With hundreds of companies having reported quarterly results, we're now in the heart of earnings season. The key to making smart investment decisions with stocks releasing their quarter reports is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed, knee-jerk decision.

Let's turn to Caterpillar (NYSE:CAT). With its gain of less than 2% underperforming the overall Dow Jones Industrial Average (DJINDICES:^DJI) in 2012, Caterpillar has had some less-than-enthusiastic guidance about what the future of its business may look like. 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 next Monday.

Stats on Caterpillar

Analyst EPS Estimate


Change From Year-Ago EPS


Revenue Estimate

$16.13 billion

Change From Year-Ago Revenue


Earnings Beats in Past 4 Quarters


Source: Yahoo Finance.

Will Caterpillar keep building?
Caterpillar has a habit of leading analysts to make conservative estimates for its earnings and then blowing those estimates away. All four of its earnings beats in the past year have been by more than 10%, and even though analysts have pulled down their calls for the current quarter by $0.10 per share in the past three months, the stock has climbed substantially, rising more than 15% since mid-October.

Caterpillar's tepid performance in 2012 owed to uncertainties regarding the pace of growth in formerly red-hot emerging markets, especially China. Back in September, Caterpillar cut its long-term forecast for earnings in 2015 from a range of $15 to $20 to a range of $12 to $18. With expectations that 2013 wouldn't improve markedly on 2012, investors were largely disappointed.

Yet since then, signs of economic strength have pushed the stock higher. The stock market in Shanghai has bottomed at least temporarily, and an improving housing industry in the U.S. is bolstering substantial cyclical activity. Caterpillar and mining-equipment rival Joy Global (NYSE:JOY) have both benefited from the prospect of improving demand for many commodities that could spur new mining development.

But last week, Caterpillar noted a troubling episode that will hurt its earnings substantially. The construction giant said it had discovered accounting irregularities at a Chinese company it bought recently, and as a result, Caterpillar will have to take a $580 million one-time charge for the fourth quarter. That amounts to $0.87 per share, or more than half what the company is expected to earn excluding the charge.

In looking at next week's report, Caterpillar investors should also look for signs of how the company plans to respond to threats by General Electric (NYSE:GE) to get into the mining business. With GE showing signs that it wants to boost its exposure to emerging markets and cash in on rising levels of industrial activity worldwide, Caterpillar needs to protect its turf in order to surpass its lackluster predictions of a long-term slowdown from becoming reality.

Click here to add Caterpillar to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.