Why Caterpillar Stock Jumped to Record High Today
Key Points
Data centers are being built at a rapid clip.
The construction leader is well positioned to profit.
- 10 stocks we like better than Caterpillar ›
Shares of Caterpillar (NYSE: CAT) climbed more than 11% on Wednesday after the construction and power equipment giant said the artificial intelligence (AI) boom was boosting its sales and profits.
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AI is powering Caterpillar's growth
Caterpillar's sales rose by 10% to $17.6 billion in the third quarter. The gains were driven by a 33% surge in power-generation revenue, which benefited from strong sales of reciprocating engines used by AI data centers.
Still, Caterpillar's profits took a bit of a hit due in part to the negative impact of tariffs. Its adjusted operating margin declined to 17.5% from 20% in Q3 of 2024. The construction equipment maker's adjusted earnings per share, in turn, decreased to $4.95 from $5.17 in the prior-year period. However, that was well above Wall Street's estimates, which had called for per-share profits of $4.52.
Moreover, Caterpillar continues to crank out cash. The company generated $3.2 billion in free cash flow in Q3. That allowed Caterpillar to reward its shareholders with roughly $700 million in dividends and $400 million in stock buybacks.
A record backlog bodes well for future growth
Better still, Caterpillar's order backlog grew by $2.4 billion from Q2 -- and by a total of $11.2 billion from 2024's Q3 -- to a record $39.8 billion.
"Our team's continued discipline in a dynamic environment, coupled with a growing backlog, positions us for sustained momentum and long-term profitable growth," CEO Joe Creed said.
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Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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