The Dow Jones Industrial Average - that group of 30 blue-chip behemoths with long track records of outperformance - is setting records seemingly every other day.
The DJIA has climbed by more than 60% over the past five years on a price basis alone. Add in the dividends - all 30 Dow stocks are dividend payers - and the total return comes to a whopping 85%. The blue-chip average, trading at record levels, has 30,000 in its sights. That would have been unimaginable even half a decade ago.
But not all Dow stocks are created equal. Each index component has a solid pedigree. However, their short- to intermediate-term prospects diverge widely, according to Wall Street's analyst community.
If you want to pick and choose among the bluest of blue chips, you can look at this full list of 30 Dow stocks that we've sorted by analysts' average recommendation. Here's how it works: S&P Global Market Intelligence surveys analysts' stock calls and scores them on a five-point scale, where 1.0 equals a Strong Buy and 5.0 is a Strong Sell. Scores between 3.5 and 2.5 translate into a Hold recommendation. Any score lower than 2.5 means that analysts, on average, rate the stock as being Buy-worthy. The closer a score gets to 1.0, the better.
Here's a look at how analysts rate all 30 Dow stocks right now - and why.
Walgreens Boots Alliance
Market value: $47.5 billion
Dividend yield: 3.4%
Analysts' average recommendation: 3.21 (Hold)
Walgreens Boots Alliance's (WBA, $53.37) sluggish revenue growth has analysts sitting on the fence. The largest U.S. pharmacy chain is forecast to post sales growth of just 2.2% this year, according to data from S&P Global Market Intelligence. Meanwhile, analysts forecast earnings to rise at an average annual rate of 2.1% over the next five years. That includes a decline in fiscal 2020 earnings, which the pros think will drop to $5.85 per share from $5.99 last year.
Deutsche Bank, which rates WBA at Sell, described first-quarter results as "wholly disappointing," noting weakness in same-store sales (an important retail industry metric) and store closures.
Currently, 23 analysts that are tracked by S&P Global Market Intelligence are covering WBA shares. Only one calls it a Buy, versus 19 Holds, two Underperforms and one Sell. The result is the worst aggregate rating among the 30 Dow stocks, although even then, it's not a recommendation to jump ship. Meanwhile, the pros' average price target of $56.50 is higher than current prices, implying less than 6% upside over the next 12 months.
Long-term income investors can at least take heart in the fact that Walgreens has raised its dividend annually for decades.
Market value: $35.0 billion
Dividend yield: 2.4%
Analysts' average recommendation: 3.13 (Hold)
Wall Street's pros warn that Travelers (TRV, $136.88) faces numerous headwinds, including low interest rates, lower core margins and increased competitive pressures. The result is a lack of passion for shares in this blue-chip insurance company - at least at current levels.
"We continue to rate Travelers (at) Underperform as its large market shares make it more susceptible to broader loss trends and weather, and due to a lack of earnings momentum," writes William Blair Equity Research, which gives TRV its version of a Sell rating. "Risks include the potential impact of catastrophe activity, increased price competition, interest rates remaining at current low levels, and/or a material drop in equity markets."
Keefe Bruyette analyst Meyer Shields downgraded the stock to Underperform (equivalent of Sell) in January, citing margin pressures from personal lines and workers compensation as reasons he thinks the Dow stock will underperform its peers.
Of the 21 analysts covering Travelers tracked by S&P Global Market Intelligence, three rate the stock at Strong Buy, 14 say Hold, three call it a Sell and three say it's a Strong Sell. Analysts' average price target of $138.85 gives TRV stock implied upside of just a little more than 1% over the next year - hence their overall Hold recommendation.
SEE ALSO: The 20 Best Stocks to Buy for 2020
Market value: $92.0 billion
Dividend yield: 3.7%
Analysts' average recommendation: 3.00 (Hold)
Industrial conglomerate 3M (MMM, $159.76), which makes everything from adhesives to electronic touch displays, can't catch a break.
3M shares lost 20% between April 2019 and the end of the year, struggling in part because of slower growth in China. MMM did announce it was cutting 1,500 jobs in late January - a move the market usually likes. But 3M didn't get a restructuring boost because Wall Street was caught up in something else: the coronavirus outbreak in China. Sure, 3M sells respiratory masks, but that's peanuts compared to the resulting weakness it might see in its other products, and shares were knocked well into the red.
