Caterpillar Inc. (CAT) posted fourth-quarter earnings, and boy were they negative. Earnings came in at $1.08 per share compared with expectations of $1.31 per share. CAT also said it will be cutting 20,000 jobs (~11% of their workforce).

But the numbers weren’t what’s important here. What is surprising about this release was the commentary from management. Most management teams attempt to portray their company’s future in some kind of positive light, regardless of how dire the economic situation is. Not so with CAT’s management. They said “We expect 2009 will be the weakest year for economic growth in the postwar period. We are expecting recessionary conditions to persist in most of the world throughout the year, with no growth in the world economy.” They further went on to say that government stimulus plans like those from President Barack Obama may not be enough to offset the drop in private construction.

Yikes. Isn’t this supposed to be THE infrastructure company? And isn’t the infrastructure sector suppose to hold the greatest potential for growth over the coming few years, given all of the government stimulus packages?

Analysts and economists everywhere have been touting infrastructure as the best place to park your money for the next few years. They sight that governments around the world are planning to spend trillions on infrastructure projects after we’ve spent decades running an infrastructure deficit from underinvestment. I certainly buy that – the only way nations like China, India, Brazil, Mexico and Russia will develop into economic powerhouses will be if they spend on infrastructure. Even developed nations like Canada, the US and Europe require substantial upgrades to existing infrastructure like public transportation, and public utilities.

However, management at Caterpillar clearly feels differently. I have no idea why they’re so bearish on their own industry – perhaps because a big chunk of their business comes from energy and mining companies and these companies have been decimated over the last 6 months. But still, they specifically sight extreme drops in private construction and recessionary conditions around the world. You may want to disagree with CAT management, but remember they live and breathe their business every day – they’re the industry experts. Take what they say seriously.

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