All 30 Dow Stocks Ranked: The Pros Weigh In
The Dow Jones Industrial Average is made up of 30 blue chips that are tops in their industries. But some Dow stocks are better opportunities than others.
The Dow Jones Industrial Average has a new look.
In its biggest shakeup in years, the elite index of 30 blue-chip stocks swapped out three of its components for new mega-cap names. And this reconstituted group of Dow Jones stocks began trading on Aug. 31.
It's not unusual for the keepers of the Dow – S&P Dow Jones Indices – to change the average's makeup. One-off changes over the past few years include Apple's (AAPL) replacement of AT&T (T) in 2015, and Walgreens Boots Alliance's (WBA) replacement of General Electric (GE) in 2018.
With the blue-chip barometer sporting a fresh new look, it's a good time to review analysts' bull and bear cases on all 30 Dow stocks.
To that end, we've sorted the Dow by analysts' average recommendation, from worst to first, using data from S&P Global Market Intelligence.
Here's how it works: S&P 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 higher than 3.5 is a Sell rating, and a score below 2.5 means that analysts, on average, rate the stock as being Buy-worthy. The closer a score gets to 1.0, the stronger the Buy recommendation.
Read on as we show you how Wall Street's analysts rate all 30 Dow stocks (including the new components) right now – and what they have to say about them.
Stock prices, analysts' recommendations and other data as of Aug. 28, courtesy of S&P Global Market Intelligence.
Walgreens Boots Alliance
- Market value: $33.6 billion
- Dividend yield: 4.8%
- Analysts' average recommendation: 3.05 (Hold)
Walgreens Boots Alliance (WBA, $38.76) is the lowest-ranked member of the Dow stocks right now, as sluggish revenue growth has analysts sitting firmly on the fence.
The COVID-19 pandemic has benefitted some retailers in the consumer staples industry to various degrees, but WBA saw only a quick spike that has since dropped off. Adjusted earnings per share are forecast to decline more than 30% to 98 cents a share in the company's current fiscal fourth quarter from $1.43 in the prior-year period. Quarterly revenue growth is projected to be essentially flat year-over-year.
Lockdowns and a shift to online shopping have not only crimped the global pharmacy chain's sales, but also its profit margins. Credit Suisse, which rates WBA at Hold, notes that sales are being driven by lower-margin categories such as grocery as opposed to higher-margin product lines like beauty.
"The headwinds created by COVID-19 seem likely to continue through the first half of its fiscal 2021," Credit Suisse's analysts say. "WBA seems on a path for a more gradual recovery than the 'V-shaped' rebound currently reflected in 2021 earnings estimates."
Currently, 22 analysts that cover WBA are tracked by S&P Global Market Intelligence. Of those, only one calls it a Buy, versus 19 Holds and two Sells. The result is the worst aggregate rating among the 30 Dow Jones Industrial Average components … although even then, it's not a recommendation to bail out of the stock.
- Market value: $95.4 billion
- Dividend yield: 3.6%
- Analysts' average recommendation: 3.0 (Hold)
Industrial conglomerate 3M (MMM, $165.66), which makes everything from adhesives to electronic touch displays, hasn't kept up its end of the bargain when it comes to being a defensive stock. Shares are off 6% year-to-date versus a gain of almost 9% for the S&P 500.
You can blame the coronavirus. True, 3M ramped up production of N95 respirators and related products to help with the pandemic, but those aren't the kind of high-margin products that move the earnings needle.
"COVID-19 created significant incremental sales growth for the company's personal safety, home improvement, general cleaning solutions, semiconductor, data centers, and biopharma filtration businesses," says William Blair equity researchers, who rate shares at Market Perform (Hold, essentially). "Unfortunately, these only accounted for 20% of 3M's sales."
Meanwhile, health care, which is MMM's largest and most profitable segment, is suffering from a drop in demand because of the curtailment of elective procedures, and the oral care business has to recover from 60% of dentists suspending their practices.
"Demand was also notably weak for automotive original equipment manufacturers, and aftermarket, general industrial, commercial solutions, and office supplies," William Blair adds.
Happily for income investors, MMM halted buybacks and cut capital expenditures to prioritize the dividend. The company has hiked its payout annually since 1959, making it one of several Dow stocks that are members of the Dividend Aristocrats.
- Market value: $214.5 billion
- Dividend yield: 2.6%
- Analysts' average recommendation: 2.88 (Hold)
Intel (INTC, $50.43) has fallen behind the competition when it comes to implementing the latest state-of-the-art manufacturing processes for computer chips. The semiconductor maker saw its stock plummet in July after it said that its 7-nanometer chips will be delayed and fall a whopping 12 months behind schedule.
But INTC's troubles don't end there, Wedbush analysts say. Not by a longshot. Although the transition to working-from-home has given the chipmaker a lift, that's quickly receding in the rear-view mirror.
"We believe a revenue trough tied to a combination of share loss and softer end-market conditions has yet to manifest due to recent cloud spending strength and an elongated PC cycle given the need to support work-from-home," notes Wedbush, which rates the stock at Underperform (Sell).
Intel sells servers that support cloud-based computing, but Wedbush expects that customers' spending in that area will moderate in the months ahead. Demand for personal computers should also tail off. And then there's the fact that INTC has struggled to keep up with the competition.
