Caterpillar quarterly earnings dip 55% on weak demand and accounting fraud scandal

Caterpillar, the world's largest maker of construction equipment, posted a 55% drop in quarterly earnings today as a result of alleged accounting fraud at one of the company's Chinese subsidiaries and weak demand from CAT's global dealers.

Inventory of machinery in China, Europe and the US had accumulated significantly over the past year and currently remains $1 billion higher than 2012 Q4.

Despite the tough earnings report, Caterpillar expects growth in China to improve modestly and the stock was the "biggest gainer in the Dow Jones industrial average, rising $2.11, or 2.2 percent, to $97.69 as of noon Eastern time."

Caterpillar claims that fourth-quarter net income was above analysts' expectations and Chairman Doug Oberhelman is "encouraged by recent improvements in economic indicators", but remains concerned about weak growth in Europe and the US.