Caterpillar’s first quarter results for 2025 were shaped by lower sales volume, pricing headwinds, and changing dealer inventory patterns, leading to a decline in both revenue and margins compared to last year. Despite falling short of Wall Street’s expectations, management pointed to strong order rates and record growth in backlog as signs of underlying demand resilience. CEO Jim Umpleby credited the company’s merchandising programs for better-than-expected machine sales to users in Construction Industries, while also noting that lower dealer inventory build contributed to the volume shortfall.

Is now the time to buy CAT? Find out in our full research report (it’s free).

While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.

Our Top 5 Analyst Questions Caterpillar’s Q1 Earnings Call

• Michael Feniger (Bank of America) questioned the ability to offset $250-350 million in tariff costs, asking if pricing or cost reductions could fully mitigate the impact. Incoming CEO Joe Creed outlined short-term cost controls and longer-term supply chain adjustments, adding that pricing actions would depend on market and competitive factors.

• Rob Wertheimer (Melius Research) sought clarity on the interplay between dealer inventory trends, negative price realization, and customer demand optimism. Creed explained that merchandising programs boosted end-user sales, resulting in less dealer inventory build and growing backlog, signaling cautious optimism among dealers and customers.

• Tami Zakaria (JPMorgan) probed how the tariff cost range should be modeled for the back half of the year. CFO Andrew Bonfield explained that not all tariffs take effect immediately, and the company expects to implement additional mitigation measures as details and trade negotiations evolve.

• Kyle Menges (Citigroup) asked about potential for flat or positive pricing in Construction and Resource Industries as merchandising impacts moderate. Creed and Bonfield noted that pricing strategies will be tailored by segment and region, with the timing of any increases contingent on further clarity around tariffs.

• Jamie Cook (Truist Securities) inquired about the potential for Caterpillar's margins to become less volatile over time due to business mix. Creed and Bonfield emphasized that growth in services and end-market diversity should help reduce cyclicality and support more resilient margins going forward.

Catalysts in Upcoming Quarters

Looking ahead, the StockStory team will focus on (1) the pace and effectiveness of Caterpillar’s tariff mitigation strategies, (2) evidence that record backlog can be converted to revenue despite economic and policy uncertainty, and (3) margin resilience as pricing and cost controls are tested by shifting demand and competitive pressures. Progress in expanding service revenues and digital solutions will also be key benchmarks for long-term stability.

Caterpillar currently trades at $373.57, up from $307.14 just before the earnings. Is the company at an inflection point that warrants a buy or sell? The answer lies in our full research report (it’s free).

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