"INTC continues to see its share in the server and PC markets impacted by its past execution difficulties," adds Wedbush.
Sell calls are rare on Wall Street, but INTC has a total of 10 of them: six Sell ratings and four Strong Sell ratings. Twenty-one analysts say shares are a Hold, three call them a Buy and eight say Strong Buy.
- Market value: $29.3 billion
- Dividend yield: 2.9%
- Analysts' average recommendation: 2.85 (Hold)
Warren Buffett, CEO and chairman of Berkshire Hathaway (BRK.B), gave Travelers (TRV, $115.89) his own Sell call earlier this year when he dumped his entire stake in the insurer. But most Wall Street analysts say, "Hey, not so fast."
Travelers and other insurance stocks have been clobbered by the coronavirus outbreak. Low interest rates and low core margins don't help either. True, that has a number of analysts taking a wait-and-see approach, but TRV also has its bulls.
"We suggest investors build exposure to commercial insurers as earnings have likely bottomed and should gradually expand through at least 2023," write William Blair equity researchers, who singled out TRV with a rating of Outperform (Buy).
Wedbush notes that pricing power has been increasing because of worsening legal trends and elevated catastrophe activity. Reinsurance prices have firmed up too.
"Travelers should see earnings per share increase from a trough of $9.10 in 2020 to $16.00 in 2023," Wedbush says. Between the profit rebound and the stock coming off a cyclical low in terms of valuation, "Travelers has the potential for stock appreciation of 70% to 100% over the next few years," the research shop adds.
The broader community isn't quite so hot on Travelers. Four analysts call TRV a Strong Buy, one says Buy, 11 have it at Hold, two rate it at Sell and two say Strong Sell. Their average target price of $124.35 gives the stock implied upside of 7.3% over the next 12 months.
International Business Machines
- Market value: $111.4 billion
- Dividend yield: 5.2%
- Analysts' average recommendation: 2.63 (Hold)
International Business Machines (IBM, $125.07) is another of the blue-chip Dow stocks getting mostly lukewarm reviews from analysts.
The Street was optimistic about the incoming CEO – Arvind Krishna succeeded Ginni Rometty in early April – but that was before the global economy came to a standstill. And then the standard narrative of a company in secular decline – just look at the elevated dividend yield – came roaring back.
That said, IBM does have its fans. Stifel rates the stock at Buy, saying the market is too pessimistic about the company's prospects and has driven down IBM shares too far.
"While risk is elevated, given slower than expected revenue stabilization, we believe the risk/reward remains attractive, given very negative market sentiment and several potential catalysts over the next 12 months, which could drive both estimates and the multiple higher," Stifel analysts say.
Catalysts include re-accelerating services growth, better software performance and a weaker U.S. dollar, the analysts add.
Just bear in mind that IBM's problems emerged long before the pandemic and recession. Shares have lost 13% over the past three years, a period when the S&P 500 rose 43%.
Three analysts give shares a Strong Buy rating and one says Buy, while 11 analysts call IBM a Hold. One analyst slaps a Sell recommendation on the stock.
- Market value: $99.2 billion
- Dividend yield: 4.7%
- Analysts' average recommendation: 2.61 (Hold)
The seemingly endless saga of its grounded 737 Max jets hit Boeing (BA, $175.80) pretty hard. Then came the pandemic that pummeled global air traffic and even pushed some carriers into bankruptcy. At their 2020 lows, BA shares lost more than 70% of their value, and the aircraft maker also was forced to kill its dividend.
Investors surely hope the worst is behind BA, but they're not betting on it, given shares that are still off 46% year-to-date. Even analysts who call the stock a Hold lean toward pessimism.
"While we remain Neutral rated, we see greater relative risk on the downside," says Credit Suisse. "It remains difficult to articulate a cogent reason to be constructive on the stock. On the 737 Max alone, we are increasingly unlikely to see recertification before Q4, cancellations look set to continue, and the long-term market share equation remains poised to tip permanently in Airbus's favor."
As for income investors: Don't get your hopes up for the kind of largesse with cash BA was known for in the past, says UBS, which rates the stock at Neutral (Hold).
"Boeing was a cash machine for most of the last decade and as such distributed large amounts of capital directly to shareholders through share repurchase and dividend activities," UBS analysts say. "But given the building net debt balances, we expect it to be at least five years before Boeing treads toward repurchase again."
UBS adds that dividends, which could potentially restart in 2022 or 2023, will likely be lower as well.
- Market value: $34.1 billion
- Dividend yield: 6.1%
- Analysts' average recommendation: 2.6 (Hold)
Shares in chemical giant Dow (DOW, $46.05) still have a way to go before they reclaim their pre-crash peak, but they are showing signs of life lately. DOW is up 19% over the past three months. That beats the S&P 500 by 4 percentage points.
Dow suffered a slew of downgrades in the second quarter. Although analysts haven't much changed their recommendations, their price targets have inched up amid signs of improvement.
Deutsche Bank, which rates the stock at Buy, says recovery in the polyethylene market is accelerating. Additionally, DOW's cheap valuation and high dividend yield are especially attractive.
On the other side of the ledger, Credit Suisse, which rates shares at Neutral, contends that coronavirus headwinds are going to impact earnings not just this year, but next year and in 2022 as well.
