When a company projects flat sales for the coming year, it's easy to see why ARM Holdings (NASDAQ:ARMHY) has been given the cold shoulder. But when you see a fan favorite like Starbucks (NASDAQ:SBUX) get the boot after its stout results, you start to wonder whether Mr. Market woke up on the wrong side of the bed in 2005. Throw in a whacking to superstar eBay (NASDAQ:EBAY), and there's little doubt the mood has turned downright Grinch-like. With a tough crowd to please, it would've taken record results from Caterpillar (NYSE:CAT) to be rewarded with a standing ovation.

Stepping up to the challenge, the company took center stage and with an operatic voice sang, "Without question, 2004 was one of the most remarkable years in our proud history." And after the final note was belted out, the crowd roared with cheer -- uh, not quite. Instead, the boo birds came out, and its stock was dropped 5%. I guess record results weren't enough after all.

If you're trying to find a reason for its poor reception, you won't find any fault with Caterpillar's sales. Its fourth-quarter revenues of $8.6 billion blasted past consensus estimates of $7.6 billion. The record quarter was a fitting end to a banner year of $30.3 billion in sales and 33% growth, exceeding its own expectations.

Sales weren't what fueled the tomato hurlers; instead, the culprit was its bottom line. For the quarter, analysts were anticipating $1.63 in earnings per share (EPS); Caterpillar came up short with an EPS of $1.55. The fourth quarter's net income helped the company grow its 2004 EPS a whopping 85% to $5.75. But investors were hung up on operating costs that increased $1.1 billion.

One of the primary reasons for the higher costs was skyrocketing steel prices. Couple a greater materials expense with its supply chain difficulties, and together its margin of performance wasn't at the level that management had hoped to achieve. To be fair, its 2004 operating margins of 9% were a 30.4% improvement over the same period a year ago. However, it falls shy of the operational level by fellow equipment maker John Deere (NYSE:DE).

Despite the climate of higher-priced steel, Caterpillar was able to turn out a butterfly of a record year. And now that its stock has received a 5% shaving, with a forward price to earnings of 11.9, the company appears to be reasonably valued given a blended (sales and earnings) growth estimate of 19.3%. Throw its dividend into the equation, and a get-your-feet-wet buy here price of $86 and some change might make sense.

Fool contributor Jeremy MacNealy does not own shares in any of the companies mentioned.