3 Reasons to Buy Caterpillar Stock in 2026

By Reuben Gregg Brewer – Mar 7, 2026 at 11:15PM ESTKey PointsCaterpillar is largely known for its giant earth-moving equipment.The company's equipment is likely to be in high demand in 2026.Caterpillar (CAT 3.54%) is an iconic company with a huge portfolio of earth-moving products. In 2025, the company generated $67.6 billion in sales and $19.06 in adjusted earnings per share. The future is likely to be bright, as well, with the company's $51 billion backlog sitting at record levels. Here are three reasons to buy Caterpillar stock in 2026. 1. Caterpillar is benefiting from reshoring efforts Caterpillar's equipment gets used to build everything from roads to buildings, and a lot in between. Over the past several years, companies have made a material effort to build in their home markets rather than manufacturing abroad and importing finished products. This so-called reshoring move generally requires the construction of new factories and other assets. Image source: Getty Images. Notably, spending on manufacturing plants in the United States has increased by more than 40% since 2020. While this spending isn't quite as "hot" as it was a couple of years ago, it is still running at an elevated pace, and that should translate into strong demand for Caterpillar's products. For example, Caterpillar's sales to construction industries were up 11% worldwide in the fourth quarter of 2025. 2. Data centers are a new and growing category The hot construction topic of the day, however, is data centers. The emergence of artificial intelligence as a major new technology has dramatically increased the need for data centers. Spending on data centers has increased by nearly 350% since 2020. To be fair, construction spending on data centers is just a fraction of the spending on manufacturing. Still, data centers are an additional catalyst for demand. ExpandNYSE: CATCaterpillarToday's Change(-3.54%) $-24.96Current Price$681.12Key Data PointsMarket Cap$317BDay's Range$675.25 - $696.3352wk Range$267.30 - $789.81Volume160KAvg Vol2.8MGross Margin32.21%Dividend Yield0.87% 3. Caterpillar also provides power One lesser-known product category for Caterpillar is power. It makes engines that can provide power in remote locations or serve as backups in case of problems with the power grid. The company's power products are particularly useful for energy-related businesses that operate in remote areas, such as oil drilling. However, Caterpillar's power products can also help get a data center up and running before it has access to grid power. And those same products can keep a data center running even when the grid is down. Given the increasing importance of technology to modern life, Caterpillar's power business could be a hidden gem. There's one problem with Caterpillar There are clearly reasons to like Caterpillar stock in 2026. However, there is one sticking point that will stop many investors. The stock's 37x price-to-earnings ratio is far above its five-year average of roughly 19x. That said, Caterpillar's business tends to be cyclical, which can lead to material drawdowns. If you like the long-term opportunity Cat offers but not its current valuation, you should probably keep it on your wish list just in case there's a sell-off in 2026.Read NextMar 7, 2026 •By Reuben Gregg BrewerIs This Industrial Giant Actually an AI Play?Mar 1, 2026 •By Todd ShriberCan Caterpillar's Momentum Continue in 2026 and Beyond?Feb 17, 2026 •By James Halley2 Monster Stocks to Hold for the Next 10 YearsJan 15, 2026 •By Marc Guberti3 Top Dow Jones Dividend Stocks to Buy for Passive Income in 2026Sep 8, 2025 •By Josh CableCaterpillar Stock Keeps Inching Along. Is It a Good Buy for Steady Growth?Sep 6, 2025 •By Steven PorrelloCan $10,000 in Caterpillar Stock Turn Into $50,000 by 2030?About the AuthorReuben Gregg Brewer is a contributing Motley Fool stock market analyst covering energy, utilities, REITs, and consumer staples. He is the former director of research at Value Line Publishing, where he rose from mutual fund analyst to equity analyst before leading all research operations. Reuben holds a bachelor’s degree in psychology from SUNY Purchase, a master’s in social work from Columbia University, and an MBA from Regis University. He has been featured as a financial expert on CNBC and in the Financial Times, Barron’s, and InvestmentNews.TMFReubenGBrewerStocks MentionedCaterpillarNYSE: CAT$681.12(-3.54%)-$24.96*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.