It's been a tough year for Caterpillar (CAT -0.86%) investors. The stock is down 10% year to date, with the heavy-equipment manufacturer giving investors little to cheer in its muted guidance for 2015 outlined during its fourth-quarter earnings release in January.

It's time for another earnings report, with Caterpillar scheduled to announce its first-quarter numbers on April 23. While an outlook upgrade may not see the day, there are three key areas that investors should watch for in this earnings report to understand where the company, and its stock, is headed.

Is Caterpillar's strongest business under pressure?
Analysts expect Caterpillar's first-quarter revenue to decline 6% year over year, but I wouldn't be surprised if it trumps estimates, backed by strong numbers from its energy and transportation, or E&T division. While Caterpillar's construction-equipment sales have been unpredictable because of sluggish international markets, E&T has played a phenomenal role if offsetting weakness in the company's resource industries (primarily mining equipment) division over the past couple of years.

 

 Data source: Caterpillar financials. Chart by author

I expect the trend to continue in Caterpillar's first quarter, given that its global machine retail sales from E&T were up 17% year over year for the three months ended February even as sales from mining and construction divisions declined 12% and 11%, respectively. These statistics are from the supplementary retail sales information for three-months rolling period that Caterpillar releases every month.

That said, even if Caterpillar beats top line estimates, investors should look beneath the surface for any signs of stress. Caterpillar is currently selling out of its E&T backlog, and revenue could dry up if its order books don't fill up soon. That depends a great deal on the health of the oil and gas sector which accounted for nearly one-third of E&T sales in 2014.

Oil prices may have recovered more than 20% since Caterpillar's last earnings release end January, but oil companies continue to cut back spending as they cannot sustain big investments at current levels. In fact, in one of the recent earnings call, Caterpillar CEO Doug Oberhelman specified how oil at "low $70s on a sustained basis" could send a "chill across the market." Simply put, I see slim chances of Caterpillar improving its cautious outlook despite the rally in oil prices in recent weeks.

Will China pull brakes on Caterpillar's growth?
I'm worried about what Caterpillar will have to say about its resource industries business' prospects in its upcoming earnings call. Prices of key commodities, including iron ore and coal, have worsened to hit multi-year lows over the past couple of months, triggering a fresh round of spending cutbacks by major miners. Things look bleak, especially with the Chinese economy growing at its slowest pace since 2009 in the first quarter.

One of Caterpillar's manufacturing facilities in China. Source: Company website

Remember, slowdown in China also hurts Caterpillar's construction business. At last count, the company projected weak sales from China to drive its construction industries sales 5% to 10% lower this year. With two of its businesses relying heavily on the Chinese market for growth, investors must watch out for Caterpillar's take on the market in its upcoming earnings call.

How will Caterpillar grow amid challenges?
Caterpillar's first-quarter earnings will likely disappoint, with analysts projecting the company to earn $1.35 a share versus $1.61 in comparable period last year, excluding restructuring costs. During its last call, Caterpillar projected to incur roughly $150 million in restructuring costs in 2015 compared to $441 million last year, suggesting that it doesn't have big-scale cost reduction plans for the year.

On the flip side, as it highlighted during its last call, Caterpillar plans to increase spending on research and development in 2015. The company is also apparently looking for growth opportunities, especially in the energy sector. So what Caterpillar is doing to boost its margins and where it's putting money under these tough business conditions are crucial updates investors cannot miss this week, because that could be the key to the company's growth and success.

Take a long-term view
Irrespective of whether Caterpillar delivers a hit or a miss in the first quarter, investors should look beyond the headlines and focus on what the company is doing to position itself for the next growth cycle. As a cyclical company, Caterpillar will have its share of ups and downs; and 2015 looks like it'll be another challenging year. But how the industrial heavyweight tackles market headwinds, and not how it performs in a particular quarter, will determine its worth in the long run.