Caterpillar (CAT) Earnings Preview: Stock Rally Pauses For Breath Leading In

Caterpillar Inc. (NYSE:CAT) is set to release its third-quarter 2025 financial results before the market opens today, as the equipment giant grapples with the impact of tariffs while striving to maintain its robust growth trajectory. Caterpillar's stock is down 0.46% in the last five days, as markets take a breather ahead of the earnings release, after what has been a very strong year for CAT bulls.

Analysts are projecting earnings per share (EPS) of $4.52 and revenue of $16.77 billion for the third quarter. These figures represent a considerable performance, but the shadow of tariffs looms large. Caterpillar has already warned about a significant financial hit, estimating a $500 million to $600 million impact on Q3 earnings and a staggering $1.5 billion to $1.8 billion impact for the full year due to the newly implemented tariffs.

The company's management has stated that while they are implementing measures to mitigate these increased costs, the fluid nature of trade negotiations makes it difficult to predict the ultimate outcome. This uncertainty has understandably weighed on market sentiment, leading to a 3% dip in premarket trading following the tariff announcement. Despite this, the company maintains its sales and revenue outlook, but expects its full-year adjusted operating profit margin to be near the lower end of its target range.

The market's reaction to the earnings report will largely depend on how well Caterpillar demonstrates its ability to navigate these tariff-related headwinds. Analysts will be scrutinizing the company's cost-cutting measures, pricing strategies, and overall operational efficiency to assess its resilience. Moreover, any updates on the company's outlook for the remainder of the year and beyond will be closely monitored.

Ultimately, the upcoming earnings release will serve as a critical test for Caterpillar. The company's ability to effectively manage the tariff challenges, maintain its profitability, and capitalize on growth opportunities could prove pivotal. After a 45.78% rally in the stock YTD, there is plenty that markets like about CAT, and with infrastructure investment accelerating, there may be more to come.