Updated from 8:09 a.m. EDTCaterpillar ( CAT) reported a significant earnings miss Friday and said it must work harder to eliminate production bottlenecks. The tractor company earned $667 million, or 94 cents a share, in the quarter, up from $498 million, or 70 cents a share, a year ago. Analysts were forecasting earnings of $1.06 a share in the latest quarter. Overall sales rose 17% from a year ago to $8.98 billion, while sales of engines and machines rose 17% to $8.39 billion. Analysts, who try to predict the latter number, were forecasting $8.47 billion. The shares were a major drag on the Dow Jones Industrial Average Friday, falling $5, or 9.3%, to $49.03. Caterpillar called it the best third quarter in company history but said there was room for improvement. "In particular, we have to work through capacity bottlenecks and need more focus on production processes to improve order fulfillment and supply chain efficiencies," the company said. "To help move us faster along this path, we announced last week a new division to drive improvements in our production processes and order fulfillment capability." The company said most of its plants are seeing improved supplier performance. "However, demand continues to increase, and our factories are working to raise production schedules to meet the strong growth in demand. Tires continue to have tight availability, and on a factory-by-factory basis a number of component categories are in tight supply," it said. Looking ahead, the company sees full-year 2005 earnings of $3.85 to $4 a share, down from its previous outlook of $4 to $4.20 a share. The company said the guidance reflects a potential dealer-discount and product-realignment charge of $100 million and a higher tax rate. The outlook comes out to a prediction of $1.01 to $1.16 a share in earnings for the fourth quarter. Analysts, who probably weren't including the charges, were forecasting $1.20 a share in the quarter.