The analyst consensus for profit growth isn't pretty either. They expect earnings to decline at an average annual rate of more than 1% over the next three to five years. Four analysts rate DOW stock at Strong Buy, one says Buy, 14 rate it at Hold and one says Sell, according to S&P Global Market Intelligence.
- Market value: $245.2 billion
- Dividend yield: 4.2%
- Analysts' average recommendation: 2.5 (Buy)
Analysts lean toward the Buy camp when it comes to Verizon (VZ, $59.26), one of just two communications-sector plays among the 30 Dow stocks.
True, the COVID-19 took a bite out of revenue and earnings in the most recent quarter. Verizon estimated the pandemic impacted adjusted earnings by 14 cents a share, hurt by lower wireless service revenue and lower advertising revenue from Verizon Media.
But that's in the past, says William Blair, which rates VZ at Market Perform, as wireless revenue growth improves in the current quarter. Credit Suisse, with a Neutral rating, concurs: "Our industry checks indicate wireless is back in a fundamentally open state, with 90+% of Verizon and national wireless carrier stores open in the second half of June."
Keep in mind that VZ isn't expected to be a growth factory. Hey, it's a telecom in a saturated market and has mountains of competition. But the valuation and dividend could definitely work for some portfolios. "The company is an attractive defensive stock for investors seeking income and capital preservation," adds William Blair.
On the Street, five analysts give VZ stock a Strong Buy rating, three say Buy and 18 call it a Hold. Analysts forecast average annual earnings growth of just 3.2% over the next three to five years.
- Market value: $82.6 billion
- Dividend yield: 1.7%
- Analysts' average recommendation: 2.48 (Buy)
The Street's collective wisdom tips American Express (AXP, $102.54) into the Buy camp. Eight analysts rate AXP at Strong Buy, three say Buy, 15 call it a Hold, two say Sell and one rates it at Strong Sell.
One investor who has never wavered in his faith in the credit card company is Warren Buffett, who first bought shares in AmEx in 1963. Although he has sold stakes or dumped positions in many financial stocks this year – including Visa and Mastercard (MA) – he hasn't touched AXP.
While shares in AXP are still down almost 18% for the year-to-date, the credit card company has been remarkably resilient during the downturn. "Credit quality still looks pretty good for AXP as loan balances are stabilizing," notes Piper Sandler, which has AXP at Overweight (Buy). "The balance of loans has stabilized around $50B in recent months. We do not believe that temporary relief programs are distorting the data."
William Blair reminds clients that AXP has historically been a steady ship.
"While we acknowledge COVID-19–driven business headwinds and elevated uncertainty on the duration and severity, we reiterate our Outperform rating," William Blair writes. "We are confident long-term returns are not materially impaired. We believe the stock should trade as it has for much of its past, suggesting over 50% upside."
Analysts forecast AXP to generate average annual earnings growth of 13% over the next three to five years, according to S&P Global Market Intelligence.
- Market value: $77.8 billion
- Dividend yield: 2.9%
- Analysts' average recommendation: 2.36 (Buy)
Caterpillar (CAT, $143.63) is the world's biggest maker of construction and mining equipment. That makes it something of a bellwether for the health of the global economy. And with China and other overseas economies gaining some traction, it's reasonable to expect a pickup in business.
"Caterpillar is a leading manufacturer of construction and mining equipment," says Stifel, which rates shares at Buy. "We believe improving demand, coupled with ongoing cost actions and cash flow improvement sets the stage for meaningful earnings growth as markets recover."
The uptrend in CAT stock is undeniably good news. Shares have popped almost 20% in the past three months vs. a gain of 15% for the S&P 500 as investors look to better growth over the next year or so. Although the company's end market recovery is more gradual that first thought, Credit Suisse is all in. "Given attractive upside vs. the current share price, we maintain our Buy rating," they say.
A number of analysts feel the same as Stifel and Credit Suisse, as seven of them call CAT a Strong Buy and four say Buy. Thirteen analysts rate it at Hold and one says Sell. The Street's long-term growth forecast stands at 9.7% for the next three to five years, according to S&P Global Market Intelligence.
- Market value: $148.3 billion
- Dividend yield: 2.5%
- Analysts' average recommendation: 2.21(Buy)
Biopharmaceutical giant Amgen (AMGN, $253.12) essentially replaced Pfizer in the Dow, and it's going to have more sway in the blue-chip average than the old-line pharma company did.
Remember that the Dow is constructed unusually: it's weighted by nominal share price rather than market capitalization. AMGN, at about $250 a share to PFE's $38, greatly increases the Dow's exposure to the pharma sector. Indeed, before getting the boot, PFE was basically tied with WBA for least important Dow stock.
Like any pharma or biopharma company, Amgen faces increasing competition from generic drugs and biosimilar treatments. Nevertheless, analysts are fairly bullish on AMGN's prospects, thanks to hit drugs such as arthritis treatment Enbrel, white blood cell stimulant Neulasta, and Prolia for anemia.
And, of course, few things help a pharma stock as much as a promising pipeline of drugs under development.
"As we enter the second half of 2020, excitement is building for key data readouts expected by the end of the year that could reignite long-term growth for the company," says William Blair equity researchers, who rate AMGN at Market Perform.
As for the pandemic, AMGN is restarting clinical trials that were previously paused due to COVID-19, and it believes physician offices are better equipped and prepared to deal with another surge of cases should that scenario come to pass. Amgen also is working on an antibody treatment for the novel coronavirus.
