on the dollars reinvested (see incremental ROIC in the durability report).
Graham’s defensive-investor test
3 of 6 metGraham gave the defensive investor seven numerical criteria in The Intelligent Investor. Here they are, run mechanically on the filings, his framework, not our verdict. Meeting them is a floor of safety, not a reason to buy; missing one is no veto, since many fine modern businesses fail his strictest liquidity tests by design. The worth is in seeing exactly where a company stands against the canon, every number sourced.
- Adequate size PassRevenue ≥ $2B · $67.6B
Big enough to weather a storm. Graham's 1972 floor was ~$100M of sales (≈ $700M today); we use a $2B revenue line as a conservative modern stand-in.
- Strong liquidity MissCurrent ratio ≥ 2× · 1.44×
Current assets at least twice current liabilities, near-term bills covered without touching the business. Strict by design: many cash-rich modern firms run leaner and miss it, holding their cushion in longer-dated securities.
- Conservative debt MissDebt ≤ working capital · $30.7B vs $15.9B WC
Graham's rule that borrowings not exceed net current assets. Capital-heavy and buyback-heavy firms routinely fail it, read it next to interest coverage, not alone.
- Earnings stability NearA profit every year (10-yr record) · 1 loss year
Graham wanted earnings in each of the past ten years, the stability a defensive owner leans on.
- Dividend record PassUninterrupted dividends · paid every year (10)
An unbroken dividend was Graham's mark of durability. He wanted twenty years; the filings show about ten, and a single suspension breaks the streak. Non-payers, many fine modern compounders, fall outside his defensive net by design.
- Earnings growth PassEarnings +33% over the record · +339%
At least a third more earnings than a decade ago, averaging three years at each end. Net income (not per-share), so stock splits don't distort it, buybacks and dilution show up in the share-count line instead.
- Moderate price —P/E ≤ 15 and P/E × P/B ≤ 22.5 · decided by the price
Graham's valuation gate, the wall he kept between a sound business and a sound investment. Earnings are $18.81/share and book value $45.14/share. Enter a price in “What the price implies” just below for the P/E, P/B, and whether it clears. But this is the rule Buffett outgrew: there's no hard P/E law, and a wonderful business can deserve a far richer multiple if the thesis holds, treat it as the bargain-hunter's floor, not a verdict on the price.
Graham would be the first to say a checklist is a starting point, not an answer. These are his defensive, bargain-hunter's tests, the cigar-butt lens. Buffett and Munger grew past it, paying fair prices for wonderful businesses; that lens lives in the moat and owner-earnings work above, and both still matter. Clearing Graham’s tests earns a closer look; failing them earns harder questions, not a dismissal.
What the price implies
reverse-DCFA price is the one input we don't pull, you bring it. Type today's close (read it off any broker or quote site) and see the owner-earnings growth you'd have to believe to justify it, set beside what Caterpillar Inc has actually delivered. Nothing is stored; the number stays in your browser.
Enter a price above to run it.
Graham capped the multiple at 15×; Buffett and Munger let that rule go, a wonderful business can deserve 50× if the thesis holds. Read it as the bargain-hunter's floor, not a ceiling on good sense.
The discount rate is your interest rate, what a dollar years from now is worth today, anchored to the long-term Treasury yield (~4–5% today, plus whatever premium you want for risk). Drag it toward the risk-free rate and watch how much growth the price suddenly “needs”: interest rates are gravity on valuations.
Owner earnings $9.5B on 466M diluted shares; net debt $26.2B. This is a lens, not a price target, it says what you'd have to believe, not what the company is worth, and it runs on one year of (noisy) owner earnings at assumptions you can see and change.
What the filing emphasizes, FY2025
read the 10-K →Each year a 10-K must name what could go wrong, in the company's own words. Here are the ones Graham and Buffett would stop on, each set against the figure from the same filings that bears on it, anchored to a period you can find in the record above. We point; the judgment is yours.
- Pricing power & competitionBusiness
Whether the company sets its price or takes it. Durable pricing power is the surest mark of a moat; price competition is the surest mark there isn't one.
