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4 Must-Buy Dow Stocks Ahead of Earnings Reports This Month

Nalak Das

U.S. stock markets are northbound since the beginning of this year after a fabulous 2019, marking the best performance in six years. Maintaining this momentum, all three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite — have already recorded fresh all-time highs in January. On Jan 15, the Dow achieved a milestone closing above the technical barrier of 29,000 for the first time.

Dow’s Performance in Fourth Quarter

The 30 stocks Dow Index, popularly known as Wall Street’s blue-chip index, rallied 22.3% in 2019. This was an excellent performance after a disappointing 2018 when it had lost nearly 6%. In the fourth quarter, the Dow gained 6%.

The last three months of the year were quite promising for the Dow as the U.S.-China trade war finally seemed to ease and strong economic data boosted investors’ sentiments. At the beginning of the quarter, deputy level delegation from the United States and China started negotiating on trade issues and agreed to sign a phase one” trade deal.

The United States halted the scheduled tariff hikes and abandoned imposing tariffs on a new set of products. China, on its part, promised to buy more agricultural products and comply with U.S. intellectual property rights. Buoyed by these positives, the Dow reached a milestone, closing above 28,000 for the first time on Nov 15.

Dow Maintains Momentum

The blue-chip index has maintained last year’s momentum since the beginning of 2020. Year to date, the index has gained more than 1.7%. On Jan 15, it ended above 29,000 for the first time. This means the Dow took just three months to complete the journey from 28,000 to 29,000.

On Jan 15, the Dow closed at 29,030.22, well above its 50-day and 200-day moving averages of 28,165.88 and 26,877.94, 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 the long-term trend setter.

It is widely believed 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.

4 Top Dow Stocks Set to Beat Earnings Estimates

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.

We have narrowed down our search to four Dow companies slated to release their earnings results this month. Each of these stocks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). 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%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

The chart below shows price performance of our four picks in the past year.

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. The Zacks Rank #1 company has an Earnings ESP of +4.08% for the first quarter of fiscal 2020 (ended December 2019).

Apple has an expected earnings growth rate of 16% for the current year (ending September 2019). The Zacks Consensus Estimate for the current year has improved 0.9% over the last 60 days. The trailing four-quarter positive earnings surprise is 3.6%, on average. Apple is set to release earnings results on Jan 28, after the closing bell.

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 #2 company has an Earnings ESP of +0.77% for fourth-quarter 2019.

Johnson & Johnson has an expected earnings growth rate of 4.8% for the current year. The last four-quarter positive earnings surprise is 4.3%, on average. Johnson & Johnson will release earnings results on Jan 22, before the opening bell.

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 Zacks Rank #2 company has an Earnings ESP of +0.91% for the second quarter of fiscal 2020 (ended December 2019).

Procter & Gamble has an expected earnings growth rate of 9.3% for the current year (ending June 2019). Positive earnings surprise for the trailing four quarters is 4.9%, on average. The Procter & Gamble will release earnings results on Jan 23, before the opening bell.

American Express Co. AXP provides charge and credit payment card products and travel-related services to consumers and businesses worldwide. It operates through three segments: Global Consumer Services Group, Global Commercial Services, and Global Merchant and Network Services. The Zacks Rank #2 company has an Earnings ESP of +0.21% for fourth-quarter 2019.

American Express has an expected earnings growth rate of 10.9% for the current year. The Zacks Consensus Estimate for the current year has improved 0.3% over the last 60 days. American Express is set to release earnings results on Jan 24, before the opening bell.

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