The Dow's Top Earners

With the Dow Jones Industrials (INDEX: ^DJI  ) falling almost 240 points, the stock market saw a fair amount of volatility over the past week. With plenty of earnings reports moving the markets, investors are still extremely nervous about the results they're seeing and what they imply for the future.

Let's review the Dow companies that reported earnings to see how they contributed to the Dow's moves throughout the week.

Stock

Expected EPS

Actual EPS

Price Change for the Week

Caterpillar (NYSE: CAT  )

2.22

2.54

0.5%

DuPont

0.46

0.32

(8.4%)

3M

1.65

1.65

(5.3%)

United Technologies (NYSE: UTX  )

1.18

1.37

0.3%

AT&T

0.60

0.63

(2%)

Boeing (NYSE: BA  )

1.13

1.35

(3.9%)

Procter & Gamble (NYSE: PG  )

0.96

1.06

1.3%

Merck

0.92

0.95

(1.9%)

Source: Yahoo Finance. Earnings in some cases are adjusted to exclude extraordinary items.

Hard-hit companies
Again, the disparities among the various sectors represented by these companies reveal some useful information about investors' attitudes toward the overall economy. On one hand, three classic industrial stocks, DuPont, 3M, and Boeing, all fared particularly badly during the week. For DuPont, the chemical company saw sales drop 9% from the year-ago quarter, with a particularly sharp drop in the electronics and communications segment. The company cited a lack of infrastructure spending in Asia as fueling the sales decline, and weakness in demand for titanium dioxide and photovoltaic-related materials also contributed to DuPont's missing estimates on both the top and bottom lines. DuPont followed up the report by announcing it will cut 1,500 jobs as a cost-cutting measure, showing the consequences of missing estimates.

3M, on the other hand, managed to meet earnings expectations and give a slightly more upbeat view on its outlook. 3M is seeing weak macroeconomic conditions, but the company doesn't expect to change its overall plan and will continue making investments overseas. Although shareholders responded negatively to a pullback on guidance for the fourth quarter, 3M seems to be making all the right moves for long-term success.

Finally, Boeing didn't come close to meeting earnings expectations. But as Fool contributor Daniel Ferry points out, the key for Boeing in the long run is its move away from the defense industry and toward commercial sales. As defense becomes a smaller part of the business, it'll be even more important for Boeing to execute well on the commercial side.

Heading higher
On the other side of the coin, Procter & Gamble, Caterpillar, and United Tech all held up reasonably well. For P&G, that's exactly the kind of performance you would expect from a stock that many look to as a defensive play that excels in down markets. But some of the positive movement actually came from increased optimism about the stock. Given concerns in recent months as the appearance of activist investor Bill Ackman has undermined confidence in CEO Bob McDonald, seeing the stock at new multiyear highs is definitely a vote of confidence.

Meanwhile, Caterpillar's performance has broader implications on the global economy. Despite P&G's worldwide reach, it hasn't historically relied on any one market to provide the bulk of its growth. By contrast, although Caterpillar has retained a strong presence in its domestic markets, it has increasingly relied on China to provide it with the growth in construction and mining that it needs to sell its equipment. With the company having warned about its longer-term earnings in the years to come, Caterpillar hasn't sounded the all-clear just yet, but the company is taking steps to secure the growth it needs in the long run.

Finally, United Technologies actually beat earnings estimates soundly, which helped it stay higher despite a shortfall on the revenue side. Really, though, past earnings are pretty much irrelevant at this point, as the company continues to work to integrate its recently closed acquisition of Goodrich.

Don't stop looking
By now, most of the Dow 30 stocks have given their earnings reports for the quarter. The key now for investors is to hold companies accountable for the forward-looking statements they've made in their quarterly announcements. It's easy to forget, but making sure that what a company says publicly matches up with what actually happens is an essential part of building trust and having faith that company management is on your side.

It's critical to go beyond earnings reports if you want to truly understand a stock. For instance, Caterpillar is the market share leader in an industry in which size matters, and its quality products, extensive service network, and unparalleled brand strength combine to give it solid competitive advantages. But does that mean that Caterpillar is a buy right now? Read all about Caterpillar's strengths and weaknesses in our brand new report. Just click here to access it now.

Fool contributor Dan Caplinger has no positions in the stocks mentioned above. You can follow him on Twitter, @DanCaplinger. The Motley Fool has no positions in the stocks mentioned above. Motley Fool newsletter services recommend 3M, Procter & Gamble, and AT&T. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (0) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

DocumentId: 2080670, ~/Articles/ArticleHandler.aspx, 4/20/2014 6:06:17 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement