Caterpillar Inc. (NYSE:CAT) profits were down in the fourth quarter of 2012. The company announced earnings of $1.04 per share for the final three months of last year, on revenues of $16.08 billion. Caterpillar, like Alcoa, is used by analysts as a measure of the world industrial climate, because international construction and industry is so dependent on the company’s products.

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During the same period on 2011, the company earned $2.32 per share on revenues of $17.2 billion. Despite the year on year decline in profit, the company’s shares were up in trading this morning by more than 2 percent. The motives behind investor confidence in the company appear to be related to guidance on the Chinese economy. The firm’s executives believe that the country’s economic worries will not lead to any hard landings, and that growth should remain stable in 2013.

Caterpillar Inc. (NYSE:CAT) CEO Doug Olberman said that the outlook for the world economy, and demand for the company’s products, is uncertain for the year ahead. U.S. growth may pick up as the year wears on, but the first half of the year is unlikely to bring the kind of prosperity that the first halves of 2012 and 2011 did.

The outlook for the Chinese economy, which may still be dreadful, is imperative to the perception of Caterpillar’s stock. The country has been undergoing a construction boom in recent years, and the associated demand for raw materials, such as that seen in the mining industry in Australia, causes a related surge in demand for its products.

According to Caterpillar’s CEO, China should grow at its current pace throughout 2013. For firms across the economic spectrum, Chinese demand is incredibly important. Any drop in demand from that region will not be met well by the marketplace, so the placation from the chief executive of Caterpillar was well received.

A Credit Suisse Group AG (NYSE:CS) report on this morning’s earnings report put a price target of $124 on Caterpillar’s stock. The paper was trading at around $97 this morning on the New York stock exchange. The report estimated that 2013 EPS would total $8.65, lower than 2012, but greater than 2011.

The report highlighted the declines in Caterpillar Inc.’s (NYSE:CAT) inventory during the fourth quarter. The company managed to reduce that inventory, which has been an overhang on the firm’s stock,  by $2 billion in the three months. The report asserts that this change was one of the most significant revealed in the earnings report, and further decreases in inventory will be looked for in earnings reports to come.

Caterpillar Inc.’s (NYSE:CAT) confidence that china would be good going forward was tempered by its experiences in that country earlier this year. In the fourth quarter, the company faced a $580 million charge relating to the purchase of a fraudulent Chinese mining equipment manufacturer.

That charge was the equivalent of $0.87 cents per share, an amount that would have pushed earnings above analysts’ expectations for the quarter. Caterpillar Inc. (NYSE:CAT) shares will be one to watch on the market today, as analysts put further study into the report, and refine their outlook for the company’s future.