Caterpillar also cut its full-year forecast to $9 to $9.25 a share, compared to previous estimates of $9.40 a share. Revenue is estimated to be $66 billion, below previous expectations of a range of $68 billion to $70 billion.
Two of the global economy's heavyweights, China and Europe, are struggling for different reasons, factors reflected in Caterpillar's downbeat outlook. A visible slowdown in Asia's largest economy — one of Caterpillar's most important markets — has many analysts worried about a deep and prolonged downturn.
Meanwhile, the euro zone is grappling with a debt crisis and an austerity drive dragging on the Continent's key economies. Along with a sluggish U.S. economy, the circumstances in Europe and China are ratcheting up the general uncertainty, according to Caterpillar CEO Doug Oberhelman. (Read more: EU Faces 2 Tough Months of Bargaining to Boost Euro Confidence.)
"I don't predict a recession anywhere in the world at all in 2013, but Europe is the one where there are so many political unknowns it's hard to see how that's going to end up," Oberhelman told CNBC's "Squawk Box." However, he said, "We sure see China past the bottom. I'm optimistic about China in 2013."
In light of the troubled outlook, the Caterpillar executive said he was taking a "pragmatic view" of the upcoming year. He was also sanguine about the U.S.'s ability to avoid plunging over the "fiscal cliff" that could see tax rates spike dramatically and spending slashed deeply early next year. (Read more: 'Hugely Irresponsible' to Dive Off 'Fiscal Cliff': Summers.)
"There are lots of things that are just unknown right now. Maybe in 30, 60, or 90 days maybe that'll start to clear up and we'll know better," Oberhelman said. "Right now that's the best we can see in our crystal ball. Short term is actually a little tougher to forecast than the long-term."
Oberhelman did expect the U.S. housing market to continue its rebound. He told CNBC that "The bubble that we went through is being worked off, [and] there's no question in my mind that housing starts will inch up," and return to their pre-2007 levels in the longer-term.
"It's contingent on the unemployment rate, how many people are working, and when that's solved we'll see housing starts back over a million," the CEO added.