⚠ The 2023 Price Was a One-Time StepModerate threat

Caterpillar (CAT) — threat to the moat

Caterpillar's 2023 price rises came in an inflationary year, and it gave some back in construction once inflation passed.

Part of the 2023 increase may have been a tide rather than a moat: prices customers accepted because costs everywhere were rising. Once inflation eased, so did Caterpillar's price realization: $5,596 million in 20231, $1,238 million in 20242, minus $817 million in 20253.

Construction Industries price realization ($M)+2,6782023-702024-1,1362025Caterpillar Forms 10-K FY2023-FY2025, sales bridges
From the biggest gain to the biggest give-back.

The danger is that part of what looked like pricing power was the market's general tolerance for price rises. Construction Industries, which had contributed $2,678 million of price in 20234, gave back $1,136 million in 20255.

The segment's margin fell with it, from 25.4% in 2023 to 18.7% in 20256.

Resource Industries followed the same path. Its price realization was $1,422 million in 20237, $405 million in 20248 and minus $272 million in 20259. Power & Energy was the only segment still adding price in 2025, with $592 million10.

The 2026 figures will separate the two explanations. The company guided to favourable price realization of about 2 percent of sales and revenues11; getting it while rivals are not raising prices would show real pricing power, while missing it would show 2023 was the market, not the moat.