Of 29 analysts surveyed by S&P Global Market Intelligence, 10 rate the stock at Strong Buy, six say Buy, 11 call it a Hold, one says Sell and one calls it a Strong Sell. They expect average earnings growth of 6.4% over the next three to five years.
- Market value: $313.2 billion
- Dividend yield: 3.5%
- Analysts' average recommendation: 2.12 (Buy)
JPMorgan Chase (JPM, $102.77) gets an average rating of Buy from Wall Street analysts, and they collectively have a bit more conviction on the name than they did at the start of summer. Some upgrades have improved JPM's to 2.12 from 2.46 back in June.
The nation's biggest bank by assets, like the industry as a whole, has to contend with minuscule interest rates and rising loan-loss reserves, among other issues. Piper Sandler, however, says JPM is a standout in the sector.
"Credit performance to-date has been as positive as could have possibly been expected," notes Piper Sandler, which rates shares at Overweight (Buy). "We continue to believe JPM is poised to be a relative outperformer whether the operating environment continues to rebound (favorable business mix and market-leading position) or enters a 'double-dip' recession (as the 'strong get stronger' in a difficult operating environment)."
For what it's worth, Warren Buffett has been much less bullish on banks stocks this year, and JPM has been no exception. Berkshire Hathaway cut its stake in the bank by 61% in the second quarter, which follows a 3% reduction in the first quarter.
Nine analysts rate JPM at Strong Buy, seven say Buy and nine say Hold. One lone bear says the stock is a Strong Sell. Their long-term growth rate stands at 8% for the next three to five years.
- Market value: $178.2 billion
- Dividend yield: 3.4%
- Analysts' average recommendation: 2.11 (Buy)
Cisco Systems (CSCO, $42.20) was remarkably resilient in the early months of the pandemic, helped by the rush to working from home. But as the current environment becomes the new normal, some analysts are increasingly uneasy.
Wall Street is in the Buy camp, and an average price target of $49.46 gives the stock implied upside of 17% over the next year. It's the longer term that's more concerning, as cutbacks in corporations' capital expenditures weigh on CSCO's top line. Indeed, William Blair, which rates the stock at Market Perform, says the pandemic has exposed CSCO's "strategic shortcomings."
"Our view is that Cisco is facing a crossroads moment in its business that was not caused by the pandemic but is being exacerbated by it," William Blair analysts say. "The pandemic is spotlighting that despite some progress in recent years in transforming its business toward higher-growth software and cloud revenue, Cisco remains heavily dependent on hardware and on-premises revenue."
William Blair notes that 60% of the IT company's product revenue is still tied to traditional switching and routing. "With the pandemic accelerating underlying digital transformation trends, the warts in Cisco's product portfolio are becoming more visible," the analysts add.
More often than not, however, Cisco gets thumbs up on the Street. Argus Research, which calls CSCO a Buy, notes that combined sales from software and services exceeded 50% of revenue for the first time ever.
"While mindful of suppressed enterprise demand related to the coronavirus outbreak, we believe that category leader Cisco represents an attractive Buy and a core long-term holding," Argus Research analysts write.
- Market value: $2.13 trillion
- Dividend yield: 0.7%
- Analysts' average recommendation: 2.08 (Buy)
Don't tell Apple (AAPL, $499.23 / $124.81 on split-adjusted basis) we're in the midst of the worst economic downturn in many decades. Shares in the iPhone maker are up 70% so far this year, and its market capitalization is greater than $2 trillion – a once-unthinkable level.
Although analysts as a group are bullish on the name, AAPL does have a number of Sell recommendations. Of 39 analysts covering AAPL tracked by S&P Global Market Intelligence, 18 have it at Strong Buy, seven rate it a Buy, 10 call it a Hold, one says Sell and three say Strong Sell.
Apple bulls point to the September launch of the iPhone 12, which is expected to be a massive upgrade. Wedbush believes the latest iteration of the money-printing gadget will spark an upgrade "super cycle."
"While the soft macroeconomic environment and COVID backdrop are weighing on near-term consumer demand trends, Apple has a 'once in a decade' opportunity over the next 12 to 18 months as we estimate roughly 350 million of Cupertino's 950 million iPhones worldwide are in the window of an upgrade opportunity," writes Wedbush, which rates AAPL at Buy.
CFRA concurs with this view, adding, "We think the possibility of AAPL beginning to bundle different services (e.g., music and TV+), which could be announced next month, would be a bigger catalyst to the shares. We believe AAPL's ultimate path in Services is to create a recurring-based model similar to Amazon Prime."
While Wall Street leans on the bullish side with their overall calls, analysts' average target price of $108.93 (based on Apple's new price following its stock split) gives AAPL implied downside of 13% over the next 12 months or so.
Procter & Gamble
- Market value: $345.0 billion
- Dividend yield: 2.3%
- Analysts' average recommendation: 2.05 (Buy)
Consumer staples stocks such as mega-cap Procter & Gamble (PG, $138.77) were early winners from the pandemic and rolling lockdowns. People will always need products such as P&G's Charmin toilet paper, Head & Shoulders shampoo and Crest toothpaste.
William Blair, which rates PG at Outperform (Buy), figures that consumption of the company's products was up 12% for the four weeks ended Aug. 9, driven by laundry detergent, dish detergent, toilet tissue and paper towels.
