Dow ETF in Focus Ahead of Q4 Earnings
After logging in double digit gains in the fourth quarter, the Dow Jones continued its solid run to start the New Year buoyed by the widening reach of COVID-19 vaccines and hopes of more stimulus from a Democratic-led U.S. Congress.
The strength is likely to continue heading into the earnings season. For the fourth quarter, the S&P 500 earnings are expected to decline despite 0.3% higher revenues. The earnings projection reflects an improvement from the 13.4% earnings decline expected at the end of the third quarter and follows the 7% earnings drop in Q3 (read: ).
Given this upside in the earnings trend, SPDR Dow Jones Industrial Average ETF , which tracks the Dow Jones Industrial Average Index, is in the spotlight.
DIA in Focus
This is one of the largest and the most-popular ETFs in the large-cap space with AUM of $24.8 billion and an average daily volume of 3.3 million shares. Holding 30 blue chip stocks, the fund is widely spread across components with each holding less than 8% share. Information technology (21.1%), healthcare (17.7%), industrials (16.6%), financials (14.9%) and consumer discretionary (13.4%) are the top five sectors. DIA charges 16 bps in annual fees and has a Zacks ETF Rank #3 (Hold) with a Medium risk.
Nearly two-tenth of the blue chip firms are expected to announce results this week and in the next. JPMorgan Chase is expected to release earnings on Jan 15 while International Business Machines and Goldman are scheduled to report on Jan 19. UnitedHealth Group will report on Jan 20.
Let’s delve deeper into the fourth-quarter earnings picture that will likely aid the fund in the coming days.
Earnings Whispers
According to our methodology, the combination of a positive and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our .
JPMorgan has a Zacks Rank #1 and Earnings ESP of +2.50%. The company saw positive earnings estimate revision of 34 cents over the past 30 days for the to-be-reported quarter. Analysts raising estimates right before earnings — with the most up-to-date information possible — is a good indicator for the stock. However, it delivered an average negative surprise of 4.02% in the last four quarters. The stock has an unimpressive VGM Score of F (read: ).
International Business Machines has a Zacks Rank #4 and an Earnings ESP of +3.39%. It saw negative earnings estimate revision of 42 cents in the past 30 days for the to-be-reported quarter and came up with a beat in each of the last four quarters, the average being 2.71%. IBM has a VGM Score of B.
UnitedHealth has a Zacks Rank #3 and an Earnings ESP of 0.00%. The stock witnessed positive earnings estimate revision of a penny over the past 30 days for the soon-to-be-reported quarter and delivered an earnings surprise of 15.22%, on average, over the last four quarters. It has a VGM Score of B (read: ).
Goldman has a Zacks Rank #1 and an Earnings ESP of +3.14%. The company witnessed positive earnings estimate revision of a penny over the past 30 days for the yet-to-be-reported quarter. Goldman’s earnings surprise track over the preceding four quarters has also been robust, the average beat being 15.22%. The stock has a VGM Score of B.
Bottom Line
With some blue-chip companies’ earnings scheduled for the coming days, investors should closely monitor the movement of the Dow ETF and grab an opportunity that arises from a surge in any of the 30 stocks.
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