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5 Blue-Chip Stocks Likely to Gain on Q1 Earnings This Week

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Nalak Das
·6 min read
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The north-bound journey of the U.S. stock markets has gathered pace in April supported by a great start to the first-quarter 2021 earnings season. Most of the major banks and other financial institutions have outperformed the consensus estimates. Market participants have high expectations for this earnings period.

Meanwhile, five blue-chip stocks are set to beat their first-quarter earnings estimates this week. Investment in these stocks may be fruitful as an earnings beat is likely to raise the prices of these stocks in the near term.

A Brief Look at the Dow in Q1

The Dow — popularly known as the blue-chip index — regained momentum in February after closing January in the negative territory. In first-quarter 2021, the index gained 7.8%, higher than the 5.8% gain of the S&P 500 and 2.8% gain of the Nasdaq Composite.

Several positive developments took place last quarter. First, the U.S. government ramped up nationwide COVID-19 vaccination on a priority basis. The speeding up of the process implies a faster-than-expected reopening of the U.S. economy. This along with the easing of COVID-19 infections boosted business activities.

Notably, unlike the market's benchmark S&P 500 or the teach-heavy Nasdaq Composite, the composition of the Dow is mostly inclined toward cyclical stocks that suffered the most during lockdowns. Therefore, the reopening of the economy benefited the blue-chip index the most.

Moreover, the two major fiscal stimuli, the $900 billion of the second-round of government aid package approved in late December and a fresh round of a massive $1.9 trillion coronavirus relief package approved by the Biden administration in February significantly strengthened the U.S. economy. The massive fiscal stimulus primarily boosted cyclical or reopening stocks.

Robust Early Trends for Q1 Earnings

The first-quarter 2021 earnings season has started with much vigor. As of Apr 16, just 44 S&P 500 companies reported results. Total earnings of these companies are up 93.3% year over year on 7.7% higher revenues, with 81.8% beating both EPS and revenue estimates.

For the first quarter as a whole, total earnings of the S&P 500 companies are expected to be up 27.1% from the same period last year on 6.2% higher revenues. The estimates are all the more impressive primarily because first-quarter 2020 was partially affected by the global outbreak of the deadly coronavirus. (Read More: Big Banks Foreshadow the Improving 2021 Earnings Picture)

Our Top Picks

We have narrowed down our search to five blue-chip stocks slated to release first-quarter earnings results this week. Each of these stocks carries either a Zacks Rank #1 (Strong Buy) or 3 (Hold) and has a positive Earnings ESP. You can see the complete list of today’s Zacks #1 Rank stocks here.

Our research shows that for stocks with the combination of a Zacks Rank #3 or better and a positive Earnings ESP, the chance of an earnings beat is as high as 70%. These stocks are anticipated to appreciate after the earnings releases. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

The chart below shows the price performance of our five picks in the first quarter.

Johnson & Johnson JNJ researches and develops, manufactures, and sells various products in the health care field worldwide. It operates in three segments: Consumer, Pharmaceutical, and Medical Devices. The Zacks Rank #3 company has an Earnings ESP of +3.03%.

Johnson & Johnson has an expected earnings growth rate of 18.1% for the current year. It has a trailing four-quarter earnings surprise of 9.5%, on average. The company is set to release earnings results on Apr 20, before the opening bell.

Verizon Communications Inc. VZ offers communications, technology, information, and entertainment products and services to consumers, businesses, and governmental entities worldwide. It provides communication services in the form of local phone service, long distance, wireless and data services. The Zacks Rank #3 company has an Earnings ESP of +0.41%.

Verizon Communications has an expected earnings growth rate of 3.5% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.2% over the last 30 days. It has a trailing four-quarter earnings surprise of 2.9%, on average. The company is set to release earnings results on Apr 21, before the opening bell.

Dow Inc. DOW provides various materials science solutions for consumer care, infrastructure, and packaging markets in the United States, Canada, Europe, the Middle East, Africa, India, the Asia Pacific, and Latin America. It operates through the Packaging & Specialty Plastics, Industrial Intermediates & Infrastructure, and Performance Materials and Coatings segments.

The Zacks Rank #1 company has an Earnings ESP of +1.73%. The Dow has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 5.9% over the last 7 days. It has a trailing four-quarter earnings surprise of 21%, on average. The company is set to release earnings results on Apr 22, before the opening bell.

American Express Co. AXP provides charge and credit payment card products, and travel-related services worldwide. It operates through three segments: Global Consumer Services Group, Global Commercial Services, and Global Merchant and Network Services. The Zacks Rank #3 company has an Earnings ESP of +5.70%.

American Express has an expected earnings growth rate of 23.6% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.6% over the last 7 days. It has a trailing four-quarter earnings surprise of 43.4%, on average. The company is set to release earnings results on Apr 23, before the opening bell.

Honeywell International Inc. HON operates as a diversified technology and manufacturing company worldwide. It has solid footprints in the aerospace industry, with commercial aviation and defense being the two major business sources. The Zacks Rank #3 company has an Earnings ESP of +2.31%.

Honeywell International has an expected earnings growth rate of 11.4% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.6% over the last 30 days. It has a trailing four-quarter earnings surprise of 7.4%, on average. The company is set to release earnings results on Apr 23, before the opening bell.

Zacks Top 10 Stocks for 2021

In addition to the stocks discussed above, would you like to know about our 10 best buy-and-hold tickers for the entirety of 2021?

Last year's 2020 Zacks Top 10 Stocks portfolio returned gains as high as +386.8%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.

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