Caterpillar Squashed

Caterpillar's top line beat expectations, with overall revenue up 7% to $11.36 billion, compared with Wall Street's expectation for $11.1 billion. All the gains, however, came from abroad.

Sales and revenue in North America fell 10% to $5.1 billion due to a 14% decline at the company's domestic machinery business and a 8% drop in engine sales.

"Disappointing earnings in the second quarter were attributable to the sharp negative swing in on-highway truck engine profitability, weakness in North American machine sales, continued selected supply chain disruptions and higher material costs," said Caterpillar CEO Jim Owens in a press release.

Also, Caterpillar's core operating costs rose by $435 million, mostly because of rising material costs and operating inefficiencies resulting from lower on-highway truck engine production, supply chain challenges, new product introduction and greater capacity.

"While costs were a challenge, we were pleased with the spectacular sales growth outside North America and the performance of our engine businesses other than on-highway truck," said Owens.

Despite its shortfall, the company backed its previous outlook for full-year earnings in a range from $5.30 to $5.80 a share. Caterpillar sees revenue of $44 billion -- the high end of the range it had forecast earlier.

Overall, Caterpillar is expecting "below trend [economic] growth" in North America, with gross domestic product increasing by 2.1% for the year. Besides the continued weakness in the housing market, it sees a "very weak industry for heavy-duty truck engines."