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Will CAT's FY2026 share buybacks exceed 60% of ME&T free cash flow?

Resolves February 15, 2027(354d)

IG: 0.48

Current Prediction

56%

Likely Yes

Model Agreement88%

Predictions9 runs

Last UpdatedFebruary 23, 2026

Why This Question Matters

Buyback discipline is the critical test of whether the MIXED capital deployment assessment trends toward resolution. Management guided a 'larger ASR' for 2026 at the same time as CapEx ramps by $1B and tariff costs escalate by $800M. The Stress Scanner identified buybacks exceeding $5B while FCF falls below $8B as an escalation trigger. If buybacks exceed 60% of ME&T FCF, it demonstrates that OPACC incentives are overriding capital allocation discipline — validating the Stress Scanner's concern and potentially shifting CAPITAL_DEPLOYMENT from MIXED toward AGGRESSIVE. Historical precedent (buybacks flexed in 2015-16, 2020) would be broken.

CAPITAL_DEPLOYMENTFUNDING_FRAGILITY

Prediction Distribution

0%25%50%75%100%

opus

sonnet

haiku

Range: 52% – 62%Aggregate: 56%

Individual Predictions(9 runs)

opusRun 1

58%

The mechanical math favors YES. Management guided both 'larger ASR' than $3B and FCF 'slightly below $9.5B.' If buybacks reach $5.5B on $9.0B FCF, the ratio is 61%. The OPACC incentive paradox — flagged by the committee as potentially preventing rational buyback pullback — is the key unresolved debate. The committee's own escalation trigger was 'buybacks exceeding $5B while FCF below $8B,' a more extreme scenario than the 60% threshold tested here. The 60% boundary is within the guided range.

Management guided both larger buybacks and lower FCF — both push ratio toward 60%OPACC incentive paradox may prevent buyback reduction even under margin pressure60% threshold is lower than committee's own $5B/$8B trigger — more reachable

opusRun 2

55%

FY2025 ratio was 54.7%. Exceeding 60% requires a ~5pp increase. Two paths: buybacks increase by ~$0.8B while FCF flat, or FCF drops ~$0.8B while buybacks flat. Management guided both directions but 'slightly below $9.5B' could mean $9.0-9.3B. If buybacks are $5.5B on $9.2B FCF = 59.8% — just barely NO. The ambiguity in 'larger ASR' is the swing factor: it references the $3B early-2025 ASR, not the $5.2B total annual buyback. Historical precedent shows Board flexibility, but current conditions aren't crisis-level.

FY2025 ratio at 54.7% already near threshold — small changes in either variable cross 60%'Larger ASR' is relative to $3B tranche, not $5.2B total — total buybacks may not increase dramaticallyBoard has demonstrated buyback flexibility in downturns, but current environment is margin compression not crisis

opusRun 3

57%

The OPACC incentive structure is the decisive factor. Management describes it as 'our definition of winning' and 'our ultimate goal' — language that signals deep commitment. Maintaining elevated buybacks reduces share count and boosts per-share metrics that OPACC rewards. The $51B backlog supports the $3.5B CapEx guidance, and dividends are non-negotiable (32 consecutive increases). Buybacks are the discretionary lever, but OPACC bias keeps them elevated. With FCF guided slightly lower and buybacks guided higher, the ratio mechanically tilts toward exceeding 60%. The Board's historical flexibility is the main counterweight.

OPACC incentive structure biases management toward maintaining buyback levelsDividends sacrosanct (32 consecutive increases) — no flexibility thereDeployment-to-FCF gap of ~$2.6B signals intent to draw down reserves for returns

sonnetRun 1

62%

Management's own guidance points toward YES. 'Larger ASR' than $3B plus supplemental open-market purchases likely pushes total buybacks to $5.5-6.0B. FCF 'slightly below $9.5B' means $8.8-9.2B. The base case from management's own numbers is $5.5B / $9.0B = 61%. The deployment-to-FCF gap of ~$2.6B confirms management intends to spend more than they generate — buybacks are the variable that creates the overshoot. OPACC incentives reinforce this posture.