UBS, which has the stock at Neutral, expects PG's broad-based strength to last through the rest of 2020, "as consumers migrate to 'trusted brands' and possibly another stimulus round."
Stifel, with a Buy call, adds that PG is gaining market share as revenue gets a boost from "coronavirus-related buying, particularly in health care, fabric and home care, and baby, feminine, and family care, categories accounting for 71% of sales."
Nine analysts rate the stock at Strong Buy and four have it at Buy. Another eight call it a Hold and one says Sell. Their forecast for average annual earnings growth stands at about 7% over the next three to five years, which isn't too shabby for a stodgy dividend payer that has increased its dividend annually for 64 straight years.
- Market value: $159.9 billion
- Dividend yield: 6.0%
- Analysts' average recommendation: 2.04 (Buy)
CVX has cooled off after a hot run from March to June, but analysts as a group expect more upside ahead.
Chevron, like the rest of the oil and gas industry, has been forced to double down on capital spending cuts and other cost savings as it grapples with ultra-low energy prices. And it's a strategy the oil major has the wherewithal to pull off, or so say the pros.
"In this environment, we believe that a company's balance sheet strength and place of the cost curve are critical, and favor integrated oil companies (IOCs) that are well positioned to manage a potentially long period of low oil prices," says Argus Research, which rates shares at Buy. "We believe that CVX is one of these companies as it benefits from best-in-class production growth, industry-low operating costs, and a strong balance sheet. We also believe the dividend is safe and sustainable."
As for the dividend, it's a silver lining in a tough year for Chevron. A 30% decline in the stock year-to-date has lifted the dividend yield above 6% at a time when income investors are starving for returns.
Argus also likes Chevron's $5 billion all-stock deal to acquire Noble Energy, as it will "provide additional diversification and expand its already sizable shale position in the U.S."
Of the 25 analysts covering the stock tracked by S&P Capital IQ, nine call it a Strong Buy, seven say Buy and eight rate it at Hold. One rates the stock at Sell. Their average price target of $102.44 gives CVX implied upside of about 20% over the next year.
- Market value: $71.5 billion
- Dividend yield: 2.4%
- Analysts' average recommendation: 2.04 (Buy)
Warren Buffett sold the rest of Berkshire Hathaway's stake in Goldman Sachs (GS, $207.71) in the second quarter as part of a general trimming of the portfolio's bank stocks. Buffett soured on the investment bank some time ago, as this was the third straight quarter in which he dumped shares.
Happily for its shareholders, the Street is more bullish on GS than is the Oracle of Omaha. Of the 26 analysts following the stock polled by S&P Capital IQ, nine call it a Strong Buy, seven say Buy and 10 have it at Hold.
Analysts applaud Goldman's strategy of bulking up business lines such as wealth management to make it less reliant on the vagaries of trading and investment banking. Others say fears about trading activity have been overblown.
Piper Sandler, which has GS at Overweight, says it has a "number of tailwinds" heading in 2021. Among the positives: The $2.5 billion settlement with Malaysia over the 1MDB corruption scandal removes a major litigation overhang. The capital markets operating environment has been and continues to be a pleasant surprise. And the fact that GS still has the capacity to capitalize on market volatility spikes.
"At a time when virtually all banks face extreme revenue headwinds from low interest rates and sluggish loan growth, we believe GS stands out as pursuing somewhat unique growth opportunities," Piper Sandler analysts write.
Analysts project GS to deliver annual average earnings growth of more than 10% over the next three to five years.
- Market value: $308.2 billion
- Dividend yield: 2.1%
- Analysts' average recommendation: 2.0 (Buy)
Home Depot (HD, $286.29) has been one of the bigger beneficiaries of a pandemic that has folks stuck at home. Shares in the nation's largest home improvement retailer are up about 31% for the year so far and 88% since their March bottom.
And analysts as a group say HD has more room to run.
While many retailers are only just beginning to reopen from the pandemic lockdown, Home Depot, an essential business, has been open the whole time. And its stores aren't just open – they're doing brisk business. Indeed, housing market stocks in general have soared over the past few months.
One of the few things you can do when trapped at home is to fix the place up, after all.
"The company realized strong demand across all product categories in the August quarter, not just seasonal summer projects," says CFRA, which rates HD at Strong Buy. "Home improvement retailers are getting a large wallet share from U.S households who are shifting their lifestyle to living and working at home.
Argus Research, which has a Buy recommendation on HD, points to its financial strength and opportunity to deliver future earnings growth and market-share gains.
"We believe that sheltering-at-home has given consumers the time and inclination to take on small home improvement projects," Argus Research analysts write. "HD is a potential beneficiary if consumers reallocate a portion of their spending from traveling and eating out to working, relaxing and studying in a safe comfortable home and yard."
- Market value: $244.9 billion
- Dividend yield: N/A
- Analysts' average recommendation: 1.96 (Buy)
Coronavirus took a huge bite out of some of Walt Disney's (DIS, $135.54) most important businesses: namely its theme parks and studios. Happily, analysts are seeing the green shoots of a nascent recovery.
"We have been anticipating an improvement at Disney World given that the park has lagged the continued downward trend of new Florida COVID cases," says Deutsche Bank, which calls the stock a Hold. "We've now seen at least an initial inflection toward that improvement. Epcot attendance has been outpacing other parks since reopening."
