CAT vs. KMTUY: Which Heavy Equipment Stock is the Better Buy?

December 18, 2025 — 09:28 am EST Written by Madhurima Das for Zacks-> Caterpillar Inc. CAT and Komatsu Ltd. KMTUY rank among the world’s largest manufacturers of heavy equipment. Caterpillar holds the top position, with Komatsu close behind, in the Zacks Manufacturing – Construction and Mining industry. Recognized globally for their iconic yellow machinery, both companies cater to a broad range of end markets, including infrastructure, construction, mining, oil and gas, industrial applications, and transportation.Illinois-based Caterpillar has a market capitalization of $275.6 billion, whereas Tokyo, Japan-based Komatsu has a market capitalization of $30.4 billion. Around 80% of KMTUY’s revenues are generated outside of Japan, highlighting its international footprint.Both are closely watched by investors to gauge the health of the broader manufacturing and infrastructure landscape, especially during periods of economic uncertainty. The question is which stock you should put your money on. To find out, let us dive into the fundamentals, growth prospects and challenges of both Caterpillar and Komatsu.In the third quarter of 2025, Caterpillar posted record revenues of $17.6 billion, up 9.5% year over year., mainly driven by a 10% increase in sales volume. The company returned to revenue growth after six quarters of declines, supported by upbeat performances across all regions and segments. Earnings per share, however, were down 4% year over year to $4.95 due to tariff-related pressures.CAT now expects 2025 revenues to be “modestly” higher compared with 2024, an improvement from its prior projection of “slightly” higher revenues. Net incremental tariffs are projected at $1.6-$1.75 billion for 2025. Caterpillar thus expects the adjusted operating margin to land near the bottom of its target range. The company’s pricing and cost-control initiatives should help cushion the impacts. CAT maintains its revenue projection at $42-$72 billion, and margins are anticipated between 10% and 22%, per the respective revenue levels.Looking ahead, CAT stands to benefit from the surge in projects, driven by the United States Infrastructure Investment and Jobs Act, creating opportunities for its diverse construction equipment portfolio. The shift toward clean energy will drive the demand for essential commodities, boosting the need for Caterpillar’s mining equipment. Meanwhile, given their efficiency and safety, CAT’s autonomous fleet is gaining momentum among miners. As technology companies establish data centers globally to support their generative AI applications, the company is witnessing robust order levels for reciprocating engines for data centers. It is planning to double its output with a multi-year capital investment. Caterpillar recently entered into a long-term strategic collaboration with Hunt Energy Company, L.P., to meet the surging power needs of data centers. The first project is planned for Texas and is expected to serve as the launchpad for a multi-year program to deliver up to one gigawatt of power generation capacity for data centers across North America. Caterpillar also entered into an agreement to develop advanced energy optimization solutions for data centers. This collaboration focuses on integrating Vertiv's power distribution and cooling portfolio with Caterpillar’s know-how in power generation and CCHP (Combined Cooling, Heat and Power). CAT has been seeing growth in aftermarket parts and service-related revenues, which generate high margins. The company is, thus, focused on doubling its service revenues from $14 billion in 2016 to $28 billion in 2026.KMTUY reported a 2.6% year-over-year decline in net sales to JPY982.1 billion ($6.3 million) in the second quarter of fiscal 2025 (ended Sept. 30, 2025). Net income attributable to Komatsu was also down 8.1% to JPY84.5 billion. The Construction, Mining and Utility Equipment segment saw a 4% decline in net sales, with segment profit decreasing 11.8%. The segment’s results reflect the appreciation of the yen against major currencies, as well as lower volumes and higher costs. Komatsu reported improvement in net sales and profits in the Industrial Machinery and Others segment on increased sales of large press for the automotive industry and higher-margin excimer laser maintenance for the semiconductor industry.Komatsu has now reported year-over-year declines in net sales, net income and lower results for the Construction, Mining and Utility Equipment segment in both the quarters of fiscal 2025. The