Next Monday, Caterpillar (NYSE:CAT) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever surprises inevitably arise. That way, you'll be less likely to have an uninformed, knee-jerk reaction that turns out to be exactly the wrong move.

Caterpillar is a true industrial component of the Dow Jones Industrials (DJINDICES:^DJI). Its industry-leading construction and mining-equipment business literally helps to pave the way for economic progress. Yet concerns about growth in its core U.S. and Chinese markets have investors uncertain of its future prospects and have made the stock one of the weakest performers in the Dow so far this year. Let's take an early look at what's been happening with Caterpillar over the past quarter and what we're likely to see in its quarterly report.

Stats on Caterpillar

Analyst EPS Estimate


Change From Year-Ago EPS


Revenue Estimate

$13.81 billion

Change From Year-Ago Revenue


Earnings Beats in Past 4 Quarters


Source: Yahoo! Finance.

Will Caterpillar bounce back this quarter?
Over the past few months, analysts have severely cut their views on Caterpillar's earnings. A $0.34 per-share drop in estimates for the just-finished quarter and a reduction in full-year 2013 estimates of almost double that figure show the extent of the pessimism plaguing Caterpillar. Its stock has suffered the consequences, falling more than 15% since mid-January.

Caterpillar is facing a trifecta of poor economic conditions that have hurt its earnings prospects. In China, slowing growth has raised concerns about whether the emerging nation can manage the difficult global economic environment to produce a normal cyclical downturn, rather than an abrupt recession. Europe's poor economic conditions show few signs of getting better soon as systemic risks to the financial and currency systems loom over the eurozone. And in the U.S., the sluggish recovery has failed to catch fire, even as conditions in the housing market have improved.

Sales declines are clearly to blame for the immediate hit to Caterpillar's stock. By contrast, even though industry peers have seen revenue growth rates slow, they've nevertheless remained positive. Deere (NYSE:DE), for instance, is expected to see sales of its agricultural equipment rise more than 4%, bucking Caterpillar's big drops. In March, Caterpillar reported a year-over-year drop of 13% for the preceding three months, with declines everywhere but in Latin America.

The collapse in gold prices earlier this week added another dimension to Caterpillar's woes. Behind the gold headlines, other commodities also saw sizable losses, sending mining stocks of all sorts lower. Mining-equipment rival Joy Global (NYSE:JOY) also fell sharply, as it has even greater exposure to China, where commodities activity has been particularly strong. If miners have to rein in production activity even more due to lower prices and relatively high costs, then they'll stop buying mining equipment from Caterpillar and Joy Global, causing another drag on their earnings.

In Caterpillar's earnings report, pay close attention to any long-term guidance the company offers. With past calls stretching out as far as 2015, the company has a keen insight on longer-term trends that most businesses never share with investors. What Caterpillar says could give you a stronger sense of what's ahead not only for the company, but for the overall industrial economy.

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Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.