01:25 PM EDT, 08/06/2025 (MT Newswires) -- Caterpillar's ( CAT ) second-quarter earnings report had several positive takeaways, including high order backlogs and much-needed clarity on tariffs, belying what investors initially thought was a less-than-stellar print, said analysts who cover the industrial equipment company.

Orders rose sequentially to a record $37.5 billion and improved across all segments. Dealer inventories remained low and management raised its sales outlook for the remainder of 2025, indicating that demand remains robust despite the drag caused by tariffs, Bloomberg Intelligence Analyst Christopher Ciolino said in an interview with MT Newswires.

New US tariff rates were announced late last week. Caterpillar ( CAT ) and its customers will benefit from the relative clarity they provide after months of uncertainty that hampered businesses' ability to plan, Ciolino said.

"The tariff environment has seemed to fluctuate weekly, daily in some cases, and given that uncertainty, you have seen companies pause on investments," he said. "Now, we have some visibility as to what the end game is going to be as far as tariff rates, and businesses can go out and plan accordingly."

Caterpillar ( CAT ) shares declined after the company released headline second-quarter figures Tuesday morning. The heavy-machinery maker reported adjusted earnings of $4.72 a share, down from $5.99 a year earlier and below the FactSet consensus analyst estimate of $4.89. Second-quarter revenue of $16.57 billion beat analyst expectations of $16.30 billion but was down from $16.69 billion a year earlier.

Tariffs will cost the company between $1.3 billion and $1.5 billion this year, Chief Financial Officer Andrew Bonfield said on an earnings call, according to a FactSet transcript. Caterpillar ( CAT ) expects tariff impacts to be more pronounced in the second half of the year, he said.

While not speaking specifically about Caterpillar ( CAT ), Natixis Chief US Economist Christopher Hodge said businesses have been clamoring for some certainty on tariffs in order to make capital expenditure decisions.

"The clarity that is emerging about the potential worst-case scenarios for tariffs is going to be helpful for business-planning purposes," he said. "The tariffs are suboptimal, but if the downside risk is well known, businesses can begin to resume investments. CapEx for (the second quarter) was negative because the entire sector pulled back a bit because of fear about what's coming next. Now that the clouds are parting a bit, the clarity about how to proceed is more encouraging."

Caterpillar's ( CAT ) record-setting backlog is expected to be a growth catalyst as the calendar flips to 2026, Ciolino said.

"There's really good visibility as we look out into the first half of (2026), so that gives us greater confidence that there is probably very limited downside because they have such a strong backlog," Ciolino said.

Caterpillar ( CAT ) operates through three primary segments: construction industries, resource industries and energy and transportation. The E&T segment recorded sales of $7.84 billion in the second quarter, up 7% year over year, a trend that is expected to continue thanks to secular tailwinds like the heightened demand for data centers amid the artificial intelligence boom.

"Bottom line, we see increasing evidence 2025 is the trough: CAT's backlog supports EPS growth into 2026, with secular tailwinds from E&T and a case to believe CAT's margins targets need a lift at the low end and are structurally higher," Truist Securities analysts said Tuesday in a note to clients.

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