News

Amid the rally buoyed by enthusiasm around AI and Fed rate cut bets, the Dow Jones Industrial Average Index is underperforming the other large-cap indices, such as the S&P 500 and Nasdaq Composite Index. SPDR Dow Jones Industrial Average ETF Trust DIA, which tracks the Dow Jones Industrial Average Index, has gained 5.3% so far this year.

The second-quarter 2024 earnings season will kick off this week, with the banking sector players due to report numbers. The overall picture ahead of this reporting cycle is one of continued resilience and a steadily improving outlook with a favorable revision trend.

Total S&P 500 earnings are expected to be up 8.6% from the year-ago period on 4.7% higher revenues, per the latest Earnings Trends. This will be the highest earnings growth rate since the 9.9% growth rate in the first quarter of 2022. Though estimates have steadily come down since the start of the quarter, the magnitude of declines is far smaller relative to the comparable periods of other recent quarters.

Nine of the 16 Zacks sectors are expected to post earnings growth in the second quarter, with the strongest gains in the Technology sector (15.8%). This would be followed by Healthcare (19.0%), Energy (10.9%), Consumer Discretionary (12.5%) and Finance (9.0%). In particular, second-quarter earnings of the “Magnificent 7” companies are expected to be up 25.5% from the same period last year on 13.2% higher revenues (read: 5 Favorite Sectors This Earnings Season and Their ETFs).

Earnings growth for the Energy sector is on track to turn positive in the second quarter after remaining in negative territory in the preceding four quarters.

DIA in Focus

SPDR Dow Jones Industrial Average ETF Trust is one of the largest and most popular ETFs in the large-cap space, with an AUM of $32.7 billion and an average daily volume of 3 million shares. Holding 30 blue-chip stocks, the fund is widely spread across components, with a slight tilt toward the top firms. Financials (23%), information technology (20.2%), healthcare (17.9%), consumer discretionary (14.4%) and industrials (13.8%) are the top five sectors.

SPDR Dow Jones Industrial Average ETF charges 16 bps in annual fees and has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk.

Nearly one-fourth of the blue-chip firms are expected to announce results this week and the next. JPMorgan Chase JPM and Goldman GS are expected to report on Jul 12 and Jul 15, respectively. UnitedHealth UNH and Johnson & Johnson JNJ will announce earnings on Jul 16 and Jul 17, respectively, while International Business Machines IBM will report on Jul 24. Dow Inc. DOW and Intel INTC are slated to release earnings on Jul 25 (read: 5 Must-Have ETFs for the Second Half).

Let’s delve deeper into the probable second-quarter earnings picture that will likely aid the fund in the coming days.

Earnings Whispers

According to our methodology, the combination of a positive Earnings ESP 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 Earnings ESP Filter. You can see the complete list of today’s Zacks #1 Rank stocks here.

JPMorgan has an Earnings ESP of +0.57% and a Zacks Rank #3. The stock has seen a positive earnings estimate revision of a couple of cents over the past seven days for the to-be-reported quarter. Analysts increasing estimates right before earnings — with the most up-to-date information — is a good indicator for the stock. JPM delivered an earnings surprise of 12.31%, on average, in the last four quarters.

Goldman has an Earnings ESP of -1.35% and a Zacks Rank #3. The stock has witnessed positive earnings estimate revision of a couple of cents over the past seven days for the to-be-reported quarter. GS’ earnings surprise track over the preceding four quarters is good, with the average surprise being 22.78%.

UnitedHealth has an Earnings ESP of +1.06% and a Zacks Rank #3. The stock has witnessed a negative earnings estimate revision of a couple of cents over the past 30 days for the to-be-reported quarter. It delivered an earnings surprise of 3.65%, on average, over the last four quarters.

Johnson & Johnson has an Earnings ESP of 0.00% and a Zacks Rank #3. The stock saw a negative earnings estimate revision of a penny over the past 30 days for the to-be-reported quarter. JNJ’s earnings surprise track record over the preceding four quarters is robust, with an average of 4.09%.

International Business Machines has an Earnings ESP of 0.00% and a Zacks Rank #4. The stock saw no earnings estimate revision in the past 30 days for the to-be-reported quarter. IBM delivered an earnings surprise of 5.20%, on average, in the last four quarters (read: Top-Ranked ETFs That Outperformed the Market in 1H).

Dow has an Earnings ESP of -1.20% and a Zacks Rank #3. The stock has seen a negative earnings estimate revision of 9 cents over the past 30 days for the to-be-reported quarter. DOW came up with a beat in each of the last four quarters, the average being 11.36%.

Intel has an Earnings ESP of 0.00% and a Zacks Rank #4 (Sell). The stock has witnessed no earnings estimate revision over the past 30 days for the to-be-reported quarter and delivered an earnings surprise of 145.36%, on average, over the last four quarters.

Bottom Line

With some of the blue-chip companies having reasonable chances of coming up with an earnings surprise, investors should closely monitor the movement of the Dow ETF and grab any opportunity that arises from a surge in any of the 30 stocks.

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The Goldman Sachs Group, Inc. (GS) : Free Stock Analysis Report

JPMorgan Chase & Co. (JPM) : Free Stock Analysis Report

Intel Corporation (INTC) : Free Stock Analysis Report

UnitedHealth Group Incorporated (UNH) : Free Stock Analysis Report

International Business Machines Corporation (IBM) : Free Stock Analysis Report

Johnson & Johnson (JNJ) : Free Stock Analysis Report

Dow Inc. (DOW) : Free Stock Analysis Report

SPDR Dow Jones Industrial Average ETF (DIA): ETF Research Reports

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.