While Caterpillar’s 26 percent rise in the first two months of the year made it the largest gainer in the 30-company index after Bank of America Corp., the Peoria, Illinois-based manufacturer’s 9 percent drop this year puts it fourth from the bottom. At least nine analysts have cut their 2012 profit estimates in the past four weeks, reducing the average projection for Caterpillar’s earnings to increase 29 percent, from 31 percent previously.

Caterpillar, the world’s largest maker of construction and mining equipment, had nine straight quarters of earnings growth as it rode a wave of investment by mining companies. In the current quarter, Caterpillar’s strategy of expanding outside the U.S. is coming under pressure as the rate of China’s economic expansion decreases and Europe’s debt crisis drags on.

“The real question is: what does the forecast look like?” Stephen Volkmann, a New York-based analyst for Jefferies Group Inc. who reduced his rating on Caterpillar to hold from buy last week, said in a July 20 phone interview. “The concern is that the growth trajectory has slowed.”

Retail Sales

In April, the company forecast 2012 profit of about $9.50 a share and sales advancing as much as 20 percent to $72 billion, in what would be a third year of gains.

Caterpillar’s global retail machine sales rose 11 percent in the three months through June, according to a filing today, matching the gain for March through May. North America led with a 24 percent increase, compared with 31 percent reported previously. Asia-Pacific sales expanded 16 percent, up from 5 percent. Latin America was down 3 percent.

“The data demonstrates that China and Brazil may be bottoming,” Larry De Maria, an analyst at William Blair & Co. in New York, said in a note.

Caterpillar, considered a U.S. economic bellwether, is scheduled to release earnings before the start of trading tomorrow. The company is expected to report second-quarter profit increased 33 percent to $2.28 a share, according to the average of 20 estimates. Analysts project, on average, that sales rose 19 percent to $17 billion.

There have been indications that demand for the company’s signature yellow machines was cooling in some regions. Chief Executive Officer Doug Oberhelman told investors in April when Caterpillar reported first-quarter earnings that sales of construction equipment in China and Brazil were down.

China Cooling

The global economic picture hasn’t gotten brighter in the past month. Brazil’s economy is recovering more slowly than expected from a contraction last year and economists in the latest central bank survey lowered their 2012 growth estimates for the 10th straight week. Spain said July 20 that its recession will extend into 2013.

China’s economic expansion may cool for a seventh straight quarter to 7.4 percent in the three months to September, Song Guoqing, a member of the People’s Bank of China monetary policy committee, said last week. The Chinese excavator market is down 38 percent so far this year, according to estimates from William Blair.

Jim Dugan, a Caterpillar spokesman, declined to comment.

While North America remains Caterpillar’s biggest market, accounting for 36 percent of revenue in 2011, Asia and emerging nations have become increasingly important for the company. A decade earlier, about half of Caterpillar’s revenue was generated in the U.S.

Ratings Reduced

Chinese companies are emerging as challengers to Caterpillar, Oberhelman said July 17 at a conference in Aspen, Colorado.

Caterpillar rose 1.1 percent to $82.45 at 10:27 a.m. Tuesday in New York. The shares have dropped 22 percent in the past year.

Caterpillar isn’t alone in being affected by macroeconomic uncertainty. Jefferies last week also cut its ratings on U.S. companies including tractor maker CNH Global NV, electrical- equipment manufacturer Eaton Corp., and Parker Hannifin Corp., a producer of air-conditioner components.

U.S. exporters are also grappling with a stronger dollar. The euro has fallen 16 percent against the dollar in the past 12 months while the British pound has dropped 4.9 percent.

Other U.S. manufacturers have reduced their guidance. Cummins Inc., a U.S. truck-engine and power-generator maker, slumped 8.9 percent on July 10 after saying 2012 revenue will be in line with last year, ditching an earlier forecast of a 10 percent increase.

‘Moderating Growth’

Joy Global Inc., a Milwaukee-based mining-equipment maker, on May 31 lowered its full-year earnings guidance. As well as citing a contraction in the U.S. coal industry, Joy said global uncertainty is keeping customers cautious about new projects.

Commodity prices, as measured by the Standard & Poor’s GSCI Spot Index of 24 raw materials, have declined 12 percent from this year’s peak in March.

Caterpillar’s U.S. dealers anticipate 2012 revenues will rise about 10 percent, less than in a previous survey and the 16 percent mid-point of Caterpillar’s own forecast, Brian Rayle, a Cleveland-based analyst for Northcoast Research who has a hold rating on the shares, said in a July 19 report.

Dealers historically have forecast more conservative sales growth than Caterpillar’s North American businesses report, Rayle said.

“The moderating growth outlook from dealers, which is consistent with the slowing growth being reported in a number of Caterpillar’s end markets, is evidence of the relative weakness that the company is currently working through,” Rayle said.