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5 Dow Stocks Poised to Beat on Earnings This Month

Nalak Das

U.S. stocks are northbound since the beginning of 2019 barring some fluctuations. After completing the best first half in more than two decades, all three major stock indexes -- the Dow, S&P 500 and Nasdaq Composite -- recorded their fresh all-time highs in July. Wall Street still has something to offer irrespective of the fact that the bull run is in its eleventh year.

Dow Firmly in the Green Despite Fluctuations

Just like Wall Street, the Dow is feeling the weight of intensifying trade conflict between the United States and China this month. The index is showing regular fluctuations in the third quarter of 2019.

Despite severe market volatility, the Dow is still in positive territory with a gain of 15.9% year to date. This is an excellent performance after a disappointing 2018, when the blue-chip index lost nearly 6%. Moreover, 18 components of the 30-stock index have given double-digit returns so far this year.

On Oct 17, the Dow closed at 27,025.88, well above its 50-day and 200-day moving averages of 26,454.45 and 25,980.79, respectively. In financial literature, the 50-day moving average line is generally recognized as the short-term trend setter, while the 200-day moving average is considered as a long-term trend setter.

It is widely recognized in the technical analysis space that whenever the 50-day moving average line surges ahead of the 200-day moving average line, a long-term uptrend for the index becomes a strong possibility.

Better-Than-Expected Third-Quarter Earnings So Far

As of Oct 16, 43 S&P 500 members reported third-quarter earnings results. Total earnings for these index members are down 3.8% from the same period last year on 3.7% higher revenues. Notably, 83.7% companies surpassed EPS estimates while 60.5% beat revenue estimates.

At present, total third-quarter earnings for the S&P 500 Index are expected to be down 4.1% from the prior-year period on 4.3% higher revenues. This is a good improvement from an earnings decline of 5% on 4.2% higher revenues, expected in the beginning of the reporting cycle. (Read More: Solid Start to Q3 Earnings Season)

5 Dow Stocks Set to Beat on Earnings

At this stage, it will be prudent to invest in Dow stocks with a favorable Zacks Rank and positive Earnings ESP. Strong earnings results will likely ensure a northbound move in the stock prices of these companies in the near term despite market volatility.

We have narrowed down our search to five Dow companies slated to release their earnings results this month. Each of these stocks carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) 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%.

The chart below shows price performance of our five picks year to date.

The Procter & Gamble Co. PG provides branded consumer packaged goods to consumers in North and Latin America, Europe, the Asia Pacific, Greater China, India, the Middle East, and Africa. It operates in five segments: Beauty; Grooming, Health Care, Fabric & Home Care, and Baby, Feminine & Family Care. The company has an Earnings ESP of +0.76% for the first quarter of fiscal 2020 (ended September 2019).

Procter & Gamble has an expected earnings growth rate of 10.7% and 7.1% for the current quarter and year, respectively. The company delivered positive earnings surprise in the last four quarters, with an average beat of 2.9%. The stock has soared 26.8% year to date. Procter & Gamble is expected to release earnings results on Oct 22, before the opening bell.

United Technologies Corp. UTX provides high-end technology products and services to the building systems and aerospace industries worldwide. The operations of the company are primarily classified into two principal businesses: Commercial and Aerospace. The company has an Earnings ESP of +0.99% for third-quarter 2019.

United Technologies has an expected earnings growth rate of 5.2% and 5.5% for the current quarter and year, respectively. The Zacks Consensus Estimate for the current quarter has improved 0.5% over the last 30 days.

The company delivered positive earnings surprise in the last four quarters, with an average beat of 13.2%. The stock has soared 29.7% year to date. United Technologies is expected to release earnings results on Oct 22, before the opening bell.

The Boeing Co. BA designs, develops, manufactures, sales, services, and supports commercial jetliners, military aircraft, satellites, missile defense, human space flight and launch systems, and services worldwide. It operates in four segments: Commercial Airplanes, Defense, Space & Security, Global Services, and Boeing Capital. The company has an Earnings ESP of +6.25 % for third-quarter 2019.

The Boeing delivered positive earnings surprise in the last four quarters, with an average beat of 21.1%. The stock has surged 14.4% year to date. The Boeing is expected to release earnings results on Oct 23, before the opening bell.

Merck & Co. Inc. MRK is a global healthcare solutions provider primarily for Pharmaceutical, Animal Health, Healthcare Services, and Alliances segments. It offers therapeutic and preventive agents to treat cardiovascular, type 2 diabetes, chronic hepatitis C virus, HIV-1 infection, intra-abdominal, fungal infection, insomnia, and inflammatory diseases. The company has an Earnings ESP of +0.26% for third-quarter 2019.

Merck & Co. has an expected earnings growth rate of 5% and 13.1% for the current quarter and year, respectively. The Zacks Consensus Estimate for the current year has improved 0.4% over the last 30 days.

The company delivered positive earnings surprise in the last four quarters, with an average beat of 8%. The stock has gained 9.6% year to date. Merck & Co. is expected to release earnings results on Oct 29, before the opening bell.

Apple Inc. AAPL designs, manufactures and sells iPhone, iPad, iPod, Apple TV, Mac personal computers, Apple Watch, HomePod and AirPods. These devices are powered by software applications including iOS, macOS, watchOS and tvOS operating systems.

It also provides iCloud, Apple Pay and a variety of other accessory, service and support offerings to its customers. The company has an Earnings ESP of +0.68% for the fourth quarter of fiscal 2019 (ended September 2019).

Apple has an expected earnings growth rate of 11.2% for the current year. The company delivered positive earnings surprise in the last four quarters, with an average beat of 3%. The stock has jumped 49.1% year to date. Apple is expected to release earnings results on Oct 30, after the closing bell.

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Merck & Co., Inc. (MRK) : Free Stock Analysis Report
 
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