Caterpillar Falls Short on Earnings, Cuts Forecast

Caterpillar Inc. reported disappointing quarterly earnings and cut its 2006 and 2007 forecast on slowing demand for its earth-moving equipment and rising raw material prices that are eroding margins.

Caterpillar said a number of factors weighed on third-quarter results, including costs related to settling a dispute with Navistar International Corp. that reduced earnings per share by 8 cents.

But the chief culprits were slowing machinery sales, as the slowdown in the U.S. housing market discouraged new purchases of smaller bulldozers, graders and other vehicles, and as “new product introductions and mine permit delays in the U.S. slowed growth in large machine sales,” the company said in a statement.

The heavy equipment maker also reduced its earnings-per-share forecast for 2006 and said that 2007 revenue could be flat to up only 5%, overshadowing strong sales in the third quarter as trucking companies scrambled to update fleets ahead of tough new emission rules.

The company said third-quarter profit rose 15.3% to $769 million, or $1.14 a share, up from $667 million, or 94 cents, a year earlier. Sales rose 17% to $10.52 billion.

But that bottom line fell short of Wall Street’s hopes. Analysts polled by Reuters Estimates expected the Peoria, Ill.-based company to report earnings of $1.35 a share on sales of $9.65 billion.

Caterpillar shares closed down $10.02 at $59.