Caterpillar Inc. CAT is gaining from solid third-quarter 2021 results and robust backlog levels. The company is anticipated to continue benefiting from improving demand in most of its end markets and cost-control efforts. A strong liquidity position, ongoing investments in expanded offerings, and services and digital initiatives are expected to fuel growth as well. These factors will help the company offset the impact of higher input costs and supply chain headwinds currently plaguing the industry at large.Caterpillar currently has a Zacks Rank #3 (Hold) and a VGM Score of B. Our research shows that stocks with a VGM Score of A or B combined with a Zacks Rank #1 (Strong Buy) 2 (Buy) or 3 offer the best investment opportunities. You can see the complete list of today’s Zacks #1 Rank stocks here.Let’s take a look into the factors that make this stock worth holding on to.Upbeat Q3 Results & Improved Backlog: Caterpillar witnessed year-over-year improvement of 75% in third-quarter 2021 adjusted earnings per share to $2.66.Caterpillar and its peers like Terex Corporation TEX and The Manitowoc Company MTW have been witnessing strong order levels. Manitowoc’s backlog as of the end of the third quarter of 2021 was $891 million, up 92% from the year-ago quarter’s end — the highest seen in the last three years. Terex’s backlog surged a whopping 237% year over year to $2,725 million in third-quarter 2021.Caterpillar’s backlog at the end of the reported quarter was an impressive $20.6 billion, which was up $2.2 billion on a sequential basis and $7.2 billion on a year-over-year basis. This bodes well for the company’s top-line performance in the forthcoming quarters.Estimates Move Up: Over the past month, the Zacks Consensus Estimate for Caterpillar’s fiscal 2021 earnings has increased 2%. The consensus mark for fiscal 2022 has also been revised upward by 1% over the same time frame.Positive Earnings Surprise History: Caterpillar outpaced the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average surprise being 30.2%.Caterpillar Inc. Price and EPS Surprise Caterpillar Inc. price-eps-surprise | Caterpillar Inc. QuoteHealthy Growth Prospects: The Zacks Consensus Estimate for earnings for fiscal 2021 for Caterpillar is currently pegged at $10.36, suggesting year-over-year growth of 57.9%. The same for fiscal 2022 stands at $12.37, indicating an improvement of 19.5% on a year-over year basis.Caterpillar has an estimated long-term earnings growth rate of 12%.Growth Drivers in PlaceIn North America, the demand from both residential and non-residential construction is likely to bolster sales for Caterpillar’s construction equipment. Also, perked up investments in roads, bridges, airports and waterways as per the Infrastructure Investment and Jobs Act highlight a huge opportunity. In Resource Industries, mining orders are on an uptrend, courtesy of improving metal prices. Miners are increasingly relying on autonomous systems to increase productivity, reduce costs and emissions. The company is, hence, enhancing its autonomous capabilities and bringing innovative products into markets.In the Energy & Transportation segment, in the Oil & Gas sector, services growth and a focus on sustainability are likely to drive demand for new equipment. The company anticipates improvement in power generation, supported by data center activity, and sales to improve in transportation, courtesy of an increase in rail services and international businesses. Industrial is expected to see growth, with activity strengthening across most applications. Overall, sales in 2021 are likely to be robust, backed by improving market conditions. Its ongoing restructuring efforts are expected to lead to a benefit of $150 million in 2021.So far this year, Caterpillar generated ME&T free cash flow of $4.2 billion. It remains on track to deliver its free cash flow target of an incremental $1 billion to $2 billion annually compared with cash flow performance during 2010 to 2016. Its cash and liquidity position remains strong with the company ending third-quarter 2021 with cash and short-term investments of $9.4 billion. ME&T debt at the end of second-quarter 2021 stood at $9.7 billion. Caterpillar’s current ratio is at 1.56 and the times interest earned ratio is currently at 7.7.Caterpillar continues to focus on customers and the future by continuing to invest in digital capabilities, connecting assets and job sites, and developing the next-generation productive and efficient products. The company plans to fund initiatives that drive long-term growth focused on areas of expanded offerings and services, and digital initiatives like e-commerce.Cost Woes and Supply Chain Issues PersistCaterpillar as well as Manitowoc and Terex have been bearing the brunt of higher material costs, particularly of steel and other commodities. This along with rising freight costs, labor constraints and supply chain headwinds are expected to hinder their margins in the near term.Price PerformanceImage Source: Zacks Investment ResearchShares of Caterpillar have gained 21.4% in a year’s time compared with the industry’s rally of 20.9%.A Stock to ConsiderA better-ranked stock in the Industrial Products sector is Komatsu Ltd KMTUY, which currently carries a Zacks Rank #2. The Zacks Consensus Estimate for the Tokyo, Japan based company’s current-year earnings has been revised upward by 11% over the past 30 days.Komatsu has been witnessing strong demand for construction, mining and utility equipment over the past few quarters, leading to share price gain of 11.3% over the past year. The company has a trailing four-quarter earnings surprise of 61.1%, on average. It has an estimated long-term earnings growth rate of 29.8%. 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