“Cat Financial operates in a highly competitive environment, with financing for users of Caterpillar equipment and services available through a variety of sources, principally commercial banks and finance and leasing companies.”
From the recordOperating margin16.5% now (TTM), off a 20.2% peak (FY2024) - Concentrated dependenceBusiness
What the whole business leans on, a product, a platform, a partner. Concentration cuts both ways, and the filing is where management has to admit it.
“We do not regard our business as being dependent upon any single patent or group of patents.”
From the recordOwner-earnings margin at stake (TTM)13% - Debt terms & refinancingMD&A
The fine print behind the debt. Covenants and near-term maturities decide who is really in control when a year goes badly.
“In the event Caterpillar or Cat Financial does not meet one or more of their respective financial covenants under the Credit Facility in the future (and are unable to obtain a consent or waiver), the syndicate of banks may terminate the commitments allocated to the party that does not meet its coven…”
From the recordBalance sheet (TTM)$20.7B modest net debt · no real interest burden - Litigation & contingenciesMD&A
Claims an owner inherits. Most disclosure is boilerplate; this fires only on an actual matter, a named suit, a settlement, a contingency, a number.
“The more significant estimates include: residual values for leased assets, fair values for goodwill impairment tests, warranty liability, reserves for product liability and insurance losses, postretirement benefits, post-sale discounts, credit losses and income taxes.”
A judgment, not a number, weigh it against the filing yourself. - Cyclicality & demandMD&A
How the business behaves when the economy turns. A cyclical earns its keep across the whole cycle, not at the peak.
“The demand for our equipment and related parts is highly cyclical and significantly impacted by commodity prices, although the impact may vary by reporting unit.”
From the recordWorst year on record3.0% operating margin (FY2016) - Regulation & policyMD&A
Rules that can rewrite the economics, tariffs, antitrust, data, export controls.
“Based on the incremental tariffs announced in 2025 and in place by January 29, 2026, we expect the impact from tariffs to be around $2.6 billion in 2026, which is $800 million higher than incurred in 2025.”
A judgment, not a number, weigh it against the filing yourself.
What changed, FY2025 vs FY2024
read the 10-K →Most of a 10-K is boilerplate carried over verbatim; the signal is in what's new. These lines appear this year and weren't there last, figure updates filtered out, so only the language shift remains.
- “We include the net mark-to-market losses (gains) in Other income (expense) in the Results of Operations. 2025 net mark-to-market gain of $294 million — Primarily due to a higher actual return on plan assets compared to the expected return on plan assets (U.S. pension plans had an actual rate of retu…”
- “In the first quarter of 2026 as compared to the first quarter of 2025, excluding the impact from incremental tariff costs, we expect the profit impact of higher sales volume and favorable price realization will be partially offset by higher manufacturing costs and higher selling, general and adminis…”
- “In the first quarter of 2026 as compared to the first quarter of 2025, in Construction Industries, excluding the impact from incremental tariff costs, we anticipate favorable price realization and the profit impact of higher sales volume will be partially offset by higher manufacturing costs.”
- “The increase was mainly due to a favorable impact from higher average earning assets of $90 million, partially offset by the absence of an insurance settlement of $33 million in 2024, and an unfavorable impact from higher provision for credit losses at Cat Financial of $31 million.”
- “We include the net mark-to-market losses (gains) in Other income (expense) in the Results of Operations. 2025 net mark-to-market gain of $294 million — Primarily due to a higher actual return on plan assets compared to the expected return on plan assets (U.S. pension plans had an actual rate of retu…”
Classic text analysis over the filing itself, no model wrote a word of this, and every quote is the company's own.
Peers, Industrial machinery
The same industry, side by side on owner economics, compare, don't rank by a single number.● marks best in the group.
| Company | Revenue | Gross margin | Op. margin | ROIC | Owner earn. margin |
|---|---|---|---|---|---|
| CATCaterpillar Inc | $67.6B | 100% | 16.5% | 20% | 13% |
| BKRBaker Hughes Co | $27.7B | 66% | 11.1% | 16% | 9% |
| DOVDover Corp | $8.1B | 40% | 17.0% | 11% | 14% |