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Caterpillar’s CEO Says Demand Runs Past Its $72B Backlog. Here’s What That Means for the Stock

Wiltone Asuncion

Tue, September 22, 2026 at 2:50 AM GMT+3 6 min read

• CAT -1.04%

Key Stats for Caterpillar Stock

• Current Price: $808.99

• Target Price (Mid): ~$1,050

• Street Target: ~$980

• Potential Total Return: ~30%

• Annualized IRR: ~6% / year

What Happened?

Caterpillar (CAT) supplies the engines and turbines increasingly running data centers as permanent power plants, not backup, and its CEO just told investors that the shift is the durable one. Speaking with Wells Fargo's Jerry Revich on September 10, Chairman and CEO Joe Creed said the "great majority" of the on-site power projects Caterpillar is quoting are being designed as prime power, "that's going to be there to provide the power for the future," not temporary bridges until the grid catches up.

Shares closed at $808.99 on September 18, about 25% below the June high of $1,073, as the market debates whether the demand feeding Caterpillar's Power & Energy segment is a durable re-rating or a cyclical peak. At roughly 34 times trailing earnings, the stock is priced for permanence. Creed spent 45 minutes arguing that this is exactly what he sees, and what he said carries more weight than the fact that he appeared.

The Demand That Doesn't Fit in the Order Book

Creed's sharpest claim was that Caterpillar's record backlog understates real demand. The company holds factory slots for framework customers, the large hyperscalers and data center operators it plans with on a rolling three-to-five-year basis, and only moves a slot into backlog once the order firms. As a result, he said, "we have line of sight past the backlog," and "farther than what we have in the backlog." The company is already "pretty full for 2027 on large engines and turbines," with a first turbine order booked into 2030.

Most order books flatter the present; Caterpillar's hides part of the future. For context, the reported backlog reached a record $72 billion after the second quarter, up about 92% year over year, with 59% scheduled for delivery within twelve months. The point of the fireside was that the visible number is the floor.

Developers increasingly want natural gas prime power that runs continuously, rather than diesel that sits idle for emergencies, and Creed believes most of it stays. That changes the economics: prime power drives more fuel, more wear, and a wave of overhaul and parts demand years after the sale. "We'll hit overhaul cycles in the future," he said, calling the coming maintenance load "a great opportunity" for the dealer network. It is not theoretical. Developer Nscale is using Caterpillar G3500 engines for 2 gigawatts of on-site generation at a West Virginia campus supporting Microsoft and NVIDIA compute. Caterpillar's$24 billion services business is what compounds off that installed base.

The Glut Question He Wouldn't Dodge

Data center developers have announced roughly 101 gigawatts of on-site natural gas generation, according toRBC Capital Markets, and skeptics argue that much new supply invites discounting once it lands. His answer was measured, not dismissive. Caterpillar has been "very measured" adding capacity, its large-engine output is fungible across oil and gas, mining, and marine rather than tied to data centers alone, and the company expects "a cash payback before the end of the decade" without running the new lines flat out.

Caterpillar runs industry-leading Power & Energy margins, and Creed said that even in a future free-supply market, "we can be very competitive and maybe even grow share," framing eventual oversupply as "almost normal operating mode" rather than a cliff. That is the bet: a premium brand with a captive services annuity should hold price better than a commodity supplier when the cycle loosens. EnterpriseEBIT margin already reflects the current strength, expanding to 21.89% in the second quarter from 17.71% in the first. Whether it holds against 101 gigawatts of competing capacity is the argument the stock has not settled, and it is why shares sit below both their high and, per the model below, their estimated fair value.

TIKR Advanced Model Analysis

• Current Price: $808.99

• Target Price (Mid): ~$1,050

• Potential Total Return: ~30%

• Annualized IRR: ~6% / year

TIKR's mid-case scenario values Caterpillar at around $1,050 by the end of 2030, a total return of roughly 30% from today, or about 6% annualized over 4.3 years. The two revenue drivers are Power & Energy, carried by data center and gas-compression demand, and the recovery in Construction and Resource Industries orders, with total revenue growth modeled around 8% a year. The margin driver is operating leverage as new engine and turbine volume scales through existing plants. The primary risk is multiple compression: the model assumes the rich valuation fades gradually, and if AI-power demand cools, that de-rating arrives faster.

The upside case is that framework demand converts on schedule, prime-power installations seed a services annuity, and margins hold near current levels. The downside is that the announced on-site capacity arrives into softer demand and breaks the pricing discipline Creed described. The mid-case target sits above the Street mean of ~$980, so TIKR's model is more constructive than consensus, though both leave the stock room from here.

Conclusion

The next real test is the third-quarter report, expected in late October, though Caterpillar has not yet confirmed the date. Watch the backlog and the Power & Energy margin together. Another sequential backlog gain with margins holding near 21% would confirm Creed's "line of sight past the backlog" is converting into profitable deliveries. Flat backlog or margins slipping would suggest the glut is biting before the demand fully shows up. At this valuation, the stock needs the former. Creed says the demand runs further than the number shows, and October starts to prove whether he is right.

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