Caterpillar Inc. CAT and Komatsu Ltd. KMTUY are the world’s leading manufacturers of construction and mining equipment, with Caterpillar at the top spot and Komatsu a close second. Known for their iconic yellow machines, both serve a wide variety of sectors like infrastructure, construction, mining, oil and gas, industrial, and transportation.
Illinois-based Caterpillar has a market capitalization of $165 billion, whereas Tokyo, Japan-based Komatsu has a market capitalization of $27.4 billion. Currently, 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 hard-earned money on. To find out, let us dive into the fundamentals, growth prospects and challenges of both Caterpillar and Komatsu.
The Case for Caterpillar
CAT has seen revenue declines for the past five quarters, with earnings also falling in the last three. In its first-quarter 2025 report, CAT’s revenues dropped 9.8%, the sharpest decline in the past five quarters. The earnings decline was more pronounced (24.1%) in contrast with the drop in the single digits in the previous two quarters.
The lackluster performance stemmed from declining volumes in its Resource Industries and Construction Industries segments, led by subdued customer spending. Resource Industries volumes have declined for seven quarters in a row, and the same has fallen for six quarters for Construction Industries. Even the Energy and Transportation segment, which had shown resilience earlier, reported volume declines over the last two quarters. However, despite this, the segment delivered a 1% year-over-year improvement in operating profit in the first quarter, which was not sufficient to negate the declines in the other two segments.
The charts below show Caterpillar's revenue and earnings trends in the past four quarters.
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Image Source: Zacks Investment Research
Zacks Investment Research
Image Source: Zacks Investment Research
CAT has also been impacted by the downturn in China's real estate sector, particularly for 10-ton and larger excavators, which was once a key market for the company. Weak demand in Europe added to revenue pressures. The contraction in the U.S. manufacturing sector adds to the concerns.
The company outlined its outlook for 2025 for both pre- and post-tariff scenarios. Excluding tariffs, revenues will likely be flat compared with that reported in 2024, and the adjusted operating profit margin is expected to be in the top half of its target range. Including tariffs, revenues are anticipated to be down slightly year over year and the adjusted operating profit margin is expected within its target range.
Encouragingly, the Energy and Transportation segment is expected to offset weaker results in the Construction Industries and Resource Industries segments. While high labor costs and potential tariffs remain risks, Caterpillar’s pricing and cost-control initiatives should help cushion the impacts. CAT has a significant production base in the United States, which will give it a competitive advantage over companies reliant on imports.
Recently, Joseph Creed has replaced James Umpleby as CEO on May 1. Creed’s ability to navigate CAT through the current challenges will be closely watched.
Looking ahead, Caterpillar stands to benefit from the surge in projects, driven by the United States Infrastructure Investment and Jobs Act. 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 fleets are gaining momentum among miners.
As technology companies establish data centers globally to support their generative AI applications, Caterpillar is witnessing robust order levels for reciprocating engines for data centers. The company is planning to double its output with a multi-year capital investment. CAT’s efforts to grow its aftermarket parts and service-related revenues, which generate high margins, will also aid growth.
The Case for Komatsu
KMTUY reported fiscal 2024 results (ended March 31, 2025), with net sales increasing 6.2%, operating income rising 8.2% and net income jumping 11.7%. The Construction, Mining and Utility Equipment segment reported a 5.1% increase in net sales, whereas segment profit increased 4.3%. However, the sales increase was mainly due to the positive effects of the Japanese yen’s depreciation and improved selling prices, which helped offset the impacts of lower volumes.
Komatsu witnessed improvement in net sales and profits in the Industrial Machinery and Others segment. This was mainly due to increased sales of large press machines and machine tools concerning presses, sheet-metal machines and machine tools for the automobile manufacturing industry and due to a recovery in maintenance revenues of the Excimer lasers with respect to the business with the semiconductor manufacturing industry.
The charts below depict a general increase in revenues and earnings in the past four quarters for Komatsu.
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Image Source: Zacks Investment Research
Zacks Investment Research
Image Source: Zacks Investment Research
For fiscal 2025, KMTUY expects an 8.8% year-over-year decline in net sales, a 27.3% dip in operating income and a 29.7% fall in net income. Construction, Mining and Utility Equipment’s sales will decrease 9.4% as higher sales volume and prices will be offset by the negative effects of the Japanese yen’s appreciation and U.S. tariffs. Meanwhile, net sales for the Industrial machinery and others segment are expected to rise 3.5% 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 140 billion yen ($976 million) from increased costs linked to U.S. tariffs. The burden for fiscal 2025 is estimated at 78 billion yen ($535 million), considering existing inventory.
To counter this, Komatsu intends to implement price hikes. It is also banking on rising demand in mining to negate the impacts.
KMTUY is poised well for the future, given its technological innovation and efforts to grow its product portfolio. It is strengthening its underground hard rock mining equipment business through an enhanced lineup, the development of the latest mining methods and strategic acquisitions. Komatsu also showcased its construction equipment designed to withstand extreme environments, such as on the moon and underwater. KMTUY recently became the first company in the mining industry to autonomously operate a power-agnostic electric drive haul truck while connected to a dynamic trolley line. This represents a major step in Komatsu’s ambition to combine electrification and autonomy to help mining customers reduce carbon emissions and enhance productivity.
How Do Estimates Compare for CAT & KMTUY?
The Zacks Consensus Estimate for Caterpillar’s 2025 earnings is at $18.94, indicating a year-over-year decline of 13.5%. The estimate for 2026 of $21.31 suggests a rise of 12.5%. EPS estimates for both 2025 and 2026 have been trending south over the past 60 days.
The Zacks Consensus Estimate for Komatsu’s fiscal 2025 earnings is at $2.87, indicating a year-over-year fall of 7.7%. The 2026 estimate of $3.10 implies growth of 12.8%. Both estimates have been trending north over the past 60 days.
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(Find the latest earnings estimates and surprises on Zacks Earnings Calendar.)
Caterpillar & Komatsu: Price Performance, Valuation & Other Comparisons
Year to date, the CAT stock has declined 3.6%, whereas KMTUY has gained 8.4%. KMTUY has also outperformed the Zacks Manufacturing - Construction and Mining industry, the Industrial Products Sector and the S&P 500, as shown in the chart below.
CAT & KMTUY’s YTD Performance
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Caterpillar is currently trading at a forward 12-month earnings multiple of 17.62, higher than its five-year median. The Komatsu stock is trading at a forward 12-month earnings multiple of 10.22X, lower than its five-year median. CAT is trading at a premium to the industry average of 16.76X, while KMTUY is trading at a discount.
CAT & KMTUY’s Valuation
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Image Source: Zacks Investment Research
CAT’s dividend yield of 1.61% is lower than KMTUY’s 2.83%.
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Image Source: Zacks Investment Research
Caterpillar or Komatsu: Which Stock is Better for Your Portfolio?
Both CAT and KMTUY are poised well for the long run, backed by their solid product lineups and innovation efforts. However, Caterpillar is facing short-term pressure from declining volumes and weak global demand, and its downward estimate revision activity indicates negative analyst sentiment at the moment.
Caterpillar and Komatsu currently have a Zacks Rank #3 (Hold) each, which makes choosing one stock a difficult task. While KMTUY is more exposed to tariff risks and currency fluctuations, considering its cheaper valuation, VGM Score of A and upward estimate revision activity, the KMTUY stock appears to be a more compelling investment choice than CAT, which has a VGM score of D.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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