Which Dow Industrial Stocks have the Strongest Earnings Trends After Alcoa Earnings?

Earnings trends are extremely important when evaluating stocks. At Wall St. Cheat Sheet, we view increasing earnings quarter-over-quarter as a simple way to gauge whether costs and the business model are stable. Then we like to analyze whether the company is outperforming peers in the sector. This is what we call the “E-Squared” investment analysis (‘E = Earnings Are Increasing Quarter-Over-Quarter’ + ‘E = Excellent Relative Performance Versus Peers and Sector’).

Stocks with improving earnings metrics are worthy of your extra attention. Click here to discover our CHEAT SHEET stock picks now!

Here’s your Cheat Sheet to how the top 5 Dow Industrial stocks rank via earnings trends:

General Electric Co. (NYSE:GE): Current Price $23.46

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 181,580 154,440 149,570 147,290 147,360
Diluted EPS ($) 1.72 1.01 1.06 1.23 1.29

We’re happy to note that GE has countered flat revenue during 2011 and 2012 with a boost in profitability marked by better EPS numbers.

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Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012 Dec. 31, 2012
Revenue ($) in millions 37,970 35,180 36,500 36,350 39,330
Diluted EPS ($) 0.35 0.29 0.29 0.33 0.38

Though EPS is overall flat across the five quarters under review, nevertheless we note that EPS has improved during the last two quarters…

Caterpillar Inc. (NYSE:CAT): Current Price $85.05

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 51,320 32,400 42,590 60,140 65,880
Diluted EPS ($) 5.66 1.43 4.15 7.40 8.48

We’re definitely impressed with the solid annual jumps in both revenue and EPS during 2010 to 2012 at Caterpillar…

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Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012 Dec. 31, 2012
Revenue ($) in millions 17,240 15,980 17,370 16,440 16,080
Diluted EPS ($) 2.33 2.37 2.54 2.54 1.03

However, we drop Caterpillar from the running because of the sharp fall in its EPS in the latest quarter…

EI DuPont de Nemours & Co. (NYSE:DD): Current Price $49.82

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 31,840 27,330 28,900 34,420 35,310
Diluted EPS ($) 2.20 1.92 3.28 3.68 2.95

We note the steady growth in sales at DuPont after 2009 but are concerned that EPS fell sharply in 2012.

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Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012 Dec. 31, 2012
Revenue ($) in millions 5,568 11,260 11,280 7,336 5,435
Diluted EPS ($) 0.39 1.57 1.25 0.01 0.12

We note, however, that revenue is in a tailspin after June 2012 and that EPS has crashed thereafter. We keep it on the watchlist only because the December EPS was a notch better…

3M Co. (NYSE:MMM): Current Price $107.68

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 25,270 23,120 26,660 29,610 29,900
Diluted EPS ($) 4.89 4.52 5.63 5.96 6.32

We note that 3M has consistently grown its EPS number after 2009.

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Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012 Dec. 31, 2012
Revenue ($) in millions 7,089 7,486 7,534 7,497 7,387
Diluted EPS ($) 1.35 1.59 1.66 1.65 1.42

We note that the quarterly numbers are rather unimpressive with revenue flat and the EPS falling off in the last quarter. 3M is dropped unfortunately…

Alcoa, Inc. (NYSE:AA): Current Price $8.22

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 26,900 18,440 21,010 24,950 23,700
Diluted EPS ($) -0.10 -1.23 0.24 0.55 0.18

We note that Alcoa was unable to sustain the improvement in results in 2011 and find that EPS in 2012 has fallen to a third of the 2011 number…

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Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012 Dec. 31, 2012 Mar. 31, 2013
Revenue ($) in millions 6,006 5,963 5,833 5,898 5,833
Diluted EPS ($) 0.09 -0.0019 -0.13 0.2219 0.13

Unfortunately we drop Alcoa from the running because EPS in the latest quarter is down sharply compared to the December quarter.

Conclusion.

In this ”E-Squared” investment analysis of Dow Industrials we award General Electric Co. (NYSE:GE) the crown because of its overall better earnings performance during the last two reported quarters.

“E = Earnings Are Increasing Quarter-Over-Quarter” is a core component of our successful CHEAT SHEET investing framework. Don’t waste another minute – click here to discover our CHEAT SHEET stock picks now!

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