Analysts' average target price of $175.94 gives the Dow stock implies upside of about 10% over the next 12 months or so. But on the whole, they see MMM as a Hold. Citi Research analyst Andrew Kaplowitz (Neutral, equivalent of Hold) said the company could also be dogged over lawsuits related to the company's PFAS chemicals.
If there's one thing investors can count on, it's 3M's dividend. The company has hiked its payout annually since 1959.
Market value: $288.4 billion
Dividend yield: 2.0%
Analysts' average recommendation: 2.95 (Hold)
Analysts remain more cautious than bullish on Intel's (INTC, $67.44) short- to mid-term prospects even after a blowout earnings report for the final quarter of 2019 sent the semiconductor giant's shares to 20-year highs in January.
Robust sales of processors that drive servers in data centers and surprising strength in processors for garden-variety PCs helped Intel easily top Wall Street estimates. But a number of analysts still maintain reservations about the chipmaker going forward.
Northland Capital Markets cut its rating on INTC to Market Perform (Hold) from Outperform (Buy), citing the potential from lower demand from China's Huawei, a slowdown in Microsoft's Windows 10 upgrade cycle and competition from Advanced Micro Devices (AMD), among other challenges. Baird's Tristan Gerra, however, says the company is expanding its total addressable market and lauded the company's strong quarterly guidance. He rates the stock at Outperform.
INTC carries one of the lowest price expectations among the 30 Dow stocks: An average analyst target of $67.47 implies virtually no upside from current levels.
Market value: $258.0 billion
Dividend yield: 5.7%
Analysts' average recommendation: 2.88 (Hold)
Analysts are mostly cautious about the prospects for shares in Exxon Mobil (XOM, $60.93) over the next year or so, as the company's bottom line continues to bottom out. The largest U.S. oil producer by volume recently reported its worst quarterly profit since 2016.
Stagnant commodity prices have the industry struggling with weaker margins in natural gas, chemicals and refining. China's coronavirus outbreak - and its potential implications for global economic growth - are another risk for XOM investors. (And energy stocks in general.)
Exxon remains committed to growing its dividend. That means it has little choice but to tighten its belt. "Commodity margins across the board are at decade lows and oil and gas prices are also down," write Edward Jones analysts. "What's in their control is costs."
Four analysts polled by S&P Global Market Intelligence rate Exxon Mobil at Strong Buy, zero call it a Buy, 16 say Hold, three have it at Sell and one says XOM is a Strong Sell. Their average price target of $73 gives this Dow stock implied upside of 20% in the next 12 months.
International Business Machines
Market value: $136.7 billion
Dividend yield: 4.2%
Analysts' average recommendation: 2.81 (Hold)
International Business Machines (IBM, $154.31) gets an average recommendation of Hold from analysts surveyed by S&P Global Market Intelligence, but it does have its fans.
And shares are off to a hot, market-beating start in 2020.
Credit Suisse, for instance, recently reiterated its Outperform call, writing, "A new CEO strengthens our view that this is a new IBM." Arvind Krishna will succeed Ginni Rometty as IBM's leader effective April 6.
The new CEO will have to jolt the company out of a period of sluggish revenue growth. IBM is looking to catch up in the highly profitable industry of cloud-based computing, currently led by Microsoft (MSFT) and Amazon.com (AMZN). Big Blue acquired open-source specialist Red Hat for $34 billion in 2019 to do just that; Arvind's ascension seems to point to that need, too.
Citi analysts, who rate the stock at Hold, sees the transition "as a positive as Arvind has significant experience in the cloud segment."
Two analysts give shares a Strong Buy rating and two say it's a Buy. The majority of 15 analysts call it a Hold. And two analysts slap a Sell recommendation on the stock.
Market value: $35.8 billion
Dividend yield: 5.8%
Analysts' average recommendation: 2.61 (Hold)
Dow Inc. (DOW, $48.30) replaced DowDuPont in the blue-chip average last spring after the chemical giant broke up into three smaller companies. However, a downbeat outlook for the commodities sector and global economy is making analysts increasingly cautious on the name.
RBC Capital recently downgraded DOW to Sector Perform (Hold), citing continued price weakness in commodities and the accompanying pressure on margins. BMO Capital at the end of January maintained its Market Perform rating but cut its target price as the outlook for commodities and the global economy remains "difficult."
Analysts' ratings place Dow firmly in the consensus-Hold camp. Four analysts call it a Strong Buy and two say Buy, but 10 call it a Hold. One analyst says Sell and one analyst says Strong Sell. Nonetheless, a $54 price target implies decent upside potential of about 12% for the next year.
