The last couple of weeks haven't been kind to the housing-influenced heavy equipment industry. Shares of ASV (NASDAQ:ASVI), Blount (NYSE:BLT), and Ingersoll-Rand (NYSE:IR) are all down significantly after their respective earnings reports. And after diving 15% in the wake of its Oct. 20 Q3 earnings release, shares of heavy industry powerhouse Caterpillar (NYSE:CAT) have trimmed their losses to a slightly more palatable 12% decline.

So is the selling spree now over? Is it time to buy some Cat? Let's take a look.

Plenty has already been written in the financial press of Caterpillar's third-quarter performance -- but at the Fool, we try to look at things through a longer lens. Rather than rehash the obvious Q3 letdown, we'll focus today on what is a year-to-date success story. So far this year, Cat has:

  • Grown its sales 14% to $30.5 billion.
  • Increased its diluted profits at better than twice that rate, to $3.86 per share.
  • Generated 43% growth in operating cash flow, to $2.8 billion, for its machinery and engines segment (as opposed to finance and insurance); after laying out $900 million for capital expenditures, that left Caterpillar with $1.9 billion in free cash flow so far this year.

Based on the above numbers, the good news is that Caterpillar's performance points almost directly toward the figures that management provided as its revised full-year guidance: $41 billion in sales, and $5.05 to $5.30 per share in profits. (That guidance has fallen, primarily because of an $80 million charge for legal costs, including a settlement with Navistar (NYSE:NAV)). Cat's run rate suggests that these numbers are entirely attainable.

And the bad news? That would be the guidance for next year. Management believes that a slowing U.S. economy, particularly the housing and trucking sectors, could flatten both its sales and earnings in 2007. However, if things go well, the firm painted a best-case scenario of scraping by with 5% sales growth and perhaps $5.70 per share next year.

So is it a buy or what?
In short, yes. Despite Q3 results and Wall Street's disappointment with them, Caterpillar currently trades for a P/E of just 12 based on likely full-year 2006 results. And next year's anticipated slower growth aside, analysts still believe that in the long term, the business will continue growing its profits at about 15% per year. In the classic "PEG ratio" shorthand, Cat therefore has a price-to-earnings-to-growth ratio of just 0.8. I'd call that attractively priced.

Are you a Cat lover? Then perhaps you'll enjoy these previous Fool articles on the company:

Think Caterpillar is catnip for investors? Or would you rather stay away? Join more than 12,000 other investors at Motley Fool CAPS, our new community-intelligence stock-rating service, and let your voice be heard.

Fool contributor Rich Smith does not own shares of any company named above. The Fool's disclosure policy is just about purr-fect.