References
  1. ReportedOnce inflation eased, so did Caterpillar's price realization: $5,596 million in 2023, $1,238 million in 2024, minus $817 million in 2025.
    Caterpillar Form 10-K for fiscal 2023 - the 2023 sales bridge by segment, operating margin of 19.3 percent against 13.3 percent, and the Longwall divestiture. — FY2023 · publ. February 2024 · source ↗
  2. ReportedOnce inflation eased, so did Caterpillar's price realization: $5,596 million in 2023, $1,238 million in 2024, minus $817 million in 2025.
    Caterpillar Form 10-K for fiscal 2024 - the 2024 sales bridge (price realization and sales volume). — FY2024 · publ. February 2025 · source ↗
  3. ReportedOnce inflation eased, so did Caterpillar's price realization: $5,596 million in 2023, $1,238 million in 2024, minus $817 million in 2025.
    Caterpillar Form 10-K for fiscal 2025 - Item 7 MD&A: consolidated results, sales and profit bridges, tariffs, dealer inventory and the 2026 outlook. — FY2025 · publ. 13 February 2026 · source ↗
  4. ReportedConstruction Industries, which had contributed $2,678 million of price in 2023, gave back $1,136 million in 2025.
    Caterpillar Form 10-K for fiscal 2023 - the 2023 sales bridge by segment, operating margin of 19.3 percent against 13.3 percent, and the Longwall divestiture. — FY2023 · publ. February 2024 · source ↗
  5. ReportedConstruction Industries, which had contributed $2,678 million of price in 2023, gave back $1,136 million in 2025.
    Caterpillar Form 10-K for fiscal 2025 - note on segment information: sales, profit and external sales by segment and application. — FY2025 · publ. 13 February 2026 · source ↗
  6. Moat Explorer calcThe segment's margin fell with it, from 25.4% in 2023 to 18.7% in 2025.
    Moat Explorer calculation from Caterpillar's reported figures ($ millions unless stated). Dealers: 41 + 109 = 150 (2025); 43 + 113 = 156 (2022); 46 + 119 = 165 (2019). Segment margins (segment profit / total segment sales, FY2025 10-K basis): Construction Industries 6,975 / 27,418 = 25.4% (2023), 6,165 / 25,455 = 24.2% (2024), 4,675 / 25,060 = 18.7% (2025); Resource Industries 2,836 / 13,669 = 20.7%, 2,538 / 12,471 = 20.4%, 1,988 / 12,474 = 15.9%; Power & Energy 4,936 / 28,001 = 17.6%, 5,736 / 28,854 = 19.9%, 6,418 / 32,201 = 19.9%; Financial Products 909 / 3,785 = 24.0%, 932 / 4,053 = 23.0%, 966 / 4,220 = 22.9%, 590 / 3,044 = 19.4% (2020). Recast (Rail in Resource Industries): 2,151 / 15,920 = 13.5% (2025), 2,676 / 15,745 = 17.0% (2024); Power & Energy 6,256 / 28,624 = 21.9%. Construction Industries H1 2026 3,482 / 15,507 = 22.5%. Implied Rail: sales 15,920 - 12,474 = 3,446 and profit 2,151 - 1,988 = 163, 163 / 3,446 = 4.7% (2025); sales 15,745 - 12,471 = 3,274 and profit 2,676 - 2,538 = 138 (2024). Power generation 10,275 / 3,963 = 2.6 times (2020-2025); 10,275 / 67,589 = 15.2% of sales and revenues; three times the 2024 base 7,756 x 3 = 23,268. Oil and gas 7,502 / 27,143 = 27.6% of Power & Energy external sales; 7,502 / 3,701 = 2.0 times. Services 24 / 67.589 = 35.5%; (30 / 24)^(1/5) - 1 = 4.6% a year. Backlog 72.1 / 30.0 = 2.4 times; long end 29.2 / 19.3 - 1 = 51%. Customer advances 4,777 / 3,314 - 1 = 44%. Price realization H1 2026 426 + 595 = 1,021; 2024 against 2023 1,238 / 5,596 = 22%. Volume H1 2026 2,318 + 3,113 = 5,431. Capex excluding leased equipment 2,821 / 1,597 - 1 = 77%. Pre-tax return on average MP&E net assets (MP&E adjusted operating profit / average MP&E net assets): 4,675 / 20,070 = 23.3% (2020), 6,453 / 19,662 = 32.8% (2021), 8,656 / 19,841 = 43.6% (2022), 13,439 / 19,450 = 69.1% (2023), 13,246 / 19,999 = 66.2% (2024), 11,327 / 21,417 = 52.9% (2025). Profit 8,884 / 6,147 - 1 = 44.5% and diluted EPS 18.81 / 10.26 - 1 = 83.3% (2018-2025). Dividends paid 2,749 / profit 8,884 = 30.9%. Return on average equity 8,884 / ((19,494 + 21,318) / 2) = 43.5%. Price to earnings at year end (market capitalisation $bn / profit $bn): 39.57 / 2.512 = 15.8 (2015); 93.75 / 0.754 = 124.3 (2017); 74.98 / 6.147 = 12.2 (2018); 81.62 / 6.093 = 13.4 (2019); 98.88 / 2.998 = 33.0 (2020); 111.83 / 6.489 = 17.2 (2021); 124.67 / 6.705 = 18.6 (2022); 150.52 / 10.335 = 14.6 (2023); 175.14 / 10.792 = 16.2 (2024); 268.09 / 8.884 = 30.2 (2025); trailing 370.15 / 10.844 = 