As a group, the pros think Dow will deliver average annual earnings growth of 7.7% over the next three to five years.
Market value: $425.2 billion
Dividend yield: 2.6%
Analysts' average recommendation: 2.61 (Hold)
JPMorgan Chase (JPM, $137.88) gets an average rating of Hold from Wall Street analysts. Although the money center bank's fourth-quarter earnings easily topped analysts' estimates, macroeconomic headwinds and a too-hot run for shares might limit near-term upside in the stock.
JPM, the nation's biggest bank by assets, beat fourth-quarter forecasts thanks in large part to stronger-than-expected trading in fixed income. Overall performance was likewise solid.
"While notoriously volatile trading revenues stood out as the largest contributor to the beat relative to our expectations, results across other business were in the aggregate at least as good as expected," write Piper Sandler analysts, who rate shares at Hold.
However, low interest rates - which sap a bank's margins - and a gain of 35% over the past 52 weeks (vs. 23% for the S&P 500) have a number of analysts taking a wait-and-see approach on JPM shares. Six analysts call it a Strong Buy and four have it at Buy, but 14 say Hold. Meanwhile, three give it an Underperform rating while one calls JPMorgan a Strong Sell.
Warren Buffett, chairman and CEO of Berkshire Hathaway (BRK.B), is bullish on numerous Dow stocks, including JPM. Berkshire is currently the bank's sixth-largest investor with almost 60 million shares.
Market value: $242.6 billion
Dividend yield: 4.2%
Analysts' average recommendation: 2.59 (Hold)
Analysts are lukewarm on Verizon (VZ, $58.65), as the Dow's only telecommunications company bets big on rolling out a high-speed 5G wireless network - one that won't start to move the revenue needle until 2021.
At the same time, the telco faces potentially increased competition for wireless subscribers with the merger of Sprint (S) and T-Mobile (TMUS). Dish Network (DISH) might become the fourth "major" telecom because it is buying out Boost Mobile and some spectrum assets from the duo - a deal meant to ease antitrust concerns for the T-Mobile/Sprint tie-up. Dish now intends to build its own nationwide 5G wireless broadband network.
Either way, competition is breathing down Verizon's neck.
"Although Verizon remains focused on the wireless business and continues to achieve modest growth, elevated competition in a mature industry will cap Verizon's ability to attract new customers and accelerate growth," writes William Blair Equity Research, which rates the stock at Market Perform.
Twenty-two of the Street's analysts give VZ a Hold. Of the remaining analysts, five say Strong Buy and two call it a Buy. Analysts forecast average annual earnings growth of just 3.4% over the next three to five years. Their average target price of $62.58 gives VZ implied upside of 7% in the next 12 months or so.
Market value: $77.2 billion
Dividend yield: 3.0%
Analysts' average recommendation: 2.58 (Hold)
As the world's biggest maker of construction and mining equipment, Caterpillar (CAT, $139.72) is something of a bellwether for the health of the global economy.
That doesn't bode well, given the dour outlook Caterpillar provided in late January. The company said it expects revenues to dip again following an 8% top-line decline in 2019. Analysts already expected a weak 2020 and now project earnings per share to decline 15% on an adjusted basis.
The industrial giant was already suffering from weakness in China before coronavirus stymied business in the Middle Kingdom. And weak demand for oil and gas and a slower construction environment are piling on CAT's difficulties both at home and abroad.
"North American construction markets will likely be weaker in 2020 than we previously anticipated," writes CFRA's Elizabeth Vermillion, who slapped a Sell rating on the Dow stock.
Some analysts see value in Caterpillar's stock at current levels. Six say shares are a Strong Buy and four call it a Buy, according to S&P Global Market Intelligence. Of the remaining analysts surveyed, 13 have CAT at Hold, one says Sell and three rate it a Strong Sell.
Market value: $193.1 billion
Dividend yield: 2.4%
Analysts' average recommendation: 2.52 (Hold)
Wall Street was solidly bullish on Boeing (BA, $342.82) for a long time. However, the seemingly never-ending saga of its grounded 737 Max jets has been eroding the Street's optimism. Today, analysts' average recommendation is decidedly at Hold.
Airlines around the world grounded the aerospace giant's bestselling aircraft in March amid safety concerns after two of the craft were involved in fatal crashes. Boeing says it expects global regulators to start certifying the reconfigured 737 Max sometime in the middle of 2020 - a timeline that seemingly keeps getting pushed back.
