Dow Jones index outlook: what to expect as earnings season ramps up
As a number of Dow Jones companies post their first-quarter earnings this week, we look at what the index has in store for us over the next few days.
In different times, earnings season would have dominated financial headlines in the UK, US, and beyond. However, it is more than likely that the quarterly earnings reports of many of the largest and most influential companies on the planet will be fighting for headline space amid the cascade of unprecedented financial news that is currently the new norm.
As earnings season kicks off this week, a total of nine of the 30 companies listed on the Dow Jones Industrial Average (Dow), the most significant US stock index and a major barometer for the global economy, will be posting their own figures. The first to report will be IBM at the close of Monday, with others expected throughout the week. Let's take a look at which companies are due to report, and what we might be able to expect.
1. IBM (NYSE: IBM)
Software and electronics giant IBM has seen a major rally in share prices since the big crash in February, with shares trading at over $120.00 upon closing on Friday, up from $94.77 a month ago. Analysts are predicting healthy revenues for the first quarter, with modest growth from the fourth quarter (Q4) 2019, in part because the software and cloud computing industry has proven much less vulnerable to the current crisis than others.
2. Coca-Cola (NYSE: KO)
Coca-Cola has seen its share prices grow more than 25% in the past two weeks, buoyed by a rally in the Dow that has been instigated by trillions of dollars of Federal Reserve (Fed) money. Earnings growth is likely to be modest this week, with trouble on the horizon as Coca-Cola's complex global supply chains fall prey to Covid-19 disruption.
3. Travelers Companies (NYSE: TRV)
Analysts have predicted Q1 revenues of around $7 billion for the insurance giant Travelers Companies, only a modest dip on the same period last year. As one of the largest insurance underwriters in the world, the company is currently doing a roaring trade, although it is unclear whether payouts related to coronavirus layoffs will result in a drag on overall earnings.
4. Verizon (NYSE: VZ)
Verizon, much like its rival AT&T, has demonstrated the apparent invulnerability of the telecoms sector during this time. Its share price has almost returned to its pre-coronavirus peak, making it one of the only companies on the Dow to do so. Thanks to a string a lucrative 5G contracts, earnings at Verizon are expected to be up this quarter.
5. Boeing (NYSE: BA)
Virtually all market hawks are expecting a bloodbath when Boeing reports its earnings before markets open on Wednesday. The company, much like all other airlines, has been devastated by global travel restrictions. All of the current signs point towards heavy losses for Boeing, with few signs of its share price recovering anytime soon.
6. Visa (NYSE: V)
Payments titan Visa has consistently outperformed the Dow and the S&P 500 since the onset of the current economic turmoil, and it is likely that its earnings reports on Wednesday will reflect this. While Visa is down 11% in 2020 so far, its competitors Mastercard, DiscoverCard and American Express have fared much worse, being down 14%, 61%, and 32% respectively.
7. Dow Inc. (NYSE: DOW)
Chemical company Dow. is expected to have taken a serious beating from the coronavirus, as falling demand and supply chain disruption continues to wreak havoc on heavy industry. The current consensus is that Dow will post Q1 earnings of around $9.7 billion, putting them down 10% on the previous quarter, with Q2 expected to be significantly worse.
8. Intel (NYSE: INTC)
While long-term hopes for Intel are not particularly high among pundits, it is expected to scrape through Q1 relatively unscathed, thanks in part to a surge in demand for Intel products such as chips and laptops as the global economy makes the transition to remote working. Sales have risen for Intel in the short term, and this will likely be reflected in its earnings report.
9. American Express (NYSE: AXP)
As mentioned, American Express (AmEx) has not fared as well as Visa, its main competitor. Its share price is down 32% this year so far, with its recent rally being far more meagre than most other Dow components. AmEx has not weathered the storm as well as others, and revenues are predicted to be down this quarter.
As you can see, this earnings season promises to be one of the most interesting in recent memory. Stay tuned to see how these Dow components fare.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
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