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QS Research · Michael Burry's Scion Capital analyst template · 2006

CATERPILLAR INC (CAT)

As of 2026-11-02 · 12/15 boxes filled from SEC filings and market data

Conclusion: SHORT

Conviction high · base case -45% · downside -62% · upside -29%

At $620.88, CAT is priced as if record TTM earnings are permanent. Using the FY2020–25 normalized EBITDA of $11.68B [S2] and cycle-appropriate 12–20x EV/EBITDA, the business is worth about $239–443 per share; a 16x base case gives $341, 45% below today. Even the 20x normalized upside case is $443, still 29% below the current price. The record backlog and AI power demand are real, but earnings are cyclical, pricing power is weak [S25], and insiders are selling heavily [S97]. The expected return is negative in all three cases, meeting the short rule.

Key numbers

The 15 boxes

  1. ✓ 1. Long-form business notes

    Caterpillar Inc. manufactures construction and mining equipment, engines, turbines, and locomotives, and provides financing through Cat Financial. In FY2025 sales and revenues were $67.589 billion, with primary segments Power & Energy, Construction Industries and Resource Industries. Products are sold mainly through an independent dealer network (150 dealers serving 190 countries), with turbines and locomotives sold directly. Compared with the oldest report (FY2020, $41.748 billion revenue), the Energy & Transportation segment was renamed Power & Energy and revenue grew.

  2. ✓ 2. Competitive advantage

    Caterpillar operates in highly competitive global markets, competing on product performance, customer service, quality and price; the FY2025 10-K reports no durable pricing power and notes price discounting pressures margins. The company has a large dealer network (150 dealers, 190 countries) and a record $51.2B backlog at FY2025, but dealers are non-exclusive and patents are not individually critical. Operating income cycled from $4.55B (FY2020) to $13.07B (FY2024) and $11.15B (FY2025), showing no stable margin or return advantage.

  3. ✓ 3. 10-Q takeaways

    Q2 2026 revenue rose 24% y/y to $20.543B and six-month revenue rose 23% to $37.958B on volume and price. Operating margin expanded to 20.9% in Q2 and 19.4% in H1, but Q2 operating profit included a $392M IEEPA tariff recovery. Dealer inventory built sharply, especially in Construction Industries. 2026 guidance calls for mid-to-high-teens sales growth, Q4 CI dealer inventory decline over $1B, tariff costs around $2.2B, and capex around $3.5B.

  4. ✓ 4. Corporate governance
  5. ✓ 5. Overview of the prior 3 years of 8-K filings
  6. ✓ 6. Other significant filings
  7. ✓ 7. Chronology of significant news and events
  8. ✓ 8. Comparables valuation interpretation
  9. ✓ 9. Insider trading interpretation
  10. ○ 10. Earnings-call notes
  11. ○ 11. Impression of the shareholder letter
  12. ○ 12. Scuttlebutt overview
  13. ✓ 13. Valuation and risk/reward summary
  14. ✓ 14. Current price suppression and potential catalysts

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