×

Why some see even more gains ahead for three industrial giants

Industrial titans are set to report earnings Tuesday morning, and some are looking for impressive results from Caterpillar, United Technologies and 3M.

"I am a big believer that we should be overweighting the industrials," Chad Morganlander, portfolio manager at Washington Crossing Advisors, said Monday on CNBC's "Trading Nation." "We believe that revenues will come in somewhat stronger than anticipated, as well as margins."

Morganlander's fund owns 3M and United Technologies in a dividend-focused portfolio, and he believes that the two stocks — which each pay dividends of about 2.25 percent — will continue to show dividend growth as well as cash flow growth.

While the industrials as a sector have modestly lagged the S&P 500 this year, all three of these stocks have outperformed: Caterpillar is up 16.7 percent in 2017, United Technologies is up 12.3 percent and 3M has risen by 17.6 percent.

Going forward, these will likely continue their outperformance, according to Oppenheimer technical analyst Ari Wald.

"We too have been recommending an overweight position in the industrial sector," due to the "broad-based strength" among that sector's varied groups, Wald said Monday on "Trading Nation."

Out of the three, the technical analyst finds Caterpillar the most attractive pick.

"It has been a terrific leadership stock over the last 18 months, but it is still well below relative peak levels [measuring performance compared the S&P 500] from 2014, so still a lot of rotation potential there," Wald said.

Meanwhile, Morganlander would shy away from Caterpillar, given his concerns over the economic backdrop in China.

It is interesting to note that research analysts, a bullish bunch by nature, take a mild view of all three stocks. For each one, the most common rating is hold, according to FactSet data.

Videos

Trades to Watch

Trader Bios

About

Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Brian Sullivan

Brian Sullivan is co-anchor of CNBC's "Power Lunch" (M-F,1PM-3PM ET), one of the network's longest running programs, as well as the host of the daily investing program "Trading Nation." He is also a frequent guest on MSNBC's "Morning Joe" and other NBC properties.

Read more

Connect