The 6 Dow Stocks You Must Watch This Week

Earnings season for the Dow starts in earnest this week. Find out the stocks that will move the markets.

Jul 13, 2014 at 11:02AM

Four times a year, investors in the Dow Jones Industrials (DJINDICES:^DJI) look forward to getting the latest gauge on how their favorite companies are faring when they release their quarterly earnings reports. Although we got a single Dow component's quarterly report last month, the official start of the Dow's second-quarter earnings season comes this week, when half a dozen stocks report their most current results. Let's look at all six and why General Electric (NYSE:GE), Intel (NASDAQ:INTC), and IBM (NYSE:IBM) are most likely to have the greatest influence on the Dow Jones Industrials this week.

Source: UpstateNYer.

The runners-up in the earnings race
Besides the three preceding stocks, we'll also get quarterly reports from Goldman Sachs, JPMorgan Chase, and Johnson & Johnson. For the two bank stocks, though, we already got a sneak peek at the state of the industry when big-bank peer Wells Fargo reported its latest results last Friday. Moreover, we've already got a pretty good handle on what both Dow financial stocks are likely to see, with problematic conditions in the mortgage business and in investment-banking niches like proprietary trading likely to hold back growth at least temporarily. For Johnson & Johnson, meanwhile, it has increasingly relied on growth from its pharmaceutical segment to offset sluggishness in medical devices and consumer products, and that trend is only likely to continue as prospects improve for some blockbuster drugs in J&J's arsenal.


Source: Intel.

Targeting tech
With Intel and IBM, though, investors will get their first real look at the state of the technology industry over the past quarter. Intel has already given shareholders some good news in advance, having recently boosted its guidance for the quarter and for the full year based on better than expected PC-related revenue. Given the challenges that Intel has faced in trying to become a more important player in the mobile-device space, rising PC demand was a welcome surprise, but if all of Intel's growth ends up coming from that area, it could well disappoint investors.


Source: IBM.

IBM, on the other hand, has been working hard to divest itself of some of its lower-margin, less promising business units. Instead, it's focusing on high-margin products and services, voluntarily accepting drops in revenue in the hopes of boosting bottom-line growth to meet and exceed its $20 earnings-per-share target for 2015. Some shareholders have been wary of that strategy, but if IBM can keep moving forward and produce stronger results, it could finally convince skeptics that its current plan is the best one for the future.

What's the big deal?
Finally, General Electric arguably has the most power to move the Dow this week, if only because it could have the most complex financial report. Investors have a lot of questions about how the company's deal to acquire large parts of French giant Alstom's business lines will affect General Electric and its own prospects both in Europe and around the world. But at the same time, General Electric should continue to benefit from strength in the aerospace and energy markets, with its well-diversified exposure giving the conglomerate unique opportunities to innovate and advance the current state of technology in key areas like the Internet of Things and other important initiatives.

The Dow Jones Industrials will have a lot to consider as earnings season starts, but these six companies will be in the forefront this week. Be sure to watch their reports closely to get glimpses not only of their respective business prospects but of their entire industries as well.

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Dan Caplinger owns shares of General Electric and warrants on JPMorgan Chase. The Motley Fool recommends Goldman Sachs, Intel, and Johnson & Johnson and owns shares of General Electric, Intel, International Business Machines, Johnson & Johnson, and JPMorgan Chase. 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.

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