34.1. Share price 805.25 / 1,073.46 - 1 = -25%. Trailing twelve months to June 2026: sales and revenues 67,589 - 30,818 + 37,958 = 74,729; profit 8,884 - 4,182 + 6,142 = 10,844; diluted EPS 18.81 - 8.82 + 13.23 = 23.22. Debt at 30 June 2026 5,046 + 35 + 8,026 + 10,655 + 21,384 = 45,146; at 31 December 2025 5,514 + 35 + 7,085 + 10,678 + 20,018 = 43,330; Financial Products debt 5,514 + 7,085 + 20,018 = 32,617, 32,617 / 43,330 = 75%. Financial Products segment assets 41,476 / 64,392 = 64%. Downturns: 38,537 / 47,011 - 1 = -18% (2016); 41,748 / 53,800 - 1 = -22% (2020). Construction Industries Asia/Pacific external sales 3,783 / 4,390 - 1 = -14%; North America share 14,064 / 24,800 = 57%. Shares of 2025 sales and revenues of 67,589: Construction Industries 24,800 = 36.7%; Resource Industries 12,185 = 18.0%; Power & Energy 27,143 = 40.2%; Financial Products 4,220 = 6.2%; Construction and Resource together (24,800 + 12,185) / 67,589 = 54.7%. Segment external sum 27,143 + 24,800 + 12,185 + 4,220 = 68,348 against 67,589 (difference 759, All Other +46 and corporate items -805); 2024 25,344 + 12,100 + 24,088 + 4,053 = 65,585 against 64,809 (776); 2023 27,294 + 13,329 + 23,355 + 3,785 = 67,763 against 67,060 (703). Power & Energy share 27,143 / 68,348 = 39.7%. 2030 range: 64,809 x 1.06^6 = 91,933; 64,809 x 1.09^6 = 108,691. RPMGlobal 733 / 67,589 = 1.1%. Autonomous trucks 827 / 690 - 1 = 20%; 690 x 3 = 2,070. Tech-enabled machines 500 / 191 = 2.6 times. Latin America employees 22,300 - 19,700 = 2,600 (EAME 16,700 - 15,900 = 800; Asia/Pacific 26,900 - 25,300 = 1,600; North America 52,100 - 52,000 = 100). Profit 2025 8,884 / 10,792 - 1 = -17.7%. Cost of goods sold 44,752 / 40,199 - 1 = 11.3%. Financial Products segment assets 41,476 / 36,925 - 1 = 12.3%. Power generation growth 7,756 / 6,362 - 1 = 21.9%, 10,275 / 7,756 - 1 = 32.5%. Engine capex at 4% to 5% of 2025 machinery, power and energy sales of 63,980: 2,559 to 3,199. Earnings implied by forward and trailing P/E 34.70 / 28.01 - 1 = 24%. Analyst target 975.61 / 805.25 - 1 = 21%. Segment capex 2025: Construction Industries 358 + Resource Industries 626 = 984, against Financial Products 1,341. Power & Energy Q2 2026 external sales: North America 4,182 against other regions 373 + 1,348 + 892 = 2,613 - segment margins, growth and price realization. — 2015-2026 · publ. September 2026 · source ↗
    Method: Arithmetic on figures reported in Caterpillar's Forms 10-K, 10-Q, results releases, the March 2026 recast exhibit, the February 2026 Barclays deck, the earnings calls and market data; operands shown in the source line.
  7. ReportedIts price realization was $1,422 million in 2023, $405 million in 2024 and minus $272 million in 2025.
    Caterpillar Form 10-K for fiscal 2023 - the 2023 sales bridge by segment, operating margin of 19.3 percent against 13.3 percent, and the Longwall divestiture. — FY2023 · publ. February 2024 · source ↗
  8. ReportedIts price realization was $1,422 million in 2023, $405 million in 2024 and minus $272 million in 2025.
    Caterpillar Form 10-K for fiscal 2024 - the 2024 sales bridge (price realization and sales volume). — FY2024 · publ. February 2025 · source ↗
  9. ReportedIts price realization was $1,422 million in 2023, $405 million in 2024 and minus $272 million in 2025.
    Caterpillar Form 10-K for fiscal 2025 - Item 7 MD&A: consolidated results, sales and profit bridges, tariffs, dealer inventory and the 2026 outlook. — FY2025 · publ. 13 February 2026 · source ↗
  10. ReportedPower & Energy was the only segment still adding price in 2025, with $592 million.
    Caterpillar Form 10-K for fiscal 2025 - note on segment information: sales, profit and external sales by segment and application. — FY2025 · publ. 13 February 2026 · source ↗
  11. ReportedThe company guided to favourable price realization of about 2 percent of sales and revenues; getting it while rivals are not raising prices would show real pricing power, while missing it would show 2023 was the market, not the moat.
    Caterpillar Form 10-K for fiscal 2025 - Item 7 MD&A: consolidated results, sales and profit bridges, tariffs, dealer inventory and the 2026 outlook. — FY2025 · publ. 13 February 2026 · source ↗
Sources
Generated September 25, 2026