After reporting weaker-than-expected results earlier this year because of a drop-off in orders for mining equipment, Caterpillar (NYSE:CAT) CEO Doug Oberhelman sounded an optimistic note, telling CNBC, "We don't want to be overly optimistic but it certainly feels better than the last two springs."

Unfortunately, things haven’t gotten better for the Peoria, Illinois-based company. The company today reported earnings that were far worse than analysts expected and slashed its outlook for the year. The numbers were so bad that CNBC’s Herb Greenberg nominated Oberhelman to win the title of worst CEO of the year. That assessment, though, may be overly harsh.

For one thing, Oberhelman doesn’t seem like he’s sugarcoating the company’s problems. He called 2013 “a painful year” in the company’s earnings release, but he added that there are “encouraging signs” for 2014.

“The rest of the business is hanging in there,” Oberhelman said to CNBC.

Commodities have gone through cycles of booms and busts for decades. The forces of supply and demand balance each other out, and when that happens Caterpillar stands to benefit. Of course, the tricky part is figuring out when that rebound will occur.

“It (mining) comes back,” said Eli Lustgarten, an analyst with Longbow Securities, to CNBC. “It just takes time.”

The time, though, is right for investors to add Caterpillar to their portfolio because the shares have gotten too cheap to ignore.

For one thing, the shares are trading at a price-to-earnings multiple of about 14, well under their five-year average high of 39.9. That’s cheaper than other industrial companies such as General Electric (NYSE:GE) (18), United Technologies (NYSE:UTX) (19) and Boeing (NYSE:BA) (23). Wall Street has an average 52-week price target on Caterpillar of about $92, about 9.5% above where it currently trades. 

Investors, though, should be aware that the road ahead for Caterpillar will not be easy.

According to Caterpillar, sales from its Resource Industries division, which serves the mining sector and is the company’s largest, are expected to plunge 40% this year. The company’s other businesses, Power Systems and Construction Industries aren’t doing great either. Sales in both divisions are expected to fall 5% in 2013, though these businesses should hold their own if the economy doesn’t falter.

Mining giants such as Rio Tinto (NYSE:RIO) and BHP Biliton (NYSE:BHP) are slashing their capital expenditures because of weak commodities prices, which many analysts expect to continue. Both Goldman Sachs and Credit Suisse Group expect gold prices to continue their losses into 2014, according to Bloomberg News. The declines in gold are expected to pull down prices for silver. UBS expects the metal to fetch an average of $24 an ounce, down 17.2% from an earlier forecast in 2013 and $25 in 2014 (16.7% lower from a previous estimate). Earlier this month, Chile raised its estimate for the global surplus of copper by 40%. The largest copper producer expects prices in 2014 to fall to $3.15 per pound versus $3.15 in 2013, according to Reuters.

The Bottom Line

Caterpillar is the type of stock that illustrates Warren Buffett’s famous quote “be fearful when others are greedy and greedy when others are fearful.” There are many examples of stocks that people have left for dead that have roared back. Many pundits argued that Best Buy was stuck in a race for customers with Amazon that it couldn’t win. Netflix was written off after angering customers with an ill-advised price increased. Both have surged more than 200% this year. Though no one can predict that Caterpillar will equal that performance, the stock should do better than it is today.

Disclosure - At the time of writing, the author did not own shares of any company mentioned in this article.