⚠ The Recovery Includes a RefundLow threat

Caterpillar (CAT) — threat to the moat

Caterpillar's strong June quarter included $392 million of tariff refunds that will not recur.

The second quarter of 2026 looked like a full recovery, but it carried a one-off gain. Operating profit included $392 million of expected IEEPA tariff recoveries1, and the company's outlook does not include any additional recoveries in the second half2. Construction Industries bears about half of the tariff cost3, so it received a large share of the refund's benefit.

Q2 2026 operating profit ($M)4,295Operating profit392of which IEEPA recoveriesCaterpillar Q2 2026 results release
About a tenth of the quarter was a refund.

The consolidated operating margin was 20.9% in the quarter4; the company's adjusted margin, which excludes restructuring costs, was 21.9%5. Neither strips out the refund.

The underlying recovery is still real: sales volume rose $3.1 billion and price realization was $595 million in the quarter6. But the margin a reader should expect for construction in the second half is lower than the second quarter's.

The first quarter of 2026, without a refund, was weaker. Operating profit margin was 17.7% in that quarter, against 18.1% a year earlier, and the adjusted margin 18.0%7. The jump to 20.9% in the second quarter8 was partly volume and partly the refund.

The third-quarter construction margin, reported in October, will show it. A figure close to the second quarter's without any refund would confirm the recovery; a drop of several points would show how much the refund was carrying.

References
  1. ReportedOperating profit included $392 million of expected IEEPA tariff recoveries, and the company's outlook does not include any additional recoveries in the second half.
    Caterpillar second-quarter 2026 results release, Form 8-K exhibit 99.1 - consolidated results, cash deployment and the CEO's statement. — Q2 2026 · publ. 4 August 2026 · source ↗
  2. ReportedOperating profit included $392 million of expected IEEPA tariff recoveries, and the company's outlook does not include any additional recoveries in the second half.
    Caterpillar Form 10-Q for the quarter ended 30 June 2026 - backlog, outlook, tariffs, dealer inventory, balance sheet and the RPMGlobal acquisition - MD&A: order backlog, dealer inventory, tariffs, IEEPA recoveries and the 2026 outlook. — Q2 2026 · publ. 5 August 2026 · source ↗
  3. ReportedConstruction Industries bears about half of the tariff cost, so it received a large share of the refund's benefit.
    Caterpillar Form 10-Q for the quarter ended 30 June 2026 - backlog, outlook, tariffs, dealer inventory, balance sheet and the RPMGlobal acquisition - MD&A: order backlog, dealer inventory, tariffs, IEEPA recoveries and the 2026 outlook. — Q2 2026 · publ. 5 August 2026 · source ↗
  4. ReportedThe consolidated operating margin was 20.9% in the quarter; the company's adjusted margin, which excludes restructuring costs, was 21.9%.
    Caterpillar second-quarter 2026 results release, Form 8-K exhibit 99.1 - consolidated results, cash deployment and the CEO's statement. — Q2 2026 · publ. 4 August 2026 · source ↗
  5. ReportedThe consolidated operating margin was 20.9% in the quarter; the company's adjusted margin, which excludes restructuring costs, was 21.9%.
    Caterpillar second-quarter 2026 results release, Form 8-K exhibit 99.1 - consolidated results, cash deployment and the CEO's statement. — Q2 2026 · publ. 4 August 2026 · source ↗
  6. ReportedThe underlying recovery is still real: sales volume rose $3.1 billion and price realization was $595 million in the quarter.
    Caterpillar second-quarter 2026 results release, Form 8-K exhibit 99.1 - consolidated results, cash deployment and the CEO's statement. — Q2 2026 · publ. 4 August 2026 · source ↗
  7. ReportedOperating profit margin was 17.7% in that quarter, against 18.1% a year earlier, and the adjusted margin 18.0%.
    Caterpillar first-quarter 2026 results release, Form 8-K exhibit 99.1 - price realization and $5.0 billion of repurchases. — Q1 2026 · publ. 30 April 2026 · source ↗
  8. ReportedThe jump to 20.9% in the second quarter was partly volume and partly the refund.
    Caterpillar second-quarter 2026 results release, Form 8-K exhibit 99.1 - consolidated results, cash deployment and the CEO's statement. — Q2 2026 · publ. 4 August 2026 · source ↗
Sources
Generated September 25, 2026