But even getting the 737 Max airborne again doesn't automatically mean BA stock will take off anytime soon, bearish analysts say. "The Max grounding has gone on far longer than our initial worst-case scenarios, and we worry that the company does not have the right people in place to manage this crisis," writes CFRA, which rates Boeing's stock at Hold.
Analysts' consensus price target of $356.90 gives BA expected upside of just 4% over the next 12 months. If that comes to pass, that will drag on the industrial average, which is price-weighted. That means Dow stocks with the highest per-share price have the biggest impact on its movement. And on a price basis, Boeing currently is the DJIA's most expensive stock.
Market value: $108.9 billion
Dividend yield: 1.3%
Analysts' average recommendation: 2.35 (Buy)
American Express (AXP, $134.46) is the first of our Dow stocks to get a Buy rating - even if just barely. Of the 29 analysts tracked by S&P Global Market Intelligence, eight rate shares at Strong Buy, four say Buy, 16 have it at Hold and one says Sell.
One investor who has never wavered in his faith in the credit card company, however, is Warren Buffett.
The Oracle of Omaha first bought shares in AmEx in 1963. Today, Berkshire Hathaway, which owns nearly 19% of American Express' shares outstanding, is by far the company's largest shareholder.
Sandler O'Neill analysts, who rate shares at Buy, expect American Express to buy back $4.1 billion in stock this year and another $5.2 billion in 2020. Oppenheimer (Outperform) recently raised its price target, from $126 per share to $159, citing the likelihood of continued high fee growth. But on average, analysts see AXP hitting $140.42 in a yea from now, implying just 4% upside.
SEE ALSO: The 7 Best Financial Stocks for 2020
Procter & Gamble
Market value: $308.6 billion
Dividend yield: 2.4%
Analysts' average recommendation: 2.30 (Buy)
Analysts applaud Procter & Gamble's (PG, $124.96) ability to cut costs and raise prices to offset higher expenses for shipping and raw materials.
"P&G is focused on productivity and cost-saving plans to boost margins," writes Zacks Equity Research, which gives the consumer products giant a Buy call. "The company's continued investment in business, alongside efforts to offset macro cost headwinds and balance top-line and bottom-line growth, underscore its productivity efforts."
The fact that consumers were willing to pay more for premium brands such as Tide detergent, Crest toothpaste and Pampers diapers is encouraging after years in which cheaper competitors ate market share.
Procter & Gamble also features one of the oldest dividends among the 30 Dow stocks; its payout dates back to 1890.
Analysts' average rating stands at Buy with the following breakdown: seven Strong Buys, four Outperforms, 10 Holds and two Sells. But an average target price of $130.76 gives PG implied upside of just 5% over the next year.
Market value: $84.4 billion
Dividend yield: 2.1%
Analysts' average recommendation: 2.28 (Buy)
Analysts as a group are moderately bullish on Goldman Sachs (GS, $238.35). Wall Street's preeminent investment bank continues to simply outpace rivals in stock trading and other financial activities.
Some analysts say that a lagging stock performance makes shares look like a bargain.
"Our top money center bank and broker-dealer pick for 2020 is to be long shares of Goldman Sachs," write Piper Sandler analysts. "GS's share price rebounded strongly in 2019, but continues to underperform (its) peer group. We expect GS shares to begin outperforming in 2020."
The 29 analysts covering GS give the stock a collective price target of $266.48, implying 12% upside from here. They're split among nine Strong Buys, six Buys, 12 Holds, one Sell and one Strong Sell.
It's worth noting that Warren Buffett is a big fan of Goldman Sachs. With a 5.2% stake in GS, Berkshire Hathaway is the firm's fourth-largest shareholder.
Market value: $200.7 billion
Dividend yield: 3.0%
Analysts' average recommendation: 2.14 (Buy)
The "smart money" expects decent, though hardly explosive, returns from shares in Cisco Systems (CSCO, $47.32) over the next 12 months. Their average price target of $53 gives CSCO implied upside of about 12%.
Plenty of analysts remain cautious on this tech stock, however.
"We remain Neutral on CSCO focusing on three areas of contention," write Credit Suisse analysts. "CSCO continues to be dominant across numerous networking equipment end markets but faces pressure from service provider spending."
Over at Instinet, analysts worry about not only "coronavirus uncertainty, but also chip shortages."
Even Citi analyst Jim Suva, who has a Buy rating and $55 price target on Cisco's shares, says the company will struggle with difficult year-over-year comparisons until the second half of 2020.
