Caterpillar Rallies 172%, Trades at 34x Forward Earnings on AI Power Boom
Caterpillar has rallied 172% over the past year and now trades at 34x forward earnings of $22.89, double its five-year average. Its Power & Energy segment posted Q4 revenues of $9.4B (+23% YoY) and $1.84B profits on 19.6% margins while a $51B backlog up 71% ensures near-term visibility.
1. Stock Rally and Valuation
Caterpillar's stock has climbed 172% over the past 12 months, reflecting a multiple expansion to 34x forward earnings of $22.89, double its five-year average of 17x as investors price in sustained growth.
2. Power & Energy Segment Performance
The Power & Energy segment generated $9.4 billion in Q4 2025 revenues, up 23% year-over-year, and $1.84 billion in profits on 19.6% margins, driven by surging demand for large generator sets and gas turbines.
3. Record Backlog Provides Visibility
A record $51 billion backlog, up 71% year-over-year with 62% expected to convert within 12 months, underpins revenue visibility and includes four prime power orders exceeding 1 gigawatt each.
4. Capex Plans and AI Tailwinds
Management plans $3.5 billion in 2026 capital expenditures, a 25% increase, to double large engine capacity and more than double industrial gas turbine capacity by 2030, aligning with hyperscaler AI infrastructure needs.