Even with that slide, the stock is up 42% so far this year and about 125% since late 2024.
Worries over future AI infrastructure spending have battered industrial suppliers of power gear to data centers. By Friday, Vertiv Holdings Co. had lost 36% from its recent peak, and GE Vernova Inc. was down 16%. Some of the sharpest declines came after reports that analysts broadly welcomed.
Vertiv, a maker of transformers and data-center cooling systems, tumbled 17% when a revenue shortfall outweighed its raised full-year guidance. GE Vernova fell almost 9% despite lifting its sales outlook, leaving investors unsatisfied. Engine maker Innio NV sank after posting its first quarterly results as a public company and closed Wednesday 19% below its IPO price.
Last week, Baird shifted its Caterpillar rating to neutral-equivalent, pointing to rising efforts by local and state authorities to curb data-center development. Jefferies said GE Vernova added to bearish sentiment by issuing a multiyear target for turbine output. Eaton Corp. and nVent Electric Plc, also power-equipment names, drew warmer reactions to Friday reports.
Microsoft Corp. and Amazon.com Inc. delivered results late last week that revived beaten-up AI-linked stocks, allowing Caterpillar and its peers to claw back some ground. At the start of U.S. trading Monday, Caterpillar shares fell as much as 1.3%.
Caterpillar reports on Tuesday. Management has said adjusted operating margin would expand in Q2.
Get the market news that matters in a five-minute read with Market Briefs, our free daily newsletter
AlphaSense market intelligence strategist Ed Moya said, "The bar for Caterpillar is exceptionally high." He added, "Any softness in orders, backlog or margins will likely outweigh a standard earnings beat."
Joe Tigay, whose Rational Equity Armor Fund owns Caterpillar, said the stock "just needs management to reaffirm that demand remains healthy and that large infrastructure projects are still moving forward."
Oppenheimer analyst Kristen Owen wrote to clients last week that consensus estimates are understating momentum in Caterpillar's construction and mining equipment businesses. She wrote that "the recent market rotation has created a favorably skewed risk/reward trade-off, with the stock's recent pullback easing the setup" into the earnings report.
Marta Norton, Empower's chief investment strategist, took a more cautious line. "The upside is priced in, and the downside is just beginning to be toyed with," she said. "If I've got new dollars to deploy today, those are probably not the areas I'm going to look at."
The stock was trading around 29 times projected forward earnings, far above its 10-year average of 18. Investors are paying up for growth, meaning a routine earnings beat could be outweighed by any weakness in new orders, the backlog, or margins.
The worry among investors is that as manufacturers ramp up output to chase booming demand, the power-equipment market could wind up oversupplied.
"Anything investors learn on Tuesday about demand for Caterpillar's power equipment, as well as the industrial giant's capital spending, could affect their view of the capacity question," Thomas Martin, a senior portfolio manager at Globalt Investments, said.
Tuesday's report is a test of whether the market has overdone its AI enthusiasm for Caterpillar. The answer matters beyond Caterpillar, because the AI trade now includes power equipment, and the report will test whether that part of the boom is still real.
Join Market Briefs, our free daily newsletter, for a quick daily rundown of the markets
