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Caterpillar (NYSE: CAT) is the stronger structural downturn choice based on the companies’ latest disclosures. Its exposure spans construction, mining and other resource industries, power and energy, services, dealers and financing. Deere (NYSE: DE) is more concentrated in agriculture, with additional construction and forestry exposure. Deere could deliver more upside if large-agriculture equipment demand reaches a trough and recovers, but its current outlook makes it a recovery trade rather than the more defensive choice.
That conclusion is about business resilience, not which stock is cheaper. No same-day share price or normalized-earnings valuation is established here, so an investor should not treat either company as definitively undervalued without updating the market data.
What the downturn question really asks
“Better for a downturn” can mean two different things. The first is resilience: which company is more likely to protect cash generation, maintain its dividend and keep investing when customers defer equipment purchases? The second is recovery sensitivity: which stock could rebound more sharply when the cycle turns?
Caterpillar currently scores better on the first test because its revenue base is spread across several industrial end markets and includes a large services business. Deere may score better on the second if large-agriculture demand is at or near its bottom. Those are different investment propositions, and combining them into one “winner” can hide the risk you are actually taking.
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The reporting periods also differ. Caterpillar’s figures cited below are for calendar 2025, while Deere reports a fiscal year. Compare the labels and dates carefully rather than treating the two companies’ annual numbers as perfectly synchronized.
2025 financial snapshot
| Measure | Caterpillar (calendar 2025) | Deere (fiscal 2025) | What it indicates |
|---|---|---|---|
| Sales and revenues | $67.6 billion | $45.684 billion worldwide net sales and revenues | Caterpillar is the larger and more diversified industrial platform by reported revenue. |
| Net income or profit measure | $18.81 profit per share | $5.027 billion net income; $18.50 per share | Deere’s earnings fell materially from fiscal 2024, while Caterpillar’s per-share profit also declined despite higher sales. |
| Year-over-year direction | Sales and revenues rose from $64.8 billion in 2024 to $67.6 billion; profit per share fell from $22.05 to $18.81. | Worldwide sales and revenues declined 12%; net income fell from $7.100 billion, or $25.62 per share, to $5.027 billion, or $18.50 per share. | Both companies remain cyclical; Deere’s disclosed contraction is more pronounced in the latest annual comparison. |
| Operating cash flow | $11.7 billion enterprise operating cash flow | $5.1 billion equipment-operations cash flow | Caterpillar generated the larger reported cash-flow pool, although the definitions and fiscal periods are not identical. |
| Cash or shareholder returns | $10.0 billion enterprise cash; $7.9 billion deployed to repurchases and dividends | More than $2.8 billion returned through dividends and repurchases | Caterpillar had greater disclosed capacity for capital returns in 2025. |
| Forward earnings outlook | No comparable 2026 net-income range is cited here. | Fiscal-2026 net income forecast at $4.00 billion to $4.75 billion | Deere expects another difficult year and says 2026 may mark the bottom of the large-agriculture cycle. |
The comparison is directional rather than a like-for-like valuation or profitability ranking. Caterpillar’s “profit per share” and Deere’s net income and per-share figures are presented as each company reported them, and cash-flow definitions differ.
Why Caterpillar has the stronger structural defense
Broader end-market exposure
Caterpillar identifies Construction Industries, Resource Industries, Power & Energy and Financial Products as its primary businesses. Construction demand can weaken when developers, contractors and public-works customers delay projects. Mining and other resource customers can cut capital spending when commodity prices or production plans deteriorate. Power and energy projects can also be postponed. Diversification does not remove those risks, but it reduces dependence on one customer economy.
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Deere’s core exposure is agriculture, supplemented by construction and forestry and smaller agriculture and turf markets. That mix gives Deere a credible technology and dealer platform, but large agriculture remains the key swing factor in its latest outlook. Farm income, crop prices, interest rates, financing availability and replacement timing can all affect the decision to buy a high-value tractor or combine.
