The Market Is Flat for the Year but These Industrial Stocks Are Soaring
Key Points
The markets for farm equipment and construction machinery are expanding rapidly.
Interestingly, the AI data center buildout is helping to drive these stocks higher.
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Farm and construction machinery stocks are soaring in 2026, up double digits in a market that's moving sideways. Three industrial stocks make up the group within the S&P 500, and they're all outperforming the broader index by a mile.
Paccar (NASDAQ: PCAR) makes light, medium, and heavy-duty trucks under the Kenworth, Peterbilt, and DAF brands. It also makes advanced diesel engines. The stock is up more than 16% this year.
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Caterpillar (NYSE: CAT) manufactures a wide variety of construction and farm equipment, plus power systems like gas generators. This stock has skyrocketed 28% so far in 2026.
And Deere (NYSE: DE), like Caterpillar, makes a wide array of construction and agriculture machines and equipment. The stock is up more than 25% so far this year.
Caterpillar reported its fourth quarter results on Jan. 29 and they were stellar. Revenue climbed 18% in the quarter to $19.1 billion while earnings hit $5.16 a share. Wall Street was expecting earnings per share of $4.71 on revenue of $17.9 billion. The stock has climbed 10% since the earnings release.
Caterpillar's gas turbine division in particular is booming, and that's partly due to the massive artificial intelligence (AI) data center buildout and its insatiable power needs. Sales in the division rose 23% during the quarter, to $1.75 billion. The company expects to double sales of power generation equipment by 2030.
As for Deere, the company will report quarterly results on Feb. 19. Analysts expect earnings of $2.10 a share on revenue of $7.5 billion.
And Paccar reported fourth quarter results on Jan. 27, with adjusted earnings of $1.06 per share on revenue of $6.8 billion. Both figures beat the consensus on analyst expectations.
Image source: Getty Images.
These are good times for heavy equipment manufacturers
All three stocks are benefiting from urban expansion around the world and the infrastructure (like roads, bridges and railways) needed to accommodate it. The market for heavy construction equipment is forecast to grow at an annual rate of 6.2% a year through 2034, to $372 billion. Plus, the agriculture equipment market is moving out of a down cycle and is projected to grow 8.6% per year through 2035 and top $689 billion by then, twice as large as the market in 2025.
And there's the AI buildout, which is highly favorable for construction equipment makers and industrial transportation firms. The four largest AI hyperscalers are expected to spend at least $625 billion on data centers and AI infrastructure this year. If you're bullish on the U.S. economy, as I am, you should consider these three stocks, as the products they make are critical to economic growth.
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Matthew Benjamin has positions in Deere & Company. The Motley Fool has positions in and recommends Caterpillar, Deere & Company , and Paccar. The Motley Fool has a disclosure policy.
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