Caterpillar (NYSE:CAT) Beyond the Third Quarter

With almost perfect market conditions over the last 12 months, Caterpillar's (NYSE:CAT) revenue has soared by over 40 percent over last year.

The $10.5 billion in estimated revenue this quarter reflects market conditions which are close to optimal after a weak third quarter in 2009. Part of the 40 percent surge is attributable to that factor.

Sales of machinery this quarter is expected to by almost double last year according to Goldman Sachs (NYSE:GS), which account for about 66 percent of company revenue. Engine sales are also expected to jump by 24 percent over last year. Engine sales account for about 33 percent of Caterpillar's business.

A robust mining industry and emerging market growth are behind the projected strong growth of Caterpillar, but the question is - where do they go from here?

One of the things the company must do after the strong quarterly report coming up is to start managing expectations.

Costs related to compliance with emission standards are expected to cut into margins in earnings. Questions on the ability to continue pricing increases are married to that idea as well.

With investors and analysts expecting Caterpillar to continue on as they are, they may need to rein in those expectations and provide a more level outlook.

Having said that, some of this is out of their control, as what the Federal Reserve does in relationship to quantitative easing will play a big part in how they will be able to price.

If there is some easing that takes place, which is expected, commodity prices could easily soar much higher and Caterpillar should be able to duplicate, and possibly surpass this years' performance.

If some surprise emerges in this regard, they could take a hit.

I think QE is going to be implemented, and when it does, Caterpillar is pretty well positioned to profit from it.