Disney's big push into streaming content is another bright spot. The Disney+ streaming service hit 60.5 million subscribers in the most recent quarter. The entertainment conglomerate had targeted 60 million to 90 million subscribers by 2024. And UBS, with a Neutral rating, notes that "ESPN ad sales should benefit significantly with the return of sports."
Credit Suisse recently upgraded DIS to Outperform, as its streaming strategy supplants a slow COVID recovery.
"COVID-related dynamics are likely to severely impact many of Disney's businesses for some time," Credit Suisse analysts say. "We expect Disney shares to be even more aggressively positioned as a streaming growth story (where investors have limited investment vehicles), and eventual COVID recovery play."
The market is betting on DIS as a pandemic-recovery play, as well. Shares are up 17% over the last month vs. an 8% gain for the S&P 500.
Johnson & Johnson
- Market value: $404.5 billion
- Dividend yield: 2.6%
- Analysts' average recommendation: 1.94 (Buy)
Johnson & Johnson (JNJ, $153.64) has promising news to share. Credit Suisse (Outperform) notes the company has confidence in its COVID-19 vaccine program, which is in Phase 3 trials (the final hurdle). The health care conglomerate is also confident in its ability to deliver more than 1 billion doses by the end of 2021.
UBS (Neutral) says JNJ's $6.1 billion deal for Momenta Pharmaceuticals (MNTA) makes strategic sense as it expands the company's pipeline of immunology drugs.
Shares in JNJ have been sluggish this year, as they trail the S&P 500 by 3 percentage points, but income investors can always count on the company's dividend. Johnson & Johnson announced a dividend hike in April, to $1.01 per share from 95 cents. That marked Johnson & Johnson's 58th consecutive year of dividend increases.
Eight analysts rate the stock at Strong Buy, four call it a Buy, five say Hold and one has it at Sell. With a target price of $162.89, the Street gives JNJ implied upside of 6% in the next 12 months or so. As for the future, analysts forecast average annual earnings growth of 5.8% for the next three to five years, according to S&P Global Market Intelligence.
- Market value: $118.2 billion
- Dividend yield: 2.1%
- Analysts' average recommendation: 1.88 (Buy)
Honeywell (HON, $168.38) is back.
The industrial conglomerate was taken out of the Dow Jones Industrial Average in 2008, but it has just been reinstated to the ranks of the 30 Dow stocks, taking the place of Raytheon Technologies (RTX). United Technologies used to play the part of industrial conglomerate in the blue-chip average, but it spun off two major businesses as part of its tie-up with Raytheon.
Shares still are negative for the year-to-date but a 13% gain over the past month adds to its theme as a recovery play. That might not be so easy, as UBS (Neutral) notes that the stock's recovery hinges on its aerospace and oil & gas segments.
Regardless, analysts are more likely to be in the bull camp on the name. Eleven call HON a Strong Buy, five say Buy and eight have it at Hold. They forecast HON to deliver a 13% increase in adjusted earnings per share next year and another 11% in 2022.
Honeywell's blue-chip reputation makes it an ideal stock for long term investors, says Argus Research (Buy), citing its history of paying and raising the dividend, financial strength and talented management team.
"We think HON is poised to generate low double-digit earnings growth over the long term. We believe that Honeywell will continue to benefit from its diverse product lines," Argus Research analysts write. "Poised to generate low double-digit earnings growth over the long term, HON remains a suitable core Industrial equity holding in a diversified portfolio."
Honeywell last raised its dividend in September 2019, a 10% increase that marked the 10th time it hiked the dividend rate by double digits 2010.
- Market value: $397.3 billion
- Dividend yield: 1.5%
- Analysts' average recommendation: 1.83 (Buy)
Walmart's (WMT, $140.30) heavy investments in its e-commerce business have really paid off over the past few years, and especially during the lockdown. As a one-stop shopping for all manner of goods, and consumer staples in particular, Walmart.com has been delivering better-than-expected results.
Where WMT is really making waves today is the news that it has joined discussions with Microsoft about potentially acquiring TikTok, a popular social media property. It might seem strange that the mammoth discount retail chain would want a piece of the hottest social media platform in the world, but UBS says it makes strategic sense.
"Harnessing the reach of a rapidly growing social media platform should allow WMT to build links with advertisers & third-party sellers," writes UBS (Buy). "Connecting with a younger audience is vital to WMT's long-term outlook. Having a better understanding of younger consumers through their social media habits would be valuable to WMT."
But the key questions are how much capital it will require and what the opportunity cost of the capital will be, UBS adds.
It's too soon to say whether Walmart can forge a deal on TikTok. Something analysts are more certain about is the potential of its soon-to-be-launched Walmart+ subscription service as a rival to mighty Amazon.
"We think it will be a game-changer for both the company and industry, transforming the way millions of U.S. consumers buy their groceries, and offer a competitive value proposition relative to Amazon Prime," says CFRA (Strong Buy). The service is slated to cost $98 a year and include same-day delivery of groceries, fuel discounts and other perks.
The breakdown from S&P Capital IQ is as follows: 18 analysts call WMT a Strong Buy, eight have it at Buy, eight rate it at Hold and two say Sell. The pros think the company can generate long-term earnings growth of almost 6% a year for the next three to five years.