The bottom line: 10 analysts surveyed by S&P Global Market Intelligence rate CSCO at Strong Buy, four have it at Buy and 14 call it a Hold. That's enough for an overall Buy rating. But they expect modest average annual earnings growth of about 6% over the next three to five years.
Market value: $1.4 trillion
Dividend yield: 1.0%
Analysts' average recommendation: 2.09 (Buy)
Perhaps no one is a bigger believer in Apple (AAPL, $324.87) than Warren Buffett. His Berkshire Hathaway owns 5.7% of the company from Cupertino, California, making it the iPhone-maker's third-largest shareholder. Indeed, Buffett is so bullish on this Dow stock that Berkshire's stake, worth $81.4 billion, accounts for more than a quarter of Berkshire's entire equity portfolio.
Analysts are generally bullish, but the impact of the coronavirus on the company's supply chain is concerning. Wedbush on Feb. 9 wrote:
"After the coronavirus outbreak has forced an extended shutdown of Apple's flagship Chinese Foxconn factory over the last few weeks, production was expected to begin tomorrow, February 10. Media reports yesterday came out of China that the Chinese Authorities and public health officials have now further delayed opening the 'hearts and lungs' of the iPhone manufacturing ecosystem until further notice. Let's not sugarcoat it: if true (still not confirmed), this production news out of China over the weekend will be a shock to the system."
That said, Wedbush maintains its Outperform rating, as does the majority of the Street. Strong Buy calls are held by 20 analysts and six analysts say Buy. Thirteen analysts rate shares at Hold, one says Sell and three rate shares at Strong Sell.
An average target price of $334.61 gives AAPL implied upside of only about 3%, however. Don't be surprised if analysts either raise their price targets or cut their ratings.
Market value: $264.4 billion
Dividend yield: 2.2%
Analysts' average recommendation: 2.06 (Buy)
Analysts are bullish on Home Depot (HD, $242.36) even though the stock has already jumped past their average target price of $238.35. That suggests analysts will raise their targets and/or cut their ratings on valuation concerns - possibly when HD reports quarterly earnings at the end of February.
Loop Capital analyst Laura Champine, for example, praises elevated sales expectations driven by healthy consumer spending and improving housing data. She rates HD at Neutral, but only on valuation concerns.
Whatever happens, the pros are mostly bullish on the nation's largest home improvement chain. Even those with concerns about its elevated share price are pleased with the Dow stock's fundamentals.
Stifel is firmly in the Buy camp. "Our Buy rating is based on the company's continued demonstration of executing operational improvements while delivering strong topline growth," Stifel analysts write.
A total of 21 analysts rate HD at either Strong Buy or Buy. Twelve say it's a Hold and one calls it a Strong Sell. On average, they forecast an average annual growth rate of 10.7%.
Market value: $333.2 billion
Dividend yield: 1.8%
Analysts' average recommendation: 2.06 (Buy)
Walmart (WMT, $117.44) stock is off to a subdued start in 2020 after several years of outperformance, weighed down by trade tensions and coronavirus fears. Most analysts don't expect that to last, however, as the world's largest retailer continues to churn out sales growth from its stores and e-commerce business.
"Walmart is laser focused on improving the customer experience while achieving operational efficiencies," writes Jefferies, which rates the stock at Buy. "Today's retail environment demands scale - both physical and digital - and WMT's global store footprint, as well as its sheer digital presence, allow it to be a formidable competitor with Amazon."
WMT also is the "clear winner" in groceries, analysts say, as it drives e-commerce growth and helps the discount chain take market share from competitors.
The breakdown from S&P Global Market Research: Thirteen analysts call WMT a Strong Buy, seven have it at Buy, 13 rate it at Hold and one says Sell. The pros think the stock has about 9% upside over the next year, giving it an average price target of $127.97.
Johnson & Johnson
Market value: $395.0 billion
Dividend yield: 2.5%
Analysts' average recommendation: 2.05 (Buy)
Johnson & Johnson (JNJ, $150.09) is mostly making headlines these days for lawsuits and multimillion-dollar settlements over talcum powder and its role in the opioid epidemic. But in "better" news, the health care giant is scrambling to develop a vaccine for coronavirus.
What long-term investors shouldn't overlook is the fact that JNJ is trading at all-time highs. And well it should. Behind all the headlines and noise, Johnson & Johnson is benefiting from a number of hit drugs. Strong showings for blood cancer drugs Darzalex and Imbruvica, as well as immunology drugs Stelara and Tremfya, are boosting results. JNJ also has a number of promising projects in the pipeline.