company had reported improvement in these metrics in each of the quarters of fiscal 2024. For fiscal 2025, KMTUY expects an 5.3% year-over-year decline in net sales and a 27.2% fall in net income. Construction, Mining and Utility Equipment’s sales will decrease 6% on lower sales volume, somewhat offset by higher prices. Meanwhile, net sales for the Industrial machinery and others segment are expected to rise 6% on higher volumes.Around 50% of products sold in the United States are imported (mainly from Japan and China), making it vulnerable to the U.S tariffs. Komatsu expects to suffer annual negative impacts of 90 billion yen ($0.58 billion) from increased costs linked to U.S. tariffs (payment basis). The impact on profit and loss, including cost reduction measures implemented during the period and adjusting for inventories, is at 55 billion yen ($0.35 billion). To counter this, Komatsu intends to implement price hikes. It is also banking on rising demand in mining to negate the impacts.Over the long term, Komatsu remains well-positioned due to its focus on technological innovation, automation and portfolio expansion. It plans to expand its Smart Construction and open technology platform for mining operations while advancing the automation and remote operations to construction equipment. Komatsu is also strengthening its underground hard rock mining equipment business through an enhanced lineup, the development of the latest mining methods and strategic acquisitions. The company also plans to expand its lineup of Software Defined Vehicles (SDVs) integrated with its solutions, with the intent to enhance safety, efficiency at customer sites. Aftermarket business sales account for about 50% of sales in construction, mining and utility equipment and around two-thirds of mining equipment revenues. The company plans to build its aftermarket business alongside new equipment sales and establish a profit structure less vulnerable to fluctuations in demand for new equipment.The Zacks Consensus Estimate for Caterpillar’s 2025 earnings is $18.42 per share, indicating a year-over-year decline of 15.9%. The estimate for 2026 of $21.95 suggests a rise of 19.2%. EPS estimates for both 2025 and 2026 have been trending north over the past 60 days.The Zacks Consensus Estimate for Komatsu’s fiscal 2025 earnings is $2.55 per share, indicating a year-over-year fall of 18%. The fiscal 2026 estimate of $2.67 implies growth of 4.71%. Both estimates have been trending north over the past 60 days.Image Source: Zacks Investment ResearchIn the past six months, CAT stock has gained 56.2%, whereas KMTUY has gained 1.9%. Image Source: Zacks Investment ResearchCaterpillar is currently trading at a forward 12-month earnings multiple of 25.80X. Komatsu stock is trading at a forward 12-month earnings multiple of 11.89X. CAT is trading at a premium to the industry average of 24.91X, while KMTUY is trading at a discount.Image Source: Zacks Investment ResearchCAT’s ROE 47.16% is higher than KMTUY’s 12.41%. Image Source: Zacks Investment ResearchBoth Caterpillar and Komatsu are well-positioned for long-term growth, supported by strong product portfolios and ongoing innovation. Caterpillar has returned to positive revenue growth and expects modest top-line expansion in 2025, while Komatsu continues to grapple with declining sales across the first half of fiscal 2025 and anticipates further declines for the full year.Caterpillar currently carries a Zacks Rank #2 (Buy), while Komatsu holds a Zacks Rank #4 (Sell). Despite Caterpillar’s richer valuation, its stronger growth outlook, favorable earnings momentum and superior return on equity makes it the more compelling investment choice at this time.You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Want to be tipped off early to our 10 top picks for the entirety of 2026? History suggests their performance could be sensational. From 2012 (when our Director of Research Sheraz Mian assumed responsibility for the portfolio) through November, 2025, the Zacks Top 10 Stocks gained +2,530.8%, more than QUADRUPLING the S&P 500’s +570.3%. Now Sheraz is combing through 4,400 companies to handpick the best 10 tickers to buy and hold in 2026. Don’t miss your chance to get in on these stocks when they’re released on January 5. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free reportCaterpillar Inc. (CAT) : Free Stock Analysis ReportKomatsu Ltd. (KMTUY) : Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchThe views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.This data feed is not available at this time.