- Market value: $159.9 billion
- Dividend yield: 2.3%
- Analysts' average recommendation: 1.74 (Buy)
McDonald's (MCD, $214.91) is another Dow stock that has picked up steam lately. Shares are up nearly 10% over the past month vs. a gain of less than 8% for the S&P 500, and analysts are largely bullish on extending that trend.
UBS (Neutral) likes MCD's set up. "We believe MCD is well positioned with an attractive asset base, advantaged scale, a strong management team that is investing in long-term brand health, and multiple catalysts to support further gains," write UBS analysts.
After a trial period contributed to record-high monthly sales and guest count volumes, the rollout of McDonald's Spicy McNuggets could drive improving recovery trends and allow the hamburger slinger to gain market share, UBS adds.
McDonald's strong same-store sales progress during the second quarter "showed the power of the brand," say Jefferies analysts (Buy), who believe third-quarter results likely represent the trough as restaurants reopen globally.
The bulk of Wall Street's pros are bullish on the restaurant chain. Eighteen analysts rate the Dow stock at Strong Buy, seven say Buy and nine call it a Hold.
As for income investors, you can't beat MCD for reliability. Its dividend dates back to 1976 and has gone up every year since. MCD last raised its quarterly payout in September 2019, by 8% to $1.25 a share. That marked its 43rd consecutive annual increase.
- Market value: $214.0 billion
- Dividend yield: 3.3%
- Analysts' average recommendation: 1.71 (Buy)
Coca-Cola (KO, $49.83), like American Express, is another longtime Warren Buffett holding. And although he sold stakes in 18 stocks in the second quarter, he didn't lay a finger on KO.
Analysts are bullish on the soft-drink maker, too, in part due to Coca-Cola's Costa Coffee acquisition, as well as new products in the flavored sparkling water and energy drink categories. Ten analysts call it a Strong Buy, seven say Buy and four rate it at Hold.
True, coronavirus has hurt the company's top-line growth, especially when it comes to selling beverages at restaurants, sports stadiums and other away-from-home venues. But analysts say shares look attractively priced and think the stock's bottom has been found. KO is down 10% this year.
Morgan Stanley recently upgraded the fizzy drinks maker to Overweight, citing a compelling valuation. Furthermore, the market appears to have more than accounted for short- and longer-term COVID risk factors. Morgan Stanley's analysts add that their upgrade also hinged on Coca-Cola's stock underperforming mega-cap peers since COVID fears took off.
Analysts expect KO to generate average annual earnings growth of just 3.1% over the next three to five years. That might not rock anyone's world, but at least income investors can bank on the dividend.
Coca-Cola's streak of raising its dividend, which currently sits at more than half a century, puts it among the ranks of Wall Street's Dividend Kings.
- Market value: $216.6 billion
- Dividend yield: 2.9%
- Analysts' average recommendation: 1.68 (Buy)
Shares in Merck (MRK, $85.65) haven't been keeping up in 2020. The stock is off 6% for the year-to-date, lagging the broader market by a painful 15 percentage points.
The good news is that with the economy gradually opening up, Merck's recovery looks like it's gaining steam. Says Argus Research (Buy): "Despite near-term headwinds from COVID-19, Merck is seeing sequentially stronger end-market demand for its products as physician offices reopen, elective surgeries resume, and pet owners return to veterinary offices."
Argus' analysts add that the company continues to see strong sales of Keytruda, Lenvima and Lynparza, and newly launched Koselugo is off to a strong start. Keytruda, which is approved for a wide range of cancers, has been a huge blockbuster for Merck.
At the same time, shares are compellingly priced for what the firm offers. "Merck speaks softly and carries a big stick," Morgan Stanley says. "It's not promotional, but it has extraordinary science and compelling assets."
Of the 19 analysts covering MRK tracked by S&P Global Market Intelligence, 10 rate shares at Strong Buy, five have it at Buy and four call it a Hold. They see roughly 12% upside over the next year, based on an average price target of $95.67.
Looking further down the road, the pros expect the pharma company to deliver average annual profit growth of almost 8% over the next three to five years.
- Market value: $175.2 billion
- Dividend yield: 0.9%
- Analysts' average recommendation: 1.65 (Buy)
Shares in Nike (NKE, $112.29) have shot up almost 16% during the past month, and analysts say they have more room to run.
Susquehanna, which has a rating of Positive (Buy) on NKE, says a weaker U.S. dollar adds $620 million to its revenue estimate and 15 cents to its earnings per share estimate. Cost-cutting layoffs will also boost the bottom line.
CFRA (Strong Buy) says Nike is "one of the most well positioned companies to pass Covid-19's stress test and capture market share in this time of dislocation." The accelerating shift to direct selling on Nike.com strengthens the company's connection with core consumers – and cuts out the wholesalers, analysts add.
"With the athletic category having long-duration global secular and structural tailwinds, we see Nike as uniquely positioned to execute a more direct model," Stifel analysts write. "We expect this translates to growth, margin improvement, and strengthening return on invested capital longer-term."
More immediately, the Street forecasts adjusted EPS growth of 28% for 2021. Long-term average annual earnings growth is pegged to be 17% for the next three to five years, according to S&P Global Market Intelligence.
Of the 34 analysts covering Merck tracked by S&P Global Market Intelligence, 18 rate the stock at Strong Buy, 10 say Buy, six call it a Hold.
