Caterpillar beats in Q2 -- is it a worthy investment idea at this point?

However, believe it or not, Caterpillar beat estimates by a very huge amount. According to the Closing Bell piece on Tuesday, analysts thought the company would do just 22 cents per share. That's a huge difference. And the stock did rally accordingly after the release.

On Wednesday, though, Caterpillar's stock took a bit of a breather. Shares closed down over 2%. Volume was pretty active. That's understandable. After rising on the earnings news, you've got to figure that some traders would be booking gains.

I think Caterpillar should be looked at as a recovery play. The press release displays a management team that is very cautious about the near-term future, and you can clearly sense the desire on the company's part to cut costs as aggressively as possible to defend the ongoing profit picture. The statistics are bad, but cash flow is all right. And when you think about the company's dividend history, you come away with the idea that Caterpillar might make for an interesting total-return play. One thing I don't like can be found in the release's quaint Q&A section. Management is not interested whatsoever in buying back stock right now. Don't get me wrong, I understand the rationale. However, that doesn't mean I have to like it, right?

So here's the deal. Caterpillar is suffering. Yet, the market appears to be discounting a future recovery (depending on your perspective, of course). The earnings were decent, and the dividend appears to be okay. If you want to buy an industrial name way off its 52-week high on the speculation that it will rise as we get closer to the end of this recession, Caterpillar might be for you. This situation doesn't come without risk, so make sure you perform plenty of due diligence.

Disclosure: I don't own any company mentioned; positions can change without notice.