Caterpillar Breaks Its Losing Streak: A Pivotal Corner for CAT Stock in 2025

After six consecutive quarters of revenue contraction, Caterpillar Inc. (CAT) has finally turned the corner in Q3 2025, delivering a notable 9.5% revenue increase. This turnaround marks a critical inflection point for the industrial giant, driven predominantly by volume expansion rather than price increases—a distinction that speaks to genuine demand revival rather than mere pricing power.

The Volume Story Behind CAT’s Recovery

Volume growth contributed $1.5 billion (approximately 10% of total revenue gain) to Caterpillar’s Q3 rebound, with all three business segments posting positive volume performance simultaneously for the first time since Q2 2023. This broad-based momentum represents a fundamental shift in market conditions.

The Construction Industries segment emerged from a seven-quarter drought, while Resource Industries broke free from an eight-quarter contraction. The Energy & Transportation division, which had already demonstrated strength with a $326 million volume surge in Q2, continued its positive trajectory. This synchronized recovery across all divisions suggests the recovery isn’t concentrated in a single market but reflects broader industrial demand improvement.

Breaking Through Macro Headwinds

Caterpillar’s path back to growth has been challenging. The company faced persistent demand weakness, aggressive dealer inventory liquidation, China’s prolonged real estate crisis (which dampened excavator sales), and tariff-related uncertainties. Adding to these pressures, U.S. manufacturing contracted for nine consecutive months through November, with the New Orders Index declining for three straight months.

Yet despite this inhospitable environment, CAT’s return to positive volume growth signals underlying resilience. Management projects accelerating year-over-year sales growth in Q4, supported by sustained volume improvements.

Peer Comparison and Industry Context

The broader equipment sector remains in recovery mode. Terex Corp. (TEX) continues wrestling with seven straight quarters of negative organic growth in its Material Processing segment and eight quarters of decline in Aerial operations. Komatsu Ltd. (KMTUY) expects 2025 construction, mining, and utility equipment demand to remain flat relative to 2024, indicating the industry recovery is just beginning.

By contrast, Caterpillar’s positive inflection puts it ahead of the curve.

CAT’s Valuation and Market Momentum

CAT shares have rallied 72.4% year-to-date, substantially outpacing the industrial products industry average of 67.3% and the broader Zacks Industrial Products sector gain of 6.5%. The S&P 500’s 6.8% gain underscores how dramatically CAT has outperformed.

The stock currently trades at a forward 12-month P/E ratio of 28.86X, modestly above the industry median of 26.12X. Zacks consensus estimates project 2025 earnings to decline 15.98% year-over-year (reflecting the downcycle’s tail end), while revenues are expected to inch up 2% for the full year.

Looking ahead, the picture brightens considerably: 2026 earnings are projected to surge 19.04%, with revenues climbing 8.23%. Notably, analyst earnings estimates for both 2025 and 2026 have trended upward over the past 60 days, reflecting improving visibility into the recovery trajectory.

The Bottom Line: CAT Reaches Its Corner

Caterpillar’s Q3 performance demonstrates that the company has genuinely turned the corner from its prolonged downcycle. With synchronized volume growth across all segments, improving dealer inventory conditions, and strengthening forward guidance, the industrial group is positioned for accelerating earnings growth in 2026.

Currently rated a Zacks Rank #3 (Hold), CAT presents a compelling recovery narrative for investors seeking exposure to industrial cyclical strength. The combination of positive volume momentum, valuation near sector averages, and rising analyst estimates suggests the worst may be behind this industrial cornerstone.