Caterpillar Inc. (CAT): Will This Stock Bounce off the Bottom Wednesday?

More importantly, some of Caterpillar Inc. (NYSE:CAT)’s capital spending plans could take a back seat, especially after the recent dismal GDP numbers from China. Though the market accounted for only 3% of Caterpillar’s sales last year, it is also where Caterpillar is eying major expansion into the future. Alcoa, which relies on China for a good part of its revenue, projects the commercial construction market in China to grow between 8% and 10% this year, which sounds pretty optimistic.

Investors should pay attention to what Caterpillar Inc. (NYSE:CAT) has to say about China. Until things turn around, Caterpillar might be forced to hold back some of its expansion plans.

Foolish takeaway
Caterpillar Inc. (NYSE:CAT) had already lowered its full-year revenue guidance in the previous quarter to $57 billion-$61 billion, from its earlier projection of $60 billion-$68 billion. While a further reduction is unlikely, worsening conditions in key markets could hurt Caterpillar’s earnings prospects beyond this year. Investors should focus on whether Caterpillar sticks to its long-term growth plans. If it does, Chanos’ shorting might just give you the right opportunity to dive into the stock.

Fool contributor Neha Chamaria has no position in any stocks mentioned. The Motley Fool owns shares of General Electric Company and Terex.

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