For a recession that hits construction, mining and farming simultaneously, Caterpillar’s broader portfolio offers more ways for demand to hold up. For a downturn isolated mainly to nonresidential construction or mining, the advantage is less decisive; Caterpillar’s resource and project customers can still reduce orders together.
Services create a larger recurring layer
Caterpillar reported services revenue of $24 billion in 2025. Lifecycle support, parts, maintenance, digital tools, connected equipment and autonomous capabilities can keep producing revenue after the initial machine sale. Customers may postpone a new machine yet continue repairing and maintaining an existing fleet, especially when financing costs are high.
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That does not make services recession-proof. Customers can extend maintenance intervals, run equipment less often or use independent repair channels. Still, a substantial installed-base business generally gives Caterpillar more recurring activity to cushion a sharp decline in new-equipment orders.
Deere’s Smart Industrial strategy and integrated technology stack, including See & Spray, autonomy and Operations Center products, are designed to improve customer productivity and deepen the relationship around the machine. The fiscal-2025 release does not provide a directly comparable services-revenue figure, so investors should not assume Deere has the same recurring-revenue mix as Caterpillar.
Dealers and financing help—and transmit stress
Both companies depend on dealers to sell, service and support equipment. A capable dealer network can keep customers operating during a downturn and provide information about local demand, used-equipment values and inventory. It can also become a pressure point if dealers carry too much stock, discount aggressively or face rising floor-plan costs.
Caterpillar’s Financial Products business adds financing support for customers and dealers. Financing can sustain transactions when buyers need time to pay, but it introduces credit losses, residual-value risk and exposure to interest rates. In a downturn, weaker customers may default just as used-equipment prices fall, so the financing arm should be evaluated as a potential stabilizer and a source of downside.
Deere also operates in a market where equipment financing and dealer inventory matter, but the disclosed fiscal-2025 materials cited here do not provide a directly comparable credit-loss or portfolio-quality measure. Review each company’s latest filing for delinquency trends, provisions and the maturity profile before treating financing as a benefit.
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Current earnings and cash-flow direction
Caterpillar: higher revenue, lower per-share profit
Caterpillar’s 2025 sales and revenues increased to $67.6 billion from $64.8 billion in 2024. Profit per share declined to $18.81 from $22.05, showing that revenue growth did not translate into higher per-share earnings. Possible explanations include mix, costs, taxes, share-count effects or other company-specific factors, but the figures alone do not identify which factor dominated.
Enterprise operating cash flow was $11.7 billion, and the company reported $10.0 billion of enterprise cash. It deployed $7.9 billion to dividends and repurchases. Those figures give Caterpillar a substantial cash-generation base entering a weaker cycle, although investors must still check debt maturities, capital spending and the cash required by its financing operations.
Deere: the cycle is already visible in the numbers
Deere reported fiscal-2025 net income of $5.027 billion, or $18.50 per share, compared with $7.100 billion, or $25.62 per share, in fiscal 2024. Worldwide net sales and revenues fell 12% to $45.684 billion, while net sales were $38.917 billion. Equipment-operations cash flow was $5.1 billion, and more than $2.8 billion was returned through dividends and repurchases.
Management expects fiscal-2026 net income of $4.00 billion to $4.75 billion and says the year may mark the bottom of the large-agriculture cycle. The range is still below fiscal 2025’s result at its midpoint, so “bottom” describes the expected turning point in demand, not an immediate return to prior earnings.
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- Order intake and cancellations: A stable order book is more useful than a single quarter’s revenue when customers are delaying purchases.
- Dealer inventories: Excess inventory can lead to discounts, production cuts and weaker margins before end-customer demand improves.
- Used-equipment values: Falling resale prices can hurt dealers, customers and captive-finance portfolios at the same time.
- Margins and factory utilization: Watch whether lower volumes are offset by pricing, cost controls or restructuring.
- Cash conversion: Compare operating cash flow with capital spending, dividends, buybacks and debt repayment rather than focusing on earnings alone.
