The Bull Case for Caterpillar (CAT) Could Change Following New Data Center Energy Collaboration With Vertiv

• Vertiv and Caterpillar Inc. recently announced a partnership to integrate Vertiv’s power and cooling systems with Caterpillar’s and Solar Turbines’ expertise in power generation and combined cooling, heat and power (CCHP) to offer modular, efficient energy solutions for data centers.
• This collaboration responds to growing demand for on-site data center energy infrastructure and positions Caterpillar to offer validated, pre-engineered systems to accelerate deployment and improve energy efficiency for customers.
• We’ll explore how Caterpillar’s expanded data center focus through this Vertiv alliance could influence its long-term investment outlook.

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Caterpillar Investment Narrative Recap

To be a Caterpillar shareholder today, you need to believe that the company's growing presence in data center energy infrastructure and a record order backlog can offset near-term risks such as tariff headwinds. The recent Vertiv partnership strengthens Caterpillar’s data center strategy, but the main short-term catalyst continues to be robust order flow in Energy & Transportation, while margin pressure from tariffs remains a material risk to watch.

Of Caterpillar’s recent announcements, its third-quarter earnings report is most relevant. Despite beating revenue and earnings estimates and confirming strong demand across segments, management reiterated that higher tariffs could pressure profitability, underscoring the importance of top-line growth to offset these cost challenges.

Yet, investors should also be aware that, despite new partnerships and backlog gains, Caterpillar’s ability to sustain margins could be challenged if tariff costs persist…

Read the full narrative on Caterpillar (it's free!)

Caterpillar's narrative projects $74.0 billion in revenue and $13.5 billion in earnings by 2028. This requires 5.5% yearly revenue growth and a $4.1 billion earnings increase from the current $9.4 billion.

Uncover how Caterpillar's forecasts yield a $587.67 fair value, in line with its current price.

Exploring Other Perspectives

Nineteen individual fair value estimates from the Simply Wall St Community range from US$291.79 to US$587.67 per share. Ongoing tariff pressures and margin risks are central to the broader debate about Caterpillar’s earnings stability, so consider these perspectives as you form your own view.

Explore 19 other fair value estimates on Caterpillar - why the stock might be worth 49% less than the current price!

Build Your Own Caterpillar Narrative

Disagree with existing narratives? Create your own in under 3 minutes - extraordinary investment returns rarely come from following the herd.

• A great starting point for your Caterpillar research is our analysis highlighting 1 key reward and 2 important warning signs that could impact your investment decision.
• Our free Caterpillar research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate Caterpillar's overall financial health at a glance.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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