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Shares of


(CAT) - Get Caterpillar Inc. Report

fell sharply Thursday after the tractor company's full-year earnings guidance disappointed investors.

The stock was recently down $5.68, or 7.3%, to $72.67 on word that the company expects to earn $3 a share for the year, as opposed to the $3.15 analysts had expected according to Thomson First Call.

The company earned $222 million, or $0.62 per share, on revenue of $5.55 billion in its third quarter. Excluding a bond-retirement charge, the company would have earned 73 cents a share, 1 cent shy of the consensus estimate. Revenue exceeded expectations by more than $300 million, largely due to beneficial exchange rates in Europe. Sales rose 9% from a year agodue to higher machine volume, favorable exchange rates and in increase in sales at its financing arm but earnings were flat compared with a year ago.

The company also benefited from low interest rates. Machinery sales were up $345 million, or 12%, from a year ago, as construction activity was up over the third quarter of 2002. Machinery volume was also up 8%. This made up for weak performance in Europe which management blames on the weak economy.

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The company stressed that it is still in cost-control mode as it tries to meet its profit goals for the year.

At current prices, the stock is up over 50% for the year trading at a price-to-earnings ratio of 18 times expected 2004 earnings vs. 12 for competitors

CNH Global


and 15 for

Cummins Inc.