Has Caterpillar Inc. (CAT) Become the Perfect Stock?

Caterpillar has been feeling the pain of a sluggish global economy throughout the past year. The U.S. market has been slow to pick up steam, hurting its domestic equipment sales. Meanwhile, China has been a particularly tough market for Caterpillar, as slowdowns in the economy during the early part of the year led to reduced infrastructure and construction activity. Due to lower commodity prices, Rio Tinto plc (NYSE:RIO) and other big mining companies have cut back on production, and that has hurt both Caterpillar and rival Joy Global Inc. (NYSE:JOY) in their sales of mining equipment.

More recently, Caterpillar has started to see some signs of life. China’s stimulus package will put about $150 billion into infrastructure plays, and Caterpillar should get its fair share of that money. Meanwhile, an improving housing market has started making people more optimistic about construction in the U.S. more broadly, and that should bode well for the company going forward.

Yet that will take a while to show up in the company’s numbers. In its most recent quarter, Caterpillar’s net income fell by more than half, and the company gave fairly weak guidance for the coming year. With General Electric Company (NYSE:GE) planning to boost its presence in the mining equipment area, even a rebound in the industry could require Caterpillar to work harder to maintain its leadership position.

For Caterpillar to improve, it needs a full global recovery to take shape. Until that happens, Caterpillar is likely to see volatility in both directions as macroeconomic tides ebb and flow in the years to come.

The article Has Caterpillar Become the Perfect Stock? originally appeared on Fool.com and is written by Dan Caplinger.

Fool contributor Dan Caplinger has no position in any stocks mentioned. The Motley Fool owns shares of General Electric.

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