In this segment from MarketFoolery, host Chris Hill and analyst Taylor Muckerman review the second-quarter report of heavy equipment heavyweight Caterpillar (NYSE:CAT). The results were impressively ahead of its targets, and the company -- which has fairly good clarity about where its sales are going to come from in the next few quarters, given the nature of its business -- made a sharp upward revision in its guidance for the year.

The two discuss its share price gains over the past year, the macro conditions that it faces, and consider the key question for investors: At its current valuation, is Caterpillar still a buy?

A full transcript follows the video.

This video was recorded on July 30, 2018.

Chris Hill: Caterpillar's second quarter ... they kind of did everything, right?

Taylor Muckerman: They did.

Hill: Profits higher than expected, revenue higher than expected, they raised guidance for the full fiscal year. Caterpillar helping to push the Dow up a little bit today.

Muckerman: Not something you typically see from a company this size, boosting guidance by 7% and revenue across the board up. If you look at their divisions, Construction revenue, the biggest segment that they have as a business, up 24% to almost $6.2 billion. The Resource segment, up 38%. Energy and Transportation, up 20%. Those are some big numbers from a big company.

The stock was moving a little bit more earlier this morning. It seems to have come back down to earth. Still impressive, especially when you consider the last six or seven months. This stock got caught up in all the tariff talks and trade war talks, and reasonably so. These machines do cost a lot of money. Steel is a big factor in these machines, and China's demand is also a big factor in Caterpillar's performance. So, the trade war talks hit the stock a little bit. It still had such a great two-year run that investors who have been holding it have been well-rewarded. Judging by the company's talk today, they probably have a little bit more room to run.

Hill: Even when you figure, this thing was higher earlier this year, it's still up 25% over the last 12 months. For a company of Caterpillar's size, you don't really buy a company like Caterpillar expecting that kind of growth. We've talked before about the struggles that Caterpillar had for a good stretch of time. When you hear the comments from management -- and, you're right, raising guidance that much, with so much to go in the fiscal year, is a little bit of a surprise. But, when they back it up, when they're talking about, "Our order rates are good, our backlog is solid." They're not selling coffee. It's not a consumer-facing business. They're making huge machines, and the orders are coming months, if not years, ahead.

Muckerman: Yeah, you have some good leading indicators with a company like this, because it does take a while, surprisingly, to build a dump truck the size of a house. The energy sector has rebounded, that's helping. Construction across the globe seems to be doing well. U.S. GDP had some great numbers. Definitely still a market out there for these machines.

They're keeping up with technology. Some of these big dump trucks they have running around mines and oil fields are almost fully autonomous. They are keeping up with technology there. They're the market leader when it comes to this kind of stuff. Very big barriers to entry, as you can imagine, for the technology and the scale that they have. The finance division, doing alright there, as well. Globally, and every segment, performing very highly for this company.

As you mentioned, 25% in the last 12 months. Two years ago, the stock was about $80 a share. We're looking at it north of $140 right now. Impressive movement for a company this big.

Hill: On a valuation basis, do you look at this and think it's still cheap, or is it less cheap but still cheap enough?

Muckerman: I think, if I was looking at this stock at the beginning of the year -- I did, and I stayed away. But, the last six months, it's pulled back to a point where it's certainly worth considering, if you still believe that global growth has a couple of years left to continue this demand cycle that you've seen with Caterpillar.

Chris Hill has no position in any of the stocks mentioned. Taylor Muckerman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.