"Based on our analysis of January prescription trends for JNJ's largest U.S. Pharma franchises, the company appears to be tracking ahead of our estimates," write Credit Suisse analysts, who rate the stock at Buy. Barclays and Morgan Stanley also give Johnson & Johnson a thumbs up, writing that the stock "checks all the boxes for 2020" and is set for "outperformance."
The rest of Wall Street doesn't necessarily see it that way, at least given an average price target of $160 that implies just 7% upside in the next year or so. But don't be surprised to see the Street raise its price targets as JNJ closes the gap. The healthy dividend yield - and a 58-year streak of annual dividend increases, which is one of the longest among Dow stocks - add to a compelling case for income investors.
Market value: $255.1 billion
Dividend yield: 2.7%
Analysts' average recommendation: 2.04 (Buy)
Coca-Cola (KO, $59.61) is another longtime Warren Buffett holding that's gaining love from analysts and traders. Like Johnson & Johnson, it's trading at record highs.
Analysts as a group are bullish, in large part due to Coca-Cola's Costa Coffee acquisition, as well as new products in the flavored sparkling water and energy drink categories. Nine analysts call it a Strong Buy, five say Buy, eight rate it at Hold and one says Sell.
"We have even greater confidence that KO is well-positioned to grow in line with its (forecasts), given global revenue growth, management initiatives, innovation, portfolio expansion and general global system alignment," Deutsche Bank analysts write in their latest Buy recommendation.
Analysts expect KO to generate average annual earnings growth of more than 7% over the next three to five years, which would be welcome by investors who have dealt with muted growth for years. Long-term income investors can take comfort in Coca-Cola's dividend streak, which currently sits at more than half a century.
Market value: $204.4 billion
Dividend yield: 4.1%
Analysts' average recommendation: 2.00 (Buy)
Pfizer (PFE, $36.93) is off to a rocky start in 2020 after its fourth-quarter earnings missed Street estimates. Management added to the downbeat mood by saying the company will not buy back any shares this year after repurchasing $9 billion in 2019.
Investors are also cautious after PFE's decision last year to spin off its Upjohn unit, which sells branded drugs that have lost patent protection. Upjohn will combine with generic-drugmaker Mylan (MYL) in a deal expected to close around the middle of 2020.
Regardless of all those moving parts, analysts are bullish on the company that will emerge after PFE is free of its Upjohn business.
"We think PFE's 2020 guidance and outlook for 2020 and beyond remains robust with the company delivering on its goal to provide upside to expectations for the New Pfizer (without Upjohn)," write Cantor Fitzgerald analysts, who rate the stock at Overweight (Buy).
The 16 analysts covering Pfizer who are tracked by S&P Global Market Intelligence are split among seven Strong Buys, two Buys and seven Holds. They expect PFE to deliver average annual growth of nearly 10% over the next three to five years.
Market value: $132.4 billion
Dividend yield: 1.9%
Analysts' average recommendation: 1.90 (Buy)
There are a lot of moving parts at United Technologies (UTX, $153.06) these days, but analysts still mostly like what they see.
The industrial conglomerate in November closed its $30 billion acquisition of defense contractor Rockwell Collins.
However, it will soon split apart into three separate companies. UTX will spin off its Otis elevator unit and the Carrier heating-and-cooling-systems division later this year to focus on aerospace.
But the really big news came in June 2019, when United Technologies announced a merger with defense contractor Raytheon (RTN). The deal, pending approval, would create a company with a market value of more than $100 billion after its spinoffs. Only Boeing would be a bigger aerospace-and-defense company by revenue.
Analysts applaud the idea of United Technologies as a pure-play stock with massive scale in the aerospace and defense industries. At the end of January, Benchmark Securities initiated coverage of UTX at Buy ahead of "its historic split."
Just one analyst among the 20 covering UTX call the stock a Strong Sell; 10 rate it a Strong Buy, four say Buy and five have it at Hold. On average, they see upside potential of about 10% over the next year, with a collective price target of $168.
SEE ALSO: Where Millionaires Live in America 2019
Market value: $211.1 billion
Dividend yield: 4.6%
Analysts' average recommendation: 1.88 (Buy)
Despite a weak-oil environment, analysts are bullish on Chevron (CVX, $110.37). Declining capital expenditures and production growth from high-margin products are driving higher free cash flow (how much cash companies have left over after they meet all their obligations).
The energy giant is enjoying better-than-expected production from its operations in Texas' Permian Basin, note analysts at Jefferies, who call CVX a "Franchise Pick." Franchise Picks are the highest-conviction, Buy-rated stocks from the Jefferies U.S. Research Team.
