The Dow Jones Industrials (DJINDICES:^DJI) fell precipitously last week, scaring many investors into thinking a correction could be imminent. But after starting off on Friday, earnings season is coming in full force for the Dow, with eight component companies of the Dow Jones Industrials reporting their results this week. But even with so many companies reporting next week, investors should focus on two of the most important reports for the Dow: Intel (NASDAQ:INTC) and General Electric (NYSE:GE).
Intel will be the first tech stock to report its first-quarter earnings, and with the sector at the forefront of investors' minds right now, Intel's report will get a lot of attention not just for what it says about the company but also for what it reveals about the industry as a whole. Intel is going through a very difficult strategic transformation right now, as the chipmaker attempts to move beyond its long and historic dominance of the PC industry to find its place in the mobile-chip industry. Investors don't have high expectations for Intel, predicting a 7% to 8% drop in earnings for the first quarter and a 1% to 2% drop for 2014 as a whole. Revenue growth is also expected to be sluggish, with some of Intel's moves expected to lead to falling profit margins.
But Intel realizes that even if it has missed the opening stages of the mobile revolution, it can still leapfrog over its rivals by coming up with the next big technology. That's why Intel has spearheaded its "Make It Wearable" challenge, attempting to get new ideas from across the world through competitive grants that could give Intel huge first-mover advantages if any of those ideas pan out. Although not all of Intel's strategies are quite this forward-looking, they nevertheless point to an industry leader seeking to reestablish itself at the top of the tech world, and investors should look closely at Intel's earnings report to see how its efforts are progressing.
General Electric has also been going through some growing pains, with expectations for a steeper 18% drop in earnings per share on a slight drop in revenue. Yet longer-term, shareholders believe that General Electric will be able to right its ship by the end of 2014 and post modest increases in both net income and sales. Strategically, General Electric has been working hard to divest itself of weaker-performing businesses, with its sale of its stake in NBC Universal and more recently its decision to do an initial public offering of its Synchrony Financial consumer credit card business and the possibility of selling off its GE Money Bank division.
General Electric's future is clearly reliant on its industrial roots, with key divisions like aerospace and energy playing an increasingly important role in the conglomerate's overall success. With efforts to integrate the Internet of Things into its industrial products, General Electric is thinking forward with innovations designed to keep it competitive not just now but years and even decades into the future. Given the challenges that the financial sector is going through and the vast potential of the industrial world, General Electric's earnings report should reveal just how successful the company has been in realizing its long-term strategic vision.
Investors in the Dow Jones Industrials should pay attention to all of its components' earnings reports this week. But if you follow the Dow, you should especially watch for the reports from Intel and General Electric for signs that could push the entire stock market either higher or lower in the near future.
Are you ready to profit from this $14.4 trillion revolution?
Let's face it, every investor wants to get in on revolutionary ideas before they hit it big. The problem is, most investors don't understand the key to investing in hypergrowth markets. The real trick is to find a small-cap "pure play" and then watch as it grows in explosive fashion within its industry. Our expert team of equity analysts has identified one stock that's poised to produce rocket-ship returns with the next $14.4 trillion industry. Click here to get the full story in this eye-opening report.
Dan Caplinger owns shares of General Electric. The Motley Fool recommends Intel and owns shares of Intel and General Electric. 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.