CAT Stock Hits Record Highs Despite Caterpillar Expecting 75% YoY Rise In Q2 Tariff Costs – Why Are Investors Cheering?

• The firm said that it anticipates tariff costs of about $700 million in the second quarter.
• Caterpillar has lowered its full-year tariff cost projections.
• The management said the company will be able to manage tariff costs as it prepares to operate around the midpoint of its adjusted operating margin target range.

Shares of Caterpillar Inc. (CAT) hit a record high on Thursday after the company reported upbeat first-quarter earnings and outlined its 2026 outlook, despite elevated tariffs in the next quarter.

Caterpillar shares rose more than 9% on Thursday.  

The company reported adjusted earnings of $5.54 per share, beating analysts’ expectations of $4.65 per share, while revenue of $17.4 billion surpassed the consensus of $16.53 billion in the first quarter.

Caterpillar’s 2026 Guidance

Caterpillar said that, even though there is increased uncertainty due to geopolitical events and higher energy prices, it does not expect any material impact from these developments on its 2026 outlook. 

The firm’s management stated during the earnings call that it now anticipates low double-digit growth in full-year 2026 sales and revenue, and, with the improved outlook, the full-year adjusted operating profit margin will be higher than expected in January.

The company has also increased its free cash flow outlook, expecting it to be higher than in 2025.

Total first-quarter orders were an all-time record, providing a solid foundation for continued positive momentum, the management stated on the earnings call.

Caterpillar further added that the strong backlog growth was driven by added momentum in both power generation and oil and gas segments. The company expects further growth in power generation for both reciprocating engines and turbines, fueled by rising energy demand tied to data center construction for cloud computing and generative AI.

Tariff Headwinds

Caterpillar said that despite the impact of ongoing tariffs, it expects to see a higher operating margin in the second quarter. The company further said it anticipates tariff costs of about $700 million in the second quarter, a whopping 75% jump from the second-quarter 2025 figure.

The company expects to incur 50% of the tariff costs in its construction segment, 25% in both power and energy, and 25% in the resource industry segments.

It also lowered its full-year tariff cost projections. The company said it now expects the 2026 tariffs to be in the range of $2.2 billion to $2.4 billion. The company had previously expected tariffs to be about $2.6 billion for the full year.

Management also said the company will be able to manage tariff costs as it prepares to operate at the midpoint of its adjusted operating margin target range. 

According to the firm, its expectations for tariff costs in the second through fourth quarters have not changed significantly since January. Based on a recent ruling on tariffs by the U.S. Supreme Court, the company said it has removed these tariffs from its estimates.

How Did Retail Traders React?

On Stocktwits, retail sentiment surrounding the stock has remained in the ‘neutral’ region, amid ‘high’ message volumes.

Shares of Caterpillar have surged more than 47% year-to-date.

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