AT&T and Caterpillar's Earnings Whiffs Pull Down the Dow

Earnings season has hit the Dow Jones Industrial Average (DJINDICES: ^DJI  ) with a pair of misses today, as both AT&T (NYSE: T  ) and Caterpillar (NYSE: CAT  ) couldn't live up to Wall Street's expectations. The blue-chip index has fallen about 49 points as of 2:20 p.m. EDT, with the two earnings losers leading a large cadre of stocks lower. Let's catch up on all the stories and movers you need to know from around the Dow.

AT&T and Caterpillar take their lumps
AT&T led things off today with better-than-expected revenue improvement for the second quarter, but the company's earnings missed Wall Street's projections by a penny, and the negativity surrounding that miss has pulled the stock down by 1.7% so far. While AT&T showed some problems as smartphone discounts cut into the company's margins and landline revenue unsurprisingly declined, today's drop is more of an example of earnings-season hype than it is an indictment of AT&T's business.

After all, AT&T reached a company record of smartphone sales thanks to those same margin-squeezing discounts, and wireless-service net profit margins still stood at more than 42% for the quarter. That's hardly a number to be concerned about, particularly as the company recorded 72% more newly signed contract customers for the quarter than it did last year. The 551,000 new contract customers topped analyst projections by more than 50,000. While AT&T is still looking up at wireless leader Verizon, the company and its stock are hardly in bad shape.

Caterpillar, on the other hand, has seen its stock tumble far more drastically today, with shares down 2.6% to lead the Dow into the red. The company's revenue plunged by more than 15%, and earnings nosedived by 43% -- both far below analyst projections. China once again has hurt the company's performance, with the mining industry continuing to flounder as the world's second-largest economy slows down from previously rapid growth. Currency issues also hurt Caterpillar, according to the company.

The earnings release showed an across-the-board shellacking for Caterpillar's business segments. Operating profit tilted down in both its resource industries department and its power systems division, with the former losing 47% in profit. Unfortunately, the mining industry's outlook isn't good, and while Caterpillar has maintained its top position in the manufacturing industry, this sector is in a major slump that could last for a while, particularly as raw-materials prices remain depressed. Caterpillar has sought to cut costs, but the company cut its full-year earnings outlook from $7 per share to $6.50.

Caterpillar's miss has hit fellow Dow member Alcoa's (NYSE: AA  ) shares hard today: The aluminum giant is down 1.3%. Alcoa managed to post better-than-expected earnings to begin the season two weeks ago, but similar to Caterpillar, the reality of low aluminum prices and weak demand has turned this company's near-future outlook into mud. Alcoa has stanched the bleeding by pivoting more toward finished aluminum products such as aircraft wings, but until demand picks up and remedies a serious oversupply in the market, this stock will continue to struggle.

Caterpillar and Alcoa aren't on pace for strong growth in coming quarters, considering the global economy's slow recovery. Great growth stocks are out there, however: Motley Fool co-founder David Gardner, founder of the No. 1 growth-stock newsletter in the world, has developed a unique strategy for uncovering truly wealth-changing stock picks -- and he wants to share it, along with a few of his favorite growth stock superstars, with you. It's a special free report called "6 Picks for Ultimate Growth." So stop settling for index-hugging gains and click here for instant access to a whole new spread of stock picks to help power your portfolio.


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