Balance-sheet and credit-risk comparison
Caterpillar says it targets a mid-A credit rating and evaluates dividends and repurchases against liquidity, cash flow, the economic outlook and credit-market conditions. That framework matters in a downturn: management can preserve flexibility by slowing buybacks or moderating capital returns if financing conditions deteriorate.
The company’s diversification and $10.0 billion of reported enterprise cash support resilience, but they do not eliminate leverage or credit risk. Construction, mining, energy, dealer inventories and customer financing can weaken at the same time. Tariffs and global capital-spending decisions can also raise costs or delay projects.
Deere’s lower earnings base and forecast range make balance-sheet discipline especially important. A farmer may have a productive operation but still defer equipment purchases when crop prices are weak or interest rates are high. Investors should examine Deere’s debt, finance receivables, provisions for credit losses and cash commitments in the latest filing; the headline earnings release does not, by itself, establish that Deere has either a superior or inferior balance sheet to Caterpillar.
Dividends and buybacks in a weak cycle
Caterpillar’s $7.9 billion of 2025 dividends and repurchases was substantially larger in absolute dollars than Deere’s more than $2.8 billion. The gap reflects company size and should not be interpreted as a direct comparison of payout ratios or dividend safety.
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The useful question is whether each company can fund shareholder returns after maintenance capital spending, working-capital needs, financing losses and debt service. A buyback is most valuable when shares are purchased below a reasonable estimate of normalized value; repurchasing aggressively near a cyclical peak can destroy flexibility. Conversely, suspending every buyback during a temporary downturn may sacrifice long-term value if the balance sheet is strong.
For income investors, check the current dividend yield, payout ratio, recent increases, free-cash-flow coverage and management’s stated capital-allocation priorities on the purchase date. Those market figures are not established by the 2025 operating disclosures alone.
Backlog and demand visibility
Neither set of figures cited here supplies a single, directly comparable backlog number that can settle the question. Instead, use operating indicators appropriate to each business.
Caterpillar indicators
- Mining and energy project approvals, commodity prices and customer capital budgets.
- Construction-equipment order rates and public-infrastructure spending.
- Dealer inventory levels and the mix of new-machine, parts and services revenue.
- Power-generation demand tied to data centers, industrial loads and broader electrification trends.
Caterpillar’s annual-report discussion points to urbanization, digitalization, electrification and the changing global energy landscape as long-duration demand drivers. Those themes can support a multiyear runway, but they do not prevent a cyclical decline in the next few quarters. As Chairman and CEO Joe Creed put it: “Urbanization, digitalization, electrification and the evolving global energy landscape are creating sustained, long-duration demand for the physical systems that underpin modern life.”
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- Large-farm income, crop prices, acreage and replacement demand for tractors and combines.
- Small agriculture and turf demand, which management expects to improve.
- Construction and forestry activity, also expected to grow in the fiscal-2026 outlook.
- Adoption and monetization of See & Spray, autonomy and Operations Center products.
Deere’s chief executive, John May, said the company’s structural improvements and diverse customer segments and geographies helped it achieve its best results yet for that point in the cycle. The important qualification is that the same release still identifies large agriculture as challenged. Technology can improve productivity and customer loyalty, but it does not remove farm-cycle exposure.
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Which stock has more upside if the cycle turns?
Deere may have greater operating leverage to a large-agriculture recovery. When farmers regain confidence and replace aging equipment, a concentrated manufacturer can see orders and factory utilization improve quickly from a depressed base. Deere’s forecast that fiscal 2026 may be the bottom gives investors a potential catalyst to monitor.
That upside comes with timing risk. A “bottom” forecast can be delayed by weak crop prices, high borrowing costs, excess used inventory or another fall in farm income. If the recovery arrives later than expected, Deere’s earnings could remain under pressure while investors wait.
