Its strong market presence, diverse portfolio and innovation position it for improved performance going forward. Expanding its service revenues, which generate higher margins, is a strategic move. A strong balance sheet enables it to invest in growth while making share repurchases and paying dividends. While tariffs are expected to raise costs, CAT's pricing and cost-cutting efforts can help counter the impacts. Conversely, tariffs on imported goods will boost demand for U.S.-manufactured products. Given Caterpillar's significant manufacturing presence, it can capitalize on this surge.How Should You Play Caterpillar Stock Pre-Q2 Earnings?CAT's performance has always been closely watched by investors, as it serves as a key economic barometer for the sector. Caterpillar's second-quarter revenues are expected to have been dampened by overall lower pricing and weaker volumes in the Resource Industries segment, somewhat offset by improved volumes in the Energy and Transportation segment.