Caterpillar's Power Generation Business Surpasses Construction Revenues
Caterpillar's power generation business is rapidly gaining traction and nearing revenues comparable to its construction segment. The company's power and energy unit saw revenue growth of 17% year-over-year, reaching over $8.2 billion in the last quarter. This outpaced construction-related sales by just under $100 million.
The shift towards Caterpillar's power generation business is largely driven by the increasing demand for electricity from data centers. These facilities require auxiliary and primary power, which Caterpillar's conventional combustion-powered generators are well-suited to provide. The company is also supplying natural gas power turbines to customers willing to make a larger upfront investment.
The power arm's margin-widening pricing power has contributed to operating profits exceeding $2 billion, surpassing construction's profit of just under $2 billion. Caterpillar's order backlog now stands at $72 billion, growing 92% year-over-year over the past three months.
Despite this significant growth, analysts believe Caterpillar shares still aren't fully valued. The current consensus price target is $991.21, more than 20% above the ticker's current price of $800.25.