The world’s biggest mining and construction equipment maker, Caterpillar Inc. (NYSE:CAT), reported better than expected third quarter earnings. However, the company cautioned that the revenues and profits for the full-year 2012 would come below the previous guidance. The company blames a weaker global economy for lowering its guidance.

caterpillar

Analysts watch the performance of this construction and mining equipment maker very closely because its performance gives an indication about where the broader global economy is headed. The Peoria, Ill.-based company said that now dealers are reducing their inventory, so they are placing fewer orders than what end users want. It has resulted in temporary layoffs and shutdowns. Caterpillar Inc. (NYSE:CAT) said the reduced production levels are likely to continue until the orders from dealers and end users increase.

The company said it now expects revenues of $66 billion in 2012, with $9 to $9.25 in profits per share. Analysts surveyed by FactSet were expecting $67.2 billion in revenues, with profits of $9.41 per share. Caterpillar Inc. (NYSE:CAT) said even 2013 earnings will be similar to those of 2012, plus or minus 5 percent. “We’re not expecting rapid growth, and we’re not predicting a global recession,” Caterpillar chief executive Doug Oberhelman said.

In the third quarter, revenues jumped 4.6 percent to $16.45 billion, whereas profits soared 49 percent from $1.14 billion a year earlier, to $1.7 billion. The earnings also include $273 million, which the company received after selling a majority of its stake in a logistics business. During the quarter, the company’s margins stood at a record 15.8 percent.

Revenues from the construction business were $4.9 billion, lower than Morgan Stanley’s estimate of $5.3 billion. Mining business was also below expectations, with $5.2 billion in revenues (versus $5.4 billion estimate of Morgan Stanley). The Engines business was at $5.2 billion, slightly below the $5.4 billion estimate.

Two of the global economic heavyweights, Europe and China, are struggling. And, their impact is directly reflected in Caterpillar’s outlook. While much of Eurozone is in debt crisis, the export driven Chinese economy is faltering.

Morgan Stanley (NYSE:MS) believes that Caterpillar Inc. (NYSE:CAT) is favorably positioned to weather the tough economic scenario. Morgan Stanley analyst Vikram Malhotra maintains an overweight rating for Caterpillar stock. The company still remains a favorite pick of investors.