While investing in Dow stocks – that is, the 30 companies making up the Dow Jones Industrial Average – might seem incredibly boring, investors shouldn’t outright dismiss this avenue for potential profitability. I consider this segment to be the Mike Tyson of the equities market.
So apparently, the former undisputed world heavyweight champion is coming out of retirement – or whatever it was that Tyson was doing – to fight YouTube celebrity Jake Paul. It might seem like a joke at first. However, I wouldn’t want to fight Tyson. I don’t care how old he is. You can see that he still has tremendous power in his punches.
And that’s the thing with the Dow heavyweights. Yes, they’ve been around and so they might not consistently generate big-time returns. Still, they know a thing or two about exceeding expectations. With that in mind, here are the Dow stocks that can go the distance – and generate upside along the way.
Honeywell (HON)
An industrial and applied sciences conglomerate, Honeywell (NASDAQ:HON) engages in multiple industries, particularly aerospace technologies, building automation and energy-related solutions. It’s also a powerhouse in the industrial automation segment. Since the beginning of the year, HON stock fell almost 5%. Its trailing-year performance is okay but not great at nearly 5% up.
Still, one of the key factors that make HON a top-tier idea for Dow stocks is consistency. Last fiscal year, the company beat expectations for earnings per share in all four quarters. The average positive earnings surprise came out to 2.6%. It’s not blisteringly strong yet a lot of companies would be glad to take four out of four.
For the current fiscal year, experts believe Honeywell will post EPS of $9.96 on sales of $38.51 billion. The most optimistic target calls for EPS of $10.1 on revenue of $38.83 billion. Last year, per-share profits reached $9.16 with a top line of $36.66 billion.
Lastly, analysts rate HON a consensus strong buy with a $227.73 average price target. This implies over 14% upside potential.
Amgen (AMGN)
A biotechnology firm, Amgen (NASDAQ:AMGN) discovers, develops, manufactures and delivers human therapeutics worldwide. The company’s principal products include Enbrel to treat plaque psoriasis, rheumatoid arthritis and psoriatic arthritis. It also developed Repatha, which reduces the risks of myocardial infarction, stroke, and coronary revascularization. Despite its relevance, AMGN stock incurred a loss of nearly 9% since the January opener.
Still, this could be one of the Dow stocks offering a temporary discount. For one thing, broader technical momentum is solid, with shares up almost 16% in the past 52 weeks. Second, Amgen produces consistently decent results. For example, the company beat EPS targets for the prior fiscal year. Notably, the average positive earnings surprise landed at nearly 6%.
For the current fiscal year, experts believe that Amgen will post EPS of $19.57 on sales of $33.02 billion. Last year, the company printed EPS of $18.65 on revenue of $28.19 billion. Looking out to fiscal 2025, they believe sales could hit $34.16 billion while per-share profits could land at $21.12.
Analysts peg shares a consensus moderate buy with a $312 price target, implying almost 15% growth potential.
UnitedHealth (UNH)
A diversified healthcare company, UnitedHealth (NYSE:UNH) is a mainstay among Dow stocks. Per its corporate profile, UnitedHealth operates through four segments: UnitedHealthcare, Optum Health, Optum Insight and Optum Rx. Along with health benefit plans and services for national employers, businesses of all sizes and individuals, the company also specialized services including administering Medicaid plans.
To be sure, UNH stock features an enhanced risk profile. Recently, the company discovered a cyberattack related to its information technology (IT) network, leading to certain service disruptions. As a result, shares are down almost 9% since the start of this year. However, it could be an upside opportunity given UNH’s consistent performances.
Last fiscal year, UnitedHealth beat expectations for EPS in all four quarters. The average positive earnings surprise came out to 2.85%. For the current fiscal year, experts predict that EPS will land at $27.77 on sales of $401.02 billion. Last year, the company posted per-share profits of $25.12 on revenue of $371.62 billion.
Finally, analysts rate UNH a consensus strong buy with a $591.29 price target, implying almost 20% upside potential.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