"The company boasts the strongest balance sheet in the industry, supporting capital investment and shareholder returns," Jefferies analysts write. "The current dividend, which yields 4%, is expected to grow by 5% per year from 2018. Dividend payments are supplemented by $5 billion in share repurchases annually."
The pros give CVX stock an average analyst price target of $133, which implies an encouraging 20% in gains over the next year - and that doesn't include returns from its ample dividend.
Market value: $163.7 billion
Dividend yield: 2.3%
Analysts' average recommendation: 1.77 (Buy)
Shares in McDonald's (MCD, $217.42) are off to a hot start in 2020, and analysts believe the Golden Arches can keep it up.
"We believe key areas of focus in 2020 will include: 1) breakfast; 2) the launch of a chicken sandwich; 3) technology (personalization, loyalty, expanded delivery, voice); and 4) rest-of-day deals & value," writes Credit Suisse, which rates MCD at Outperform.
"While investors may be disappointed by the higher G&A outlook for this year, we take solace in the expectation for high-single-digit EPS growth, aided in part by a lower tax rate, less currency impact and continued sales momentum," writes BTIG analyst Peter Saleh, who ranks the stock a Buy with a $240 price target. That's higher than the average analyst target of $230, which implies less than 6% upside.
Despite the low target, analysts still appear optimistic. Seventeen analysts tracked by S&P Global Market Intelligence call MCD a Strong Buy. Eight say Buy and nine rate it at Hold. That's good for a solid average Buy recommendation. And they expect average annual earnings growth of 8.4% over the next three to five years.
Long-term income investors, meanwhile, should know that McDonald's has raised its dividend every year for 43 years.
SEE ALSO: The Best Online Brokers
Market value: $160.1 billion
Dividend yield: 1.0%
Analysts' average recommendation: 1.77 (Buy)
Traders have whipped Nike (NKE, $103.37) around on headlines about the U.S.-China trade dispute. And this year, China has factored into volatility yet again, this time on coronavirus concerns.
But analysts are keying in on its strategy of selling directly to consumers. After all, athleticwear and related goods are only getting more popular in the U.S. and abroad. If NKE cuts out the middleman, that's more profit for its shareholders.
"With the athletic category having long-duration global secular and structural tailwinds, we see Nike as uniquely positioned to execute to a more direct model," Stifel writes, rating shares at Buy. "We expect this translates to growth, margin improvement, and strengthening return on invested capital longer-term."
Oppenheimer analyst Brian Nagel (Outperform) says to view any coronavirus-related dips as an opportunity to buy shares.
Nike garners 17 Strong Buy recommendations and nine Buy ratings, according to S&P Global Market Intelligence. Seven analysts call it a Hold and one says Sell. Their average target price of $111.22 gives NKE stock implied upside of about 8% over roughly the next year.
Market value: $254.4 billion
Dividend yield: 1.3%
Analysts' average recommendation: 1.71 (Buy)
The coronavirus has forced Walt Disney (DIS, $140.90) to close parks in Shanghai and Hong Kong, which is expected to cost the company $175 million for the quarter ending in March. Longer term, however, analysts like this name thanks in no small part to the launch of its streaming service Disney+.
Cowen rates Disney at Outperform, saying it's the best way to play the streaming wars with Netflix (NFLX), Amazon.com and others. Subscriptions, above 28.6 million as of early February, already passed expectations and continue to rise.
Morgan Stanley concurs. "Disney+ is (on track for) nearly $2 billion in revenue and should surpass the $2.8 billion exit-rate we estimated," write Morgan Stanley analysts, who rate the stock at Overweight. MS believes Disney can approximately double earnings per share by 2024.
S&P Global Market Intelligence counts 15 analysts with a Strong Buy recommendation on DIS and 6 who call it a Buy, versus seven Holds and no Sells or Strong Sells.
Market value: $208.7 billion
Dividend yield: 3.0%
Analysts' average recommendation: 1.68 (Buy)
Merck (MRK, $81.97) has a big blockbuster drug on its hands, and that has helped it receive one of the strongest ratings among large-cap dividend stocks.
Investors can largely thank Keytruda, MRK's hit cancer drug that's approved for more than 20 indications, as well as the company's vaccines and animal health businesses not getting their due - yet.
"Our (sum-of-the-parts) valuation analysis indicates a highly inexpensive valuation when incorporating a premium for the company's Animal health and Vaccines franchises," write JPMorgan analysts, who have MRK at Overweight.
