Foolish Forecast: Hungry, Hungry Caterpillar

Now that Christmas is out of the way, it's time for that other "most wonderful time ... of the year" -- year-end earnings season, when those companies whose fiscal years align sensibly with the calendar version report their fourth-quarter and full-year results. Next up is Caterpillar (NYSE:CAT), which reports bright and early Friday morning.

What analysts say:

• Buy, sell, or waffle? Sixteen analysts follow Caterpillar, with eight rating it a buy, seven more a hold, and one a sell.
• Revenues. On average, analysts expect to see Cat's revenues rise 16% for the quarter, to $10.5 billion.
• Earnings. Profits are predicted to rise 12% to $1.34 per share.

What management says:
Caterpillar turned in another stellar quarter three months ago, with sales up 17% and profits up 21%. Unfortunately, the good news ended right then and there.

Looking forward to the full-year results, Cat scratched its previous projections, lowered the ceiling on its expected sales growth, and reduced profits-per-share projections by 4%. Worse, it foresaw a threat to its growth prospects in an impending slowdown for the U.S. economy in 2007. Citing "a sharp drop in sales of on-highway truck engines and weaker housing construction," management warned that 2007 could see flat year-over-year sales and earnings, and that even in the best case, both sales and profits growth would not likely get out of the single digits.

What management does:
Well, it was nice while it lasted. Working under the assumption that tomorrow's numbers will be as disappointing as Cat suggested, let's take one last look at how superbly it has improved its business during the economy's up cycle:

One Fool says:
With the numbers out of the way, I want to close with just a few words about Cat ... and cats. Remember the old Lassie television series? There's a reason Lassie was cast as a dog: Dogs are loyal. Eager to please. Man's best friend. When little Timmy falls down a well, you can count on the family dog to save him. Cats, in contrast, get a bad rap for being aloof and self-absorbed (and don't even get me started on the hairballs).

I'm not so sure that reputation is deserved, though. For when one particular feline was alerted that a Canadian investing shop had sponsored a mini-tender last month, offering to buy up shares of Cat stock from individual investors at $58.25 per stub, Cat leapt into action to protect its shareholders. Management observed that the raiders from the North were offering to buy shares at a 4% discount to the market price on the day the tender was announced, and that the shares had risen in value since. In response, it "strongly recommend[ed] against shareholders tendering shares in response to this unsolicited offer," pointing out that "TRC Capital has made many such 'mini-tender' offers for the shares of other companies for its profit," and that "these offers 'have been increasingly used to catch investors off guard,'" so as to trick them into "selling their securities at below-market prices."

Indeed, just two years ago, the Fool's own Nathan Slaughter called shenanigans on this very same TRC for trying to trick General Mills (NYSE:GIS) owners out of their shares as well.

On behalf of the Fool, and of all individual investors preyed upon by shops like TRC, I'd like to say: "Thanks, Cat. And never mind the hairballs -- it's a small price to pay."

Competitors:

• Deere (NYSE:DE)
• Kubota (NYSE:KUB)
• CIT Group (NYSE:CIT)
• Cummins (NYSE:CMI)
• DaimlerChrysler (NYSE:DCX)

What did we expect out of Cat last quarter, and what did it produce? Find out in:

• Foolish Forecast: Caterpillar
• Economic Catnip for Caterpillar

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Fool contributor Rich Smith does not own shares of any company named above. The Fool has a disclosure policy.