- Market value: $459.0 billion
- Dividend yield: 0.6%
- Analysts' average recommendation: 1.61 (Buy)
Few blue-chip Dow stocks get more love from analysts, portfolio and hedge funds than Visa (V, $215.71). Of the analysts tracked by S&P Global Market Intelligence, 21 call Visa a Strong Buy and nine have it at Buy. Only five say it's a Hold and just one rates it at Sell.
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 more than 14% annually over the next three to five years.
Wedbush (Outperform) points to improving credit and debit transaction volumes from April's (COVID-peak) bottom, among other reasons to be bullish on the stock.
"Fundamentally, looking at Visa's portfolio of growth drivers, incremental strength in eCommerce transaction volumes, solid performance in value-added services continue to somewhat offset weak cross-border (travel) trends."
Visa stock is up 15% so far this year and analysts say it's still a Buy. "We reiterate our Outperform rating, as we view Visa as continuing to have a multi-decade secular growth tailwind from the expansion of electronic payments," Wedbush says.
Not everyone is over the moon, however. For what it's worth, Warren Buffett's Berkshire Hathaway sold 5% of its stake in the company in the second quarter.
- Market value: $298.8 billion
- Dividend yield: 1.6%
- Analysts' average recommendation: 1.56 (Buy)
UnitedHealth Group (UNH, $315.50) has one of the most bullish scores of any Dow stock. Of the 27 pros covering UNH tracked by S&P Global Market Intelligence, 16 rate UNH at Strong Buy and seven call it a Buy; the remaining four have the insurer at Hold.
That said, analysts collectively see shares' potential as being somewhat constrained from here. Analysts' average price target of $343.48 gives UNH implied upside of 9% over the next 12 months. That's roughly in line with their revenue-growth estimates for 2021. And over the next three to five years, the Street sees UNH generating average annual profit expansion of 13.2%.
With a market value of about $300 billion and revenue of $242.2 billion last year, UnitedHealth is the largest publicly traded health insurance company by a wide margin. There's little wonder as to why analysts are so bullish on a company of this size when they expect double-digit profit year after year.
Shorter term, the outlook for the stock is more complicated because of the presidential election.
"Overwhelmingly, the key debates remain focused on election themes, politics and pricing," says Credit Suisse (Neutral). "The set-up for the group probably turns much more favorable as we near the debates. In the scenario Biden wins, the sector sentiment could likely swing more favorably."
- Market value: $244.4 billion
- Dividend yield: N/A
- Analysts' average recommendation: 1.54 (Buy)
Salesforce.com (CRM, $271.26) was doing cloud computing before most people had heard about "the cloud." And after being a truly heroic stock over the past 10 years, CRM has been added to the Dow, replacing oil major Exxon Mobil.
XOM was the Dow's longest-serving member, but the energy sector's weight in the broader market has declined substantially over the years. Salesforce.com probably makes the Dow Jones Industrial Average better aligned with our contemporary stock market.
Furthermore, it's a blue chip and is a long-term outperformer. Over the past decade, CRM's price has increased nearly 900% vs. a gain of 234% for the S&P 500.
Analysts as a group expect more outsized gains to come, as CRM is ideally positioned to take advantage of today's trends.
"The new work-from-home paradigm (or perhaps the developing home/office hybrid) has increased demand for software solutions for cloud computing, distributed computing, edge computing and collaboration software," writes Argus Research (Buy). "Well before the pandemic hit, Salesforce had leveraged its industry position as the top customer relationship software provider to become a critical partner in enterprise digital transformation. It is now benefiting as this trend continues to gain momentum."
As for the breakdown of analysts' recommendations, 26 rate CRM at Strong Buy, 10 say Buy, four have it at Hold and one calls it a Strong Sell. Analysts' long-term earnings growth forecast of almost 20% backstops their solidly bullish view.
- Market value: $1.72 trillion
- Dividend yield: 0.9%
- Analysts' average recommendation: 1.46 (Strong Buy)
Microsoft (MSFT, $226.66) has reigned as the Street's' favorite Dow stock throughout 2020 and is the only one of the 30 blue chips to score a rating of Strong Buy.
Indeed, there are no bears in sight. Twenty-three of the 35 analysts tracking MSFT rate it at Strong Buy, and another eight say it's a Buy. Just four are on the sidelines at Hold.
The software and cloud computing giant has been one of the rare – but big – beneficiaries of the coronavirus crisis. Workers and students sheltering at home have lifted demand for everything from Microsoft 365 productivity tools to Xbox games.
And the reasons to be bullish keep adding up. Wedbush (Buy) says MSFT is uniquely positioned to win the scramble for TikTok, should China allow a sale to go through.
"MSFT is the white knight," says Wedbush, which has the stock on its Best Ideas list. "Microsoft (not Oracle) is the only U.S. technology stalwart with the treasure chest, infrastructure, and distribution to get a deal like this done. Microsoft buying TikTok would be like Christmas morning coming early for investors."
At the same time, MSFT is a port in a storm for income investors. The trillion-dollar-plus market value, massive amounts of cash on the balance sheet and gushers of free cash flow make Microsoft one of the safest dividend stocks around. Indeed, MSFT has raised its payout annually for more than 15 years.
Analysts forecast the software giant to deliver average annual earnings growth of 13% over the next three to five years.