The stock market had a tough summer, with the Dow Jones Industrials (DJINDICES:^DJI) suffering losses of more than 1,300 points and ending the quarter still in correction territory more than 10% below its spring highs. Although more than three-quarters of the 30 Dow stocks fell during the quarter, several companies endured much larger declines that contributed substantially to the Dow's poor performance. Let's look at the three Dow-component stocks that performed the worst during the quarter.
3. United Technologies, down 19%
Many companies in the Dow have found themselves affected by the slowdown in the Chinese economy, but for United Technologies (NYSE:UTX), some of the impact has been unexpected. Most of United Tech's decline came in July, when the company said that its earnings for the full 2015 year would be lower than it had previously projected.
Weakness in the conglomerate's Otis elevator unit might not have been all that surprising, given headwinds in Europe as well as sluggish building activity in China, and even orders for new equipment from United Tech's UTC climate-control business might have been easy to explain. Yet the real problem came from its UTC Aerospace Systems division, which didn't see the demand in the aircraft-engine aftermarket that it had hoped for its Pratt & Whitney unit. With United Tech having agreed to sell its Sikorsky helicopter unit, commercial aerospace seemed like a big potential winner, but signs that that might not turn out to be the case weighed on the stock. To recover, United Tech will have to push harder to have its aerospace business participate in the industry's overall boom.
2. DuPont, down 20%
Chemicals companies have worked hard to reinvent themselves, and DuPont (NYSE:DD) seemed to be on the right track by emphasizing its more lucrative agricultural business. Yet over the past quarter, concerns about the sustainability of growth in agriculture have arisen as farm crop prices have continue to remain weak. In its earnings report in late July, DuPont said that it would have difficulties for the remainder of 2015, with pressure from a strong dollar, the impending spinoff of its performance chemicals unit, and weakness in demand for its crop-related products.
DuPont's performance has reawakened beliefs that activist investor Nelson Peltz at Trian Fund Management might make another attempt to gain more control of the company. It's uncertain whether that would be good or bad for shareholders, but that uncertainty in itself hasn't done the stock any favors, and further pressure could come before a final resolution appears.
1. Caterpillar, down 22%
Among Dow stocks, Caterpillar (NYSE:CAT) was the worst performer of the quarter, as it once again dealt with challenges on multiple fronts. After seeing construction industry weakness in China and throughout much of the world weigh on results, Caterpillar subsequently faced poor results from its resource-industries unit due to low commodities prices for mined products. Most recently, the oil bust has cost Caterpillar a formerly strong-performing business in selling heavy equipment to energy companies.
With a recent decision to cut 10,000 jobs, Caterpillar is doing its best to weather the storm. Yet even as the slump has now resulted in a 40% plunge for Caterpillar stock since the middle of last year, few investors have a strong sense of whether the worst is behind the heavy-equipment maker or whether further weakness could be yet to come.
No one is certain whether the Dow will recover in the fourth quarter or continue to pave the way toward a deeper correction or even a bear market. Regardless of what happens, though, shareholders in these three Dow stocks will be looking closely at what happens to their respective companies, in the hope that they will be able to bounce back from their plunges during the summer months.