Caterpillar Inc. CAT reported positive volume growth in its segments in the third quarter of 2025, a phenomenon last witnessed in the second quarter of 2023. Total volumes increased $1.55 billion, contributing 10% to the revenue growth in the quarter. This improvement marks a sharp acceleration from the modest $237 million volume uptick (or 1.5% growth) seen in the second quarter, which had broken a streak of six consecutive quarters of declines.
The most notable development in the third quarter was the breadth of the recovery. Energy & Transportation led the improvement with an $870 million volume increase, followed by Construction Industries with $568 million and Resource Industries with $138 million. This broad-based expansion contrasts with the second quarter, where growth was driven by Energy & Transportation, while the other two segments witnessed volume declines.
The rebound is particularly significant given the prolonged weakness Caterpillar has faced. Prior to the third quarter of 2025, Construction Industries had posted seven straight quarters of falling volumes, while Resource Industries had logged eight consecutive quarters of decline.
In 2024, CAT reported a total volume decline of $3.5 billion, followed by a further $1.1 billion decline in the first quarter of 2025. Much of this weakness stemmed from sluggish end-market demand, substantial dealer inventory reductions and China’s persistent real estate slowdown. The latter has especially weighed on large excavator demand, a critical product category for the Construction Industries segment.
The company’s return to total volume growth in the second quarter and the third quarter’s solid performance across segments represent a meaningful shift in momentum.
This is encouraging considering that the ongoing macroeconomic uncertainty and tariff-related pressures have dampened the demand outlook in the industry. In October, the U.S. manufacturing sector contracted for the eighth straight month, while the New Orders Index fell for two months in a row.
The company expects strong year-over-year sales growth in the fourth quarter, supported by improved volumes across all three segments. Our model projects volume growth of 4.7% in 2025 and 5.7% in 2026, with positive volumes across all segments.
Industry peers like Terex Corporation TEX and Komatsu Ltd. KMTUY have been feeling the strain. Terex has seen seven straight quarters of negative organic growth in both its Material Processing and Aerial segments. The Material Processing segment has been impacted by lower end-market demand in its North America concrete business. Terex’s Aerial segment sees lower end-market demand in North America across most product lines as rental customers allocated less capital expenditures, focusing primarily on replacement requirements.
Komatsu experienced a decline in volumes within its Construction, Mining & Utility Equipment segment during fiscal 2024, which persisted in the first half of fiscal 2025 (April to September). Komatsu expects demand for construction, mining and utility equipment in fiscal 2025 to remain flat to decrease 5% compared with the fiscal 2024 level.
CAT’s Price Performance, Valuation & Estimates
CAT shares have gained 52.6% so far this year compared with the industry’s 55.7% growth. In comparison, the Zacks Industrial Products sector has gained 6.8%. The S&P 500 has moved up 18.3% in the same time frame.
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Caterpillar is currently trading at a forward 12-month price/earnings (P/E) ratio of 25.96X compared with the industry average of 24.75X.
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The Zacks Consensus Estimate for CAT’s 2025 earnings indicates a year-over-year decline of 16.03%. The consensus mark for revenues implies an increase of 2% for the year. The earnings estimate for 2026 indicates 18.4% growth, with revenues rising 7.7%.
Earnings estimates for Caterpillar for both 2025 and 2026 have moved up over the past 60 days, as shown in the chart below.
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Caterpillar stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
