4 Dow Members Bucking The Negative Trend

After three consecutive days of losses, the Dow managed to snap the trend with gains on Friday. Yet the index ended last week in a negative tone, losing 2.8%. This was the first time since Oct 2014 that the blue-chip index registered losses for four consecutive weeks. Concerns including June rate-hike fears and weak first-quarter earnings had a negative impact on the index.

Weak Q1 Earnings

Weak first-quarter earnings and intensified rate hike fears affected the financial markets. As of May 20, total earnings for 480 S&P 500 members were down 6.9% from the same period last year on 1.1% lower revenues. Like the last few quarters, disappointing results from energy companies dampened the first-quarter earnings season. The energy components of the Dow – Chevron Corp. (NYSE:CVX) and ExxonMobil Corporation (NYSE:XOM) – posted disappointing first-quarter results.

While Chevron reported a first-quarter loss per share of 39 cents against the year-ago quarter’s earnings of $1.37 per share, ExxonMobil posted a year-over-year decline of 63.2% in earnings of 43 cents per share. Moreover, Apple Inc. (NASDAQ:AAPL) posted disappointing fiscal second-quarter earnings results after Phone sales witnessed the first ever year-over-year decline.

Rate Hike Fears

Also, the minutes of the Federal Reserve’s two-day policy meeting in April indicated that most of its officials remain optimist of a rate hike in the June meeting. Moreover, New York Fed President William Dudley said that he is "quite pleased" to see strong possibilities of a rate hike in June–July. Dudley also said that the Fed is “on track to satisfy a lot of the conditions" for a rate rise.

Also, Richmond Fed President Jeffrey Lacker pointed to a June rate hike, after “risks from global and financial developments having virtually entirely dissipated.” Lacker previously wanted a rate hike in April, and now agrees that “the case would be very strong for raising rates in June.” These have intensified rate hike fears among investors, which in turn affected the major benchmarks.

Despite this negative tone, some Dow components performed better than the index over the past three-month time frame on the back of strong fundamentals. These stocks may be profitable additions to your portfolio.

4 Stocks to Buy

We have identified four favorably ranked Dow components that are likely to outperform the blue-chip index in the near future. Separately, these stocks also performed better than the Dow over the past three-month period. Notably, the Dow registered a gain of 6.5% in trailing three months despite the recent decline.

Pfizer Inc. (NYSE:PFE) focuses on the development and commercialization of a wide range of products including human and animal biologic and small molecule medicines and vaccines, as well as consumer health care products. Pfizer rose 12.4% over the past three-month period.

Pfizer has a Zacks Rank #1 (Strong Buy) and its first-quarter reported earnings of 67 cents per share easily beat the Zacks Consensus Estimate of 55 cents. The company also has a four-quarter average positive surprise of 12.8%. Pfizer’s expected EPS growth is 11.7% for the current year, higher than the industry average of 6.4%.

Johnson & Johnson (NYSE:JNJ) focuses on the development, manufacturing and marketing of pharmaceutical, medical, and consumer related healthcare products. JNJ rose 7.8% over the past three-month period.

Johnson & Johnson has a Zacks Rank #2 (Buy) and its first-quarter reported earnings of $1.68 per share easily beat the Zacks Consensus Estimate of $1.64. The company also has a four-quarter average positive surprise of 2.1%. Johnson & Johnson’s expected EPS growth is 6.4% for the current year.

UnitedHealth Group Incorporated (NYSE:UNH) leverages core competencies in advanced technology-based transactional capabilities; health care data, knowledge and information; and health care resource organization and care facilitation. UnitedHealth Group rose 7.7% over the past three-month period.

UnitedHealth Group has a Zacks Rank #2 and its first-quarter reported earnings of $1.81 per share easily beat the Zacks Consensus Estimate of $1.72. In the trailing four quarters, the company’s average beat was 3.1%. For the current year, UnitedHealth’s expected EPS growth is 22.1%, higher than the industry average of 10.7%.

E. I. du Pont de Nemours and Company (NYSE:DD) is a global science and technology company with a diverse array of product offerings. The company's operating segments are – Agriculture, Electronics & Communications, Industrial Biosciences, Nutrition & Health, Performance Materials and Safety & Protection. Du Pontrose 13.9% over the past three-month period.

Zacks Rank #2 Du Pont’s first-quarter reported earnings of $1.26 per share crushed the Zacks Consensus Estimate of $1.02. The company’s trailing four-quarter average positive surprise was 14.1%. Du Pont’s expected EPS growth for the current year is 12.8%, higher than the industry average of 6.6%.