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Image: Caterpillar.

Cyclical businesses are vulnerable to downward pressure during tough times in the global economy, and Caterpillar (NYSE:CAT) has been one of the hardest-hit companies from the slowdown in China and other key regions around the world over the past couple of years. Coming into Thursday morning's second-quarter earnings report, Caterpillar investors were bracing for another round of declines in earnings and revenue, but even they were surprised by the extent to which the heavy-equipment maker's sales fell from year-ago levels. Let's take a closer look at Caterpillar's latest results and what they say about the heavy-equipment manufacturer's future.

Caterpillar can't turn itself into a butterfly
Caterpillar's second-quarter results, once again, stressed the huge difficulties the company has seen in trying to navigate a hostile industrial environment. Sales fell 13% to $12.32 billion, which was a bigger drop than the roughly 11% decline that most investors were expecting from Caterpillar. The equipment-maker blamed lower sales volume and the weakness in the euro, Japanese yen, and Brazilian real for much of the drop. Profit fell a steeper 29% to $710 million, and even after taking out the costs of its restructuring operations, Caterpillar's adjusted earnings of $1.27 per share were down by 25% year over year, only just matching the consensus estimate among investors.

Caterpillar saw weakness across the globe. Asia/Pacific sales dropped by 22%, and Latin America saw a steeper 26% decline due largely to weak construction activity in Brazil. The Europe/Africa/Middle East segment took a 12% hit, while even the typically strong North American market saw sales slump by 7%.

Looking at Caterpillar's various industry segments, there were few bright spots in the report. The construction business fared the worst, with lower end-user demand and a strong dollar pushing sales down by 18%. The energy and transportation and resource industries units also saw double-digit percentage declines in sales, while the financial products segment suffered only a slight drop in revenue. Operating profits also fell across the board, with the resource industries division seeing all of its earnings disappear as weak commodity prices led mining-company customers to cut back on capital expenditures.

CEO Doug Oberhelman emphasized Caterpillar's solid performance in addressing the elements of its operations that it can control. "Because we serve cyclical industries," Oberhelman said, "we focus intently on operational execution and cost control." Pointing to the restructuring Caterpillar has done over the past two years, Oberhelman believes that a combination of investment, innovation, and efficiency-building efforts can return Caterpillar to the right path in the long run.

Why Caterpillar sees tough times ahead
Nevertheless, Caterpillar was cautious about its near-term future. The company left its earnings guidance unchanged for the full year, expecting $5 per share excluding the costs of restructuring. It also cut its sales guidance by $1 billion to $49 billion, reflecting the negative currency-translation effect Caterpillar has seen.

Caterpillar's primary markets face substantial problems. As Oberhelman described, "Many of the key industries we serve remain weak, and we haven't seen sustained signs of improvement." Between weak emerging markets like China and Brazil, pressure on the Eurozone from the Greek financial crisis, and low commodity prices for coal, iron ore, and oil, Caterpillar is hunkering down to keep costs under control and position itself to take advantage of a recovery when it comes. Still, pressure in energy and construction will likely lead to still lower sales in the second half of this year.

In response to its share-price weakness, Caterpillar announced a big boost to its stock repurchase program. The company now expects to buy back $1.5 billion in stock during the third quarter, up from the $500 million it has spent in the first half of 2015. Despite the size of the buyback, reducing share counts by roughly 3% will only have a marginal impact on per-share metrics.

Investors in Caterpillar reacted negatively to the news, with shares falling almost 3% at the open of trading following the announcement and remaining lower into the morning hours. After years of enduring tough times, it's discouraging to see Caterpillar continue to languish in the doldrums of the global economy. Nevertheless, long-term shareholders should continue to keep watch to assess whether they believe Caterpillar's strategic plan is likely to pay off eventually.

Dan Caplinger has no position in any stocks mentioned. 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.