Keytruda already is approved for treatment of lung cancer, melanoma, head and neck cancer, classical Hodgkin's lymphoma and bladder cancer. In June, the Food and Drug Administration expanded approval of the cancer-fighting drug to include additional indications.
Of the 19 analysts covering MRK tracked by S&P Global Market Intelligence, 11 rate shares at Strong Buy, three have it at Buy and five call it a Hold. Better still, they see roughly 20% upside over the next year, based on an average price target of $98.11 per share.
Looking further down the road, analysts expect the pharma company to deliver average annual earnings growth of 8.4% over the next three to five years.
Market value: $286.3 billion
Dividend yield: 1.4%
Analysts' average recommendation: 1.68 (Buy)
UnitedHealth Group (UNH, $302.20) is a top-rated stock among Wall Street's analysts. Little wonder, then, that it's also a favorite stock pick of hedge fund managers. With a market value of $286 billion and a 2020 revenue forecast of $261.8 billion, UnitedHealth is the largest publicly traded health insurance company by a wide margin.
SunTrust rates UNH at Buy, citing "strong core trends, better (medical cost ratios), and robust free cash flows." The company is enjoying strong trends in its Optum pharmacy benefit manager unit and "superb" growth in Medicare Advantage, SunTrust's analysts add.
Of the 28 pros tracked by S&P Global Market Intelligence, 15 rate UNH at Strong Buy and seven call it a Buy; the remaining six have the insurer at Hold. The analyst community's average price target of $334.52 gives the stock implied upside of about 11% over the next year or so.
Wall Street expects big things longer-term, too. Collectively, analysts project UnitedHealth's earnings to increase an average of almost 14% annually over the next three to five years, according to data from S&P Global Market Intelligence. That's one of the best projections among these 30 Dow stocks.
Market value: $459.6 billion
Dividend yield: 0.6%
Analysts' average recommendation: 1.40 (Buy)
Few blue-chip Dow stocks get more love from analysts and big-shot investors than Visa (V, $207.40).
As the world's largest payments network, Visa is well-positioned to benefit from the growth of cashless transactions and digital mobile payments. Indeed, analysts polled by S&P Global Market Intelligence expect Visa's profits to increase an average of 16% a year over the next three to five years.
No wonder Visa is hugely popular not only with hedge fund managers, but with Warren Buffett too. Berkshire Hathaway owns 0.5% of Visa's shares outstanding, according to data from S&P Global Market Intelligence. Although Berkshire's investment in Visa was made by one of Buffett's lieutenants - Todd Combs and/or Ted Weschler (Buffett won't say which) - he's said he wishes he had thought of it himself.
"If I had been as smart as Ted or Todd, I would have (bought Visa or Mastercard)," Buffett told shareholders at the 2018 annual meeting.
Wall Street is solidly bullish on Visa, as well. Of the analysts tracked by S&P Global Market Intelligence, 23 call it a Strong Buy, 9 have it at Buy and four say it's a Hold. However, the stock is just 9% away from the pros' average price target of $225.71, so they'll need to either upgrade their targets to match their bullish stances ... or reconsider those ratings.
Market value: $1.4 trillion
Dividend yield: 1.1%
Analysts' average recommendation: 1.40 (Buy)
The folks at Microsoft's (MSFT, $183.71) Redmond, Washington, headquarters should take a deep bow. The company's transition to subscription-based services and cloud computing has been a smashing success.
William Blair Equity Research gushed over MSFT's most recent quarterly performance, calling it a "monster second quarter."
"Microsoft delivered another stellar quarter, producing sizable top- and bottom-line beats, with revenue and margin guidance for next quarter nicely exceeding consensus as well," write William Blair analysts. "Notably, Azure, Office 365 Commercial, and the aggregate Commercial Cloud business showed reacceleration."
Naturally, the pros are wild about what has become the world's largest supplier of cloud computing services.
Analysts forecast average earnings growth of more than 14% a year for the next three to five years. And of the 35 analysts covering the stock tracked by S&P Global Market Intelligence, 23 rate MSFT at Strong Buy, 10 say Buy and two say Hold - good enough for the best aggregate ranking among the 30 Dow stocks.
- The Berkshire Hathaway Portfolio: All 48 Buffett Stocks
- 64 Best Dividend Stocks You Can Count On in 2020
- The 20 Best Stocks to Buy for 2020
Copyright 2019-2020 The Kiplinger Washington Editors