Caterpillar's (NYSE:CAT) stock was squashed in trading yesterday after the construction equipment outfit reported that second-quarter profit grew 35%.

The firm's second-quarter earnings came in at $1.55 per share vs. $1.15 in the second quarter of 2003, while revenue climbed 28% to $7.56 billion from $7.19 billion. Investors fretted, though, because Caterpillar's bottom line missed analysts' expectations by $0.19 a share as added expenses ate into profits.

While the company's inability to curb costs is disappointing, frankly, it's not entirely surprising. Steelmakers have been raking in healthy profits from their commodity since supplies have been tight, although Fool contributor Rich Smith suspects this may soon come crashing to an end. Furthermore, freight expenses have been jumping as railroads such as Burlington Northern (NYSE:BNI) and Union Pacific (NYSE:UNP), as well as other transportation service providers, stretch to meet demands.

Caterpillar's decision to expedite deliveries and boost production to meet demand in exchange for a less-smooth rise in near-term earnings may be upsetting to some. However, the firm appears to be taking a long view, most likely expecting that by satisfying customers now it is ensuring steady profits going forward.

Clearly, Caterpillar remains confident on that front, since it now anticipates that its full-year earnings will jump 80% to 85% vs. last year, up from guidance of 65% to 70% growth provided in the first quarter. That means the stock is trading at about 13 times this year's earnings. No one can be sure whether the global economy will continue its recovery -- after all, a steel glut could dampen demand for mining equipment, and China may overdo its slowdown efforts. But if you think that the upturn has legs, it's hard to argue against Caterpillar.

Fool contributor Brian Gorman is a freelance writer in Chicago. He does not own shares of any companies mentioned in this article.