Caterpillar also benefits from recovery in construction, mining, energy and power, but its diversified revenue streams may make the rebound less dramatic in any one market. Investors are paying for a broader set of possible demand drivers rather than a single agricultural inflection point.
| Investor situation | More suitable starting case | Reason |
|---|---|---|
| You prioritize diversification and cash-flow resilience. | Caterpillar | Multiple industrial businesses, $24 billion of 2025 services revenue and larger reported operating cash flow provide more cushions, though they remain cyclical. |
| You expect a near-term large-agriculture recovery and accept volatility. | Deere | The fiscal-2026 outlook identifies large agriculture as the weak area and potentially at a cycle bottom, creating recovery sensitivity. |
| You need a valuation decision today. | Neither can be selected from the operating data alone. | Use current share prices, enterprise value, debt, normalized earnings and free cash flow; those same-day inputs are not supplied here. |
How to evaluate valuation without pretending the cycle is normal
Cyclical stocks can look cheapest at peak earnings and expensive near the trough. A simple price-to-trailing-earnings comparison can therefore mislead investors in both CAT and DE.
- Record the purchase-date price and share count. Use the same timestamp for both stocks and note that Deere’s fiscal year differs from Caterpillar’s calendar year.
- Calculate enterprise value. Add debt and other financing obligations, then subtract cash, while separating industrial operations from captive-finance assets where the filings allow.
- Normalize earnings. Use a multiyear range or mid-cycle margin rather than treating Deere’s fiscal-2025 trough-like result or Caterpillar’s 2025 profit per share as permanent.
- Stress-test the downside. Model lower volumes, weaker pricing, higher credit losses, dealer inventory reductions and delayed capital projects.
- Test the recovery case. For Deere, specify what farm income, crop prices and replacement rates must do. For Caterpillar, specify which construction, resource, power or energy markets are expected to improve.
- Compare shareholder returns after reinvestment. Check whether dividends and buybacks remain covered after capital expenditure, working capital, debt service and financing needs.
Do not call one stock cheaper merely because its trailing multiple is lower. A credible comparison requires the same-day market price and a consistent estimate of normalized earnings or cash flow.
Risks that could overturn the resilience judgment
- Broad industrial recession: Construction, mining, energy and agriculture could contract together, reducing Caterpillar’s diversification benefit.
- Commodity and farm-income shock: Deere’s large-agriculture exposure could remain weak longer than management expects.
- Interest rates and credit losses: Higher financing costs can reduce equipment demand and pressure finance portfolios.
- Dealer destocking: Inventory reductions can make factory orders fall faster than end-user demand.
- Tariffs and supply-chain disruption: Input costs, sourcing and cross-border sales can affect margins and delivery schedules.
- Used-equipment price declines: Lower residual values can hurt customers, dealers and lenders simultaneously.
- Technology execution: Connected, autonomous and precision-agriculture products require adoption, reliable service and returns that justify customer spending.
- Capital-allocation mistakes: Excessive buybacks or an inflexible dividend policy can reduce the cushion available in a prolonged downturn.
A practical decision checklist before buying
- Decide whether your primary goal is downside resilience or upside from a cyclical recovery.
- Read the latest quarterly filing for dealer inventories, order trends, margins, cash flow and finance-receivable quality.
- Separate Caterpillar’s industrial operations from Financial Products when analyzing debt, cash and returns.
- For Deere, identify how much of your thesis depends on large agriculture reaching a bottom in fiscal 2026.
- Update valuation with the live share price and a mid-cycle earnings estimate.
- Set a review trigger, such as a change in order cancellations, credit losses, inventory or management’s cycle outlook.
- Size the position for a scenario in which the downturn lasts longer than the company’s forecast.
Verdict
On the evidence available from 2025 results and current company outlooks, Caterpillar is the better-positioned industrial stock for a generic recession or equipment-cycle downturn. Its broader end-market mix, $24 billion services business, larger reported cash generation and substantial 2025 capital-return capacity provide more structural support.
Deere is the more targeted recovery opportunity. Its fiscal-2026 forecast and comments about a possible large-agriculture bottom could reward investors who are right about a farm-equipment rebound, but the company remains more exposed to farm economics and replacement timing. Choose Deere for that specific recovery thesis, not because the available data proves it is cheaper. Choose Caterpillar when diversification and downturn durability matter more than maximizing rebound sensitivity.
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