Caterpillar on Thursday reported adjusted fourth-quarter earnings that beat estimates, but revenue fell short of Wall Street expectations.
Shares of Caterpillar gained more than 3½ percent in premarket trading immediately following the earnings announcement. (Get the latest quote here.)
Looking ahead, Caterpillar Chairman and CEO Doug Oberhelman said: "2016 is going to be rough and challenging again."
Caterpillar does a lot of business in China, which has been building up infrastructure. In an interview on CNBC's "Squawk Box," Oberhelman said he sees long-term opportunity there but short-term pain. "Our numbers are down 30 percent-plus year over year [in China.]"
"[There's] a lot of oversupply from construction equipment," he continued. "But they're still pouring concrete and doing lots of things. Once that imbalance works out, it should be a pretty nice market."
But China's economy is showing signs of slowing — a trend that's knocked financial markets for a loop in the new year on concerns about whether the U.S. recovery could also get derailed.
Oberhelman said he sees no inflation in the U.S. and anemic growth of "1 percent or so — maybe up to 2 [percent]."
He said he was pleased to see the Federal Reserve hold steady on interest rates. "I just don't see the need for much more increase [in rates] if any at all."
The Fed's policy statement, released Wednesday afternoon following its January meeting, highlighted potential economic weakness but did not take a possible March interest rate hike off the table.
"We're trying to ... make sure we're strong at the bottom part of this cycle — so that when we do emerge, there will be growth sometime in the future — we'll be strong and ready to go," the Caterpillar CEO said. "We've just got really soft markets around in a lot of the countries, and certainly commodities and oil."
The world's largest construction and mining equipment maker's total sales and revenue fell to $11.03 billion in the fourth quarter ended Dec. 31, from $14.24 billion a year earlier. Excluding restructuring costs, Caterpillar earned 74 cents per share, compared with $1.35 the previous year.
Analysts had expected Caterpillar to report earnings of about 69 cents a share on $11.45 billion in revenue, according to a consensus estimate from Thomson Reuters.
The company said it sees full-year adjusted earnings of $4 a share, on revenue of $40 billion to $44 billion.
Caterpillar recently warned investors that global retail sales of its machinery fell 16 percent in the most recent quarter. The company has been under pressure from the slowdown in energy and mining. In 2015, Caterpillar's stock fell 26 percent.
On Friday evening, Goldman Sachs downgraded the stock to "sell" from "neutral" on lower machinery demand, saying it would be more positive on the equipment maker if there were a rebound in higher oil prices.
In December, Caterpillar announced that its president, Ed Rapp, would retire due to his ongoing battle with Lou Gehrig's disease. The company plans to announce a replacement for Rapp soon.
—CNBC's Christine Wang and Reuters contributed to this report.