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Caterpillar reported quarterly earnings on Tuesday that beat analysts expectations, but revenue fell short of estimates and the company lowered its full-year guidance.
The construction and mining equipment maker posted third-quarter earnings of 85 cents a share on revenue of $9.16 billion. The company had profit of $1.05 per share a year earlier.
Analyst expected Caterpillar to report earnings of 76 cents a share on revenue of $9.86 billion, according to Thomson Reuters consensus estimates.
Shares of the company dropped more than 2 percent in premarket trading immediately after the announcement.
"Economic weakness throughout much of the world persists and, as a result, most of our end markets remain challenged," Chairman and CEO Doug Oberhelman said in a statement. "In North America, the market has an abundance of used construction equipment, rail customers have a substantial number of idle locomotives and around the world there are a significant number of idle mining trucks."
He said Caterpillar saw a $1.8 billion decline in sales and revenue. He added the construction industry and the company's machine market position improved in China, however.
"While we are seeing early signals of improvement in some areas, we continue to face a number of challenges. We remain cautious as we look ahead to 2017, but are hopeful as the year unfolds we will begin to see more positive momentum," he said.
The company lowered its 2016 full-year outlook due to a "challenged environment." Additionally, 2017 sales and revenue are not expected to be significantly different than 2016.
Caterpillar now expects 2016 revenue of $39 billion, and a profit of $3.25 per share. The previous outlook was revenue in the range of $40 billion to $40.5 billion, with earnings of $3.55 per share.
Last week, Oberhelman said he would retire in January after more than 41 years with the company. He will be succeeded by 35-year-long veteran Jim Umpleby. A spokeswoman for Caterpillar told CNBC that his departure was his choice and that the transition is in line with that of past CEOs.
Additionally, earlier this year, the company cut its full-year sales and profit forecast as weak demand for equipment in the mining and energy sector continued to weigh on the business. Oberhelman said at the time that the company was cautious as it entered the second half of the year. He added it was not expecting an "upturn in important industries like mining, oil and gas and rail to happen this year."
Eli Lustgarten, senior Research analyst at Longbow, told CNBC on Oct. 17 that Caterpillar's tough business conditions aren't going to disappear in the next couple of years. He said allowing Umpleby to take over the helm somewhat early would allow for the company to begin to improve by 2018.
"It's a good time for Jim to take over, as I know Caterpillar will deliver even better financial results when key industries begin to improve and get back to midcycle replacement demand levels," Oberhelman said in the earnings release.
Correction: An earlier version misspelled Jim Umpleby's name.