Caterpillar Inc. (CAT Quick QuoteCAT - Free Report) reported adjusted earnings per share of $4.72 for the second quarter of 2025, which missed the Zacks Consensus Estimate of $4.88 by a margin of 3.3%. The bottom-line figure was down 21% year over year due to lower revenues and elevated costs owing to tariffs.

Including one-time items, Caterpillar’s earnings per share were $4.62, a 16% decline compared with the reported figure of $5.48 in the year-ago quarter.

CAT’s Q2 Revenues Slip on Weaker Pricing

Caterpillar reported revenues of around $16.57 billion, which beat the Zacks Consensus Estimate of $16.35 billion by a margin of 1.3%. 

The top line dipped 1% year over year as unfavorable price realization of $414 million offset higher sales volume of $237 million. Higher sales volume was mainly driven by increased sales of equipment to end users. 

Caterpillar witnessed revenue declines of 2% in North America, 4% in Latin America and 2% in Asia Pacific. EAME was the only bright spot, delivering 6% growth.

On a positive note, Caterpillar reported a record sequential backlog growth of $2.5 billion in the quarter. Its backlog is currently a solid $37.5 billion.

Caterpillar’s Q2 Profitability Pressured by Tariffs

Cost of sales increased 6.5% year over year to approximately $10.8 billion, primarily driven by unfavorable manufacturing costs, including the impact of higher tariffs. Gross profit was down 12% to $5.76 billion from the prior-year quarter. The gross margin was 34.8% compared with 39.2% in the year-ago quarter.

Selling, general and administrative expenses moved up 2.5% year over year to around $1.69 billion. Research and development expenses were up 3% to $551 million. 

CAT reported an operating profit of $2.86 billion, a 18% decline from the year-ago quarter. The operating margin was 17.3%, a 360-basis-point contraction from the year-ago quarter.

Adjusted operating profit was around $2.92 billion, down 22% from the year-ago quarter. The adjusted operating margin was 17.6% compared with 22.4% in the second quarter of 2024.

Caterpillar’s Segment Performances in Q2

Machinery and Energy & Transportation (ME&T) sales dipped 1% year over year to around $15.67 billion. 

Construction Industries' total sales were down 7% year over year to $6.19 billion on lower sales volume and unfavorable price realization. The impact of changes in dealer inventories weighed on volumes in the quarter. Regionally, sales dropped 15% in North America and 20% in Latin America, which was offset by a 13% rise in EAME and 6% in Asia/Pacific. The segment’s total sales were lower than our estimate of $6.37 billion. 

Total sales in the Resource Industries segment were down 4% year over year to $3.09 billion, mainly owing to unfavorable price realization and somewhat lower volumes.

Sales in EAME and Latin America were up 13% and 3%, respectively, but were offset by a 10% decline in sales in Asia/Pacific and 8% in North America. The segment’s second-quarter total sales were a bit higher than our projection of $3.06 billion. 

Sales of the Energy & Transportation segment were around $7.84 billion, a 7% increase from last year’s quarter aided by higher sales volumes, favorable currency impacts and price realization. Our estimate for the segment’s sales for the quarter was $7.47 billion.

The segment reported sales growth in Power Generation (28%), Oil and Gas sector (2%) and in the Industrial sector (1%), which was offset by a 7% decline in the Transportation sector. Regionally, a 14% sales increase in North America and 12% in Latin America was offset by decreases of 2% in EAME and 1% in Asia/Pacific.

The ME&T segment reported an operating profit of around $2.8 billion, down 24% year over year. Our model’s projection was $2.88 billion.

The Energy & Transportation segment reported a 4% year-over-year increase in operating profit to $1.59 billion, a bit lower than our estimate of $1.61 billion. 

The Construction Industries segment’s operating profit was down 29% year over year to $1.24 billion. Our projection was $1.23 billion. 

The Resource Industries segment’s operating profit slumped 25% year over year to $0.54 billion. Our estimate for the segment’s operating profit was $0.58 billion. 

Financial Products’ total revenues rose 4% from the year-ago quarter to $1.04 billion. The segment reported a profit of $248 million, marking a 9% increase year over year. Our model had projected revenues of $1.02 billion and an operating profit of $306 million for the second quarter of 2025.

Caterpillar’s Cash Position

Caterpillar generated an operating cash flow of $4.4 billion in the first half of 2025 compared with $5.07 billion in the prior-year comparable period.

The company returned around $1.5 billion in cash to shareholders as dividends and share repurchases through the second quarter. CAT ended the quarter with cash and equivalents of around $5.4 billion, lower than the cash holding of around $6.9 billion at 2024-end.

CAT’s Expectations for Q325 & 2025

The company anticipates revenues in the third quarter of 2025 to grow moderately year over year. CAT anticipates $400-$500 million in headwind from tariffs for the quarter. Adjusted operating margin is anticipated to be in line with third quarter of 2024, excluding tariff impact. However, including the impact of tariffs, adjusted operating margin will be lower than the year-ago quarter.

CAT now expects 2025 revenues to be slightly higher compared with 2024, an improvement from its prior projection of flat revenues. 

The company outlined its outlook for 2025 operating margins for both the scenarios, including and excluding net incremental tariffs of around $1.3-$1.5B. 
Excluding tariffs, adjusted operating margin is expected to be in the top half of its target range, corresponding to the anticipated level of revenues. Considering the impact of tariffs, Caterpillar expects the adjusted operating margin to be in the bottom half of its target range.

Caterpillar expects ME&T free cash flow in 2025 to be near the midpoint of its targeted range of $5-$10 billion.

Manufacturing & Construction Stocks’ Recent Results

Terex Corporation (TEX Quick QuoteTEX - Free Report) posted adjusted earnings of $1.49 per share for the second quarter of 2025, marking a 31% decline year over year. However, the figure came in ahead of the Zacks Consensus Estimate of $1.44.

Terex’s revenues for the quarter totaled $1.487 billion, up 7.6% from the year-ago period and also exceeding the Zacks Consensus Estimate of $1.455 billion. Terex guides revenues in the range of $5.3- $5.5 billion in 2025 and earnings per share between $4.70 and $5.10.

Komatsu (KMTUY Quick QuoteKMTUY - Free Report) reported adjusted earnings per share of 69 cents, an 8% decline year over year. Komatsu reported revenues of $6.3 billion, 2.3% higher than the year-ago quarter.  

Komatsu expects 2025 sales of around $27.7 billion compared with $26.95 billion in 2024.

Another Manufacturing & Construction Stock Awaiting Result

The Manitowoc Company (MTW Quick QuoteMTW - Free Report) is set to release its second-quarter 2025 results on Aug. 7. The Zacks Consensus Estimate for Manitowoc’s earnings is pegged at 20 cents per share, indicating a 20% decline from the year-ago quarter.

The consensus estimate for Manitowoc’s top line is pegged at $570 million, indicating a 1.4% rise from the prior year’s actual. MTW has a trailing four-quarter average earnings surprise of negative 81.4%.

Caterpillar Stock’s Price Performance & Zacks Rank

Over the past year, Caterpillar's stock has gained 32.8% compared with the industry’s 30.6% growth.

Image Source: Zacks Investment Research

Caterpillar carries a Zacks Rank #3 (Hold) at present. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.