Caterpillar and Deere Hit Opposite Cycle Peaks: One Rides Momentum, One Hunts Value

Caterpillar (NYSE:CAT | CAT Price Prediction) and Deere & Company (NYSE:DE) just printed earnings that frame the two heavy equipment giants in opposite cycle positions.

Caterpillar rode a single-quarter record of $19.1 billion in Q4 powered by data center demand. Deere, one fiscal quarter ahead, called 2026 the bottom of the large ag cycle while construction surged. Same tariff pain, very different demand stories.

Power Generation Carries Cat. Construction Rescues Deere.

Caterpillar’s Power & Energy segment hit $9.40 billion, up 23%, with Power Generation alone up 44% to $3.23 billion as hyperscalers ordered large reciprocating engines for data centers. Construction Industries added 15% growth.

North America ran hot at 26%. The catch: operating margin compressed to 13.9% from 18%, with tariffs alone costing $1.030 billion in the quarter. Revenue is booming, but profit dollars are leaking.

Deere’s Q1 FY2026 told a mirror image. Construction & Forestry jumped 34% to $2.67 billion with operating profit more than doubling. Small Agriculture & Turf rose 24%.

The trouble spot: Production & Precision Agriculture grew just 3% while operating profit collapsed 59% on tariffs, unfavorable mix, and warranty costs. Revenue beat by 28.07%, yet net income still fell 24.51%. Margin leakage, meet a farmer who isn’t buying a new combine.

Momentum Buyer vs. Cycle Bottom Hunter

CEO Joe Creed leaned into strength, telling investors “With a record backlog, we enter the new year with strong momentum”. Caterpillar deployed $5.2 billion on buybacks in 2025. The stock reflects the enthusiasm, up 185.46% over one year and 46.43% year to date.

John May struck a more measured tone, saying “2026 represents the bottom of the current cycle”, and backed it by raising FY2026 net income guidance to $4.5 billion to $5 billion.

Deere is pushing its new 210, 230 & 260 P-Tier construction lineup and See & Spray precision tech. Shares are up 27.51% year to date, trading at 33x forward earnings.

The Next Test Is Whether Margins Catch Up to Revenue

I will be watching whether Cat can convert its record backlog into actual margin expansion as tariff absorption hopefully peaks. For Deere, the question is whether Small Ag and Construction growth of roughly 15% each can offset a large ag segment guided down 5-10%. Commodity prices and farm income will dictate how fast that cycle actually turns.

Why I Lean Toward Deere for the Next 12 Months

Cat is the better business right now. The data center tailwind is real, the backlog is record, and execution has been clean. But after a 185.46% one-year run, a lot of good news is in the price.

Personally, I find Deere more interesting. You are buying a company where management openly says this is the bottom, construction is already re-accelerating, and precision ag investments should compound once farmers re-engage.

Cat offers the momentum-and-buybacks profile, while Deere offers a cycle-bottom setup with a clearer catalyst path. Further tariff cost expansion in the next quarter would be a key risk signal for both names.