Why Caterpillar, 3M, and Verizon Will Move the Dow Tomorrow

The Dow Jones Industrials (DJINDICES: ^DJI  )  on Wednesday took a pause from their recent streak of sharp gains, as investors tried to digest the huge number of companies reporting earnings, as well as some readings on the strength of the U.S. economy that cast a shadow over generally bullish sentiment. On Thursday morning, the Dow will have even more earnings results to consider, with Caterpillar (NYSE: CAT  ) , 3M (NYSE: MMM  ) , and Verizon (NYSE: VZ  ) all adding their results to the mix and weighing in with their assessment of how the broader economy is performing.

The three companies are all likely to release their earnings at about 7:30 a.m. EDT, based on Verizon's press release and on past practice from Caterpillar and 3M. All three have scheduled morning conference calls, with 3M's set for 8 a.m. EDT, Verizon to follow at 8:30 a.m. EDT, and Caterpillar bringing up the rear at 11 a.m. EDT.

Source: Caterpillar.

Of the three Dow components, Caterpillar has the hardest road ahead, as investors expect the company to report slightly higher sales but lower earnings. Years of sluggish construction and infrastructure activity, combined with 2013's plunge in mined commodities prices, led Caterpillar stock to miss out on the big bull-market rally in the Dow Jones Industrial Average last year. Even now, economic conditions worldwide have held back the heavy-equipment maker from its full potential. Yet with expectations so low, shareholders believe a turnaround in construction activity could finally help Caterpillar grow again, and they've already started bidding up shares in anticipation of future growth.

Source: 3M.

Investors expect 3M to continue its slow but steady growth as the conglomerate tries to reawaken its innovative spirit and come out with new blockbuster products that could drive the next generation of rising revenue and profit. So far, 3M has resisted the impulse to specialize and hone in on the highest-margin business niches in the market, instead retaining its breadth of coverage to make the most of whatever profit opportunities present themselves. Whether that continues will go a long way toward determining 3M's future course.

Verizon has thus far managed to avoid the full brunt of the rising price war developing among some of its telecom peers, but how long it can do so is uncertain. With its archrival having reported strong subscriber growth but flat earnings, Verizon needs to demonstrate its ability to keep margins strong and retain its customer base. Otherwise, Verizon might see erosion in its leadership position that could eventually threaten the strong cash flow it earns from its wireless and broadband Internet businesses.

For Dow investors, these three companies all give indications about the health of various key industries in the economy. 3M has the highest share price, but Caterpillar arguably has more capacity to produce a major surprise in one direction or another and so is most likely to move the Dow substantially tomorrow. Don't count Verizon out, though, especially if its growth figures are much different from what shareholders anticipate.

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