Management guidance mathematically implies ~61% ratio at base caseDeployment-to-FCF gap of $2.6B confirms capital return aggressionOPACC incentives prevent rational reduction even at elevated valuations

sonnetRun 2

52%

'Larger ASR' is relative to the $3B initial tranche, not the $5.2B full-year total. If ASR is $3.5B and supplemented by modest open-market purchases, total could be $5.0-5.3B — similar to FY2025. At $5.2B on $9.0B FCF, ratio is 57.8%. The Board has demonstrated flexibility in 2015-16 and 2020 — while current conditions aren't a downturn, tariff escalation creating margin compression could trigger a reduction in supplemental buybacks. The 60% threshold is at the boundary of plausible outcomes, not clearly in the YES zone.

'Larger ASR' may not translate to larger total annual buybacksBoard retains authority and has flexed buybacks historically60% threshold is at the boundary — outcome depends on precise FCF and buyback execution

sonnetRun 3

54%

The total intended deployment of ~$11.6B versus ~$9.0B expected FCF creates a $2.6B gap. Breaking this down: $3.5B CapEx + ~$2.8B dividends = $6.3B in non-discretionary deployment, leaving $3.7B FCF for buybacks — but management plans ~$5.3B in buybacks based on the $11.6B total. This gives $5.3B / $9.0B = 58.9% — close to but below 60%. The ratio only crosses 60% if buybacks exceed $5.4B or FCF falls below $8.7B. Both are plausible but not the central estimate.

Deployment arithmetic suggests ~59% ratio at central estimates — just below thresholdFCF shortfall below $8.7B or buybacks above $5.4B needed to cross 60%Tariff headwinds could reduce FCF enough to push ratio over the line

haikuRun 1

56%

FY2025 ratio was 55%. Management guided larger buybacks and slightly lower FCF — both push the ratio toward 60%. The base case is 58-62% depending on exact execution. Given the OPACC incentive structure and deployment-to-FCF gap, the ratio likely approaches but may or may not cross 60%.

FY2025 ratio already at 55% — small changes cross 60%Management guidance directionally favors higher ratioOPACC incentives maintain buyback aggression

haikuRun 2

53%

'Larger ASR' guidance is the strongest bullish signal, but its interpretation is ambiguous — larger than $3B initial tranche doesn't guarantee total buybacks exceed $5.2B. FCF 'slightly below $9.5B' could mean $9.3B, keeping the ratio below 60% even with $5.5B buybacks (59%). The threshold is at the boundary of management guidance ranges.

'Larger ASR' interpretation ambiguity is the key uncertainty'Slightly below $9.5B' FCF could mean $9.0B or $9.3B — significant for ratioBoard retains flexibility even if OPACC incentives push toward aggression

haikuRun 3

58%

Three factors converge: OPACC incentive structure biases toward maintaining buybacks, 'larger ASR' guidance signals increased pace, and FCF guided slightly lower. The combination makes exceeding 60% more likely than not. Historical buyback flexibility requires downturn conditions to activate — current tariff/margin headwinds are not at that severity level.

OPACC + larger ASR + lower FCF all directionally favor YESHistorical flexibility requires crisis-level conditions to activateCurrent headwinds are margin compression, not structural downturn

Resolution Criteria

Resolves YES if Caterpillar's FY2026 total share repurchases exceed 60% of ME&T free cash flow for the same period, based on the annual earnings release and/or 10-K filing. Calculated as: (total buybacks / ME&T FCF) > 0.60. Resolves NO if the ratio is 60% or below. Uses management-reported figures for both metrics.

Resolution Source

CAT FY2026 annual earnings press release (8-K filing), earnings call transcript, and 10-K annual report

Source Trigger

Buybacks exceeding $5B while FCF below $8B

stress-scannerCAPITAL_DEPLOYMENTMEDIUM

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