Is CAT a good stock to buy? We came across a bullish thesis on Caterpillar Inc. on r/investing_discussion by Variant_Invest. In this article, we will summarize the bulls’ thesis on CAT. Caterpillar Inc.’s share was trading at $914.70 as of June 9th. CAT’s trailing and forward P/E were 45.03 and 37.45 respectively according to Yahoo Finance.
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Caterpillar Inc. provides construction and mining equipment, off-highway diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives in the United States and internationally. CAT is increasingly positioned as more than a traditional cyclical industrial company, yet the market continues to value it as if its earnings remain heavily tied to short-term commodity and construction cycles.
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The company’s record $51.2 billion backlog highlights a level of demand visibility that is structurally different from prior cycles, supported by long-duration infrastructure projects, energy transition investments, mining expansion, data center construction, and government-backed spending programs that are unlikely to reverse due to temporary macroeconomic weakness.
This backlog provides Caterpillar with multi-year revenue support and significantly improves earnings stability compared to historical periods. Beyond equipment sales, the company has also transformed its business mix by expanding its higher-margin recurring services segment, including replacement parts, predictive maintenance, fleet management software, and connected equipment monitoring solutions.
These recurring revenue streams reduce dependence on volatile new equipment demand while structurally lifting margins and free cash flow generation over time. Caterpillar’s consistent ability to generate returns on invested capital above its cost of capital, even during weaker economic environments, further demonstrates the durability of its competitive advantages. Its global dealer network, brand strength, pricing power, and entrenched customer relationships create meaningful barriers to entry that competitors, including lower-cost Chinese manufacturers, have struggled to overcome.
The bullish thesis argues that the market continues to underestimate the earnings durability created by the company’s services mix shift and backlog visibility. Under a normalized earnings framework that properly reflects these structural improvements, a substantially higher valuation appears justified, supporting the view that Caterpillar’s long-term upside remains significant.
Previously, we covered a bullish thesis on Deere & Company by Best Anchor Stocks in May 2025, which highlighted the company’s resilient margins, cycle-bottom recovery potential, and structurally higher profitability despite agricultural weakness. DE’s stock price has appreciated by approximately 13.64% since our coverage. Variant_Invest shares a similar view but emphasizes on Caterpillar Inc.’s recurring services revenue and record backlog visibility supporting long-term earnings durability.
Caterpillar Inc. is not on our list of the 40 Most Popular Stocks Among Hedge Funds. As per our database, 87 hedge fund portfolios held CAT at the end of the first quarter which was 86 in the previous quarter. While we acknowledge the risk and potential of CAT as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than CAT and that has 10,000% upside potential, check out our report about this cheapest AI stock.
Disclosure: None.
