5 Dow Stocks Outperforming Analyst Expectations for 2016

October 19, 2016 by Jon C. Ogg

The stock market has enjoyed a wild ride in 2016. The drop at the start of the year and the post-Brexit panic were swept to the side, and investors just keep ignoring high stock market valuations and forgetting that the bull market is now seven and a half years old. The long and short of the matter is this year has thrown a strong curve ball to analysts, investors and economists.

It would be very rare for analysts and investors to accurately predict a return for a year out. After all, picking a day or a single earnings event is hard enough. This is also an election year when the Federal Reserve wants to raise interest rates.

24/7 Wall St. pointed out at the start of 2016 that the bullish case was for the Dow to rise about 13% to as high as 19,700 by year-end. We have only gotten within about 1,000 points of that so far in 2016, and a modified upside after the drop at the start of this year might make the Dow’s performance more likely.

Of the 30 Dow Jones Industrial Average stocks, nine have grossly disappointed against analyst expectations. It also turns out that five of them have outperformed analyst expectations — and some have outperformed analyst expectations handily.

Don’t forget that there are almost three months before 2016 formally ends, so things can still change. In less than a month we should know who will be the next president and which party will control the House and Senate. Half of the country (or more) will be very unhappy with either outcome. We will also know whether the Fed’s desire to hike interest rates comes to pass or whether all the recent jawboning we endured was just words.

24/7 Wall St. has identified five of the 30 Dow Stocks that have outperformed analyst expectations so far in 2016. We have used estimates and target data from Thomson Reuters, and the total returns seen and expected are a culmination of price appreciation and dividends paid out. Some of these gains can of course change handily, and some may have already changed, as stocks react to an earnings season that is barely underway.

Before writing any company off forever, or betting good times will never end, it is important to remember an adage here: for every saint there is a past, and for every sinner there is a future.

A Giant Machinery Surprise

Caterpillar Inc. (NYSE: CAT) has been a mega-upside surprise. Its core business numbers still look soft, but the long-awaited turnaround hopes have driven shares much higher. Caterpillar was expected to generate a total return of just 4.87% in 2016 — yet its shares on last look were up over 28%.

Shares of Caterpillar were trading at $87.22, with a consensus analyst price target of $78 and a 52-week trading range of $56.36 to $89.87. The company has a total market cap of $51 billion. Other issues to consider for Caterpillar:

The J&J Surprise

At the start of 2016, Johnson & Johnson (NYSE: JNJ) was expected to post an 8.06% total return for the year, but its stock was at a total return of 14.7% year to date ahead of earnings, and it was up 12.3% after considering earnings. What’s more, after the adjusted closing price of $102.72 on December 31, 2015, shares dipped under $97 in January.

Shares of Johnson & Johnson were last seen at $115.41. The total market cap is $316 billion. The stock has a consensus price target of $124.25 and a 52-week range of $94.28 to $126.07.

Mmm Mmm Good!

3M Co. (NYSE: MMM) investors were expecting to get a 8.51% total return in 2016, but its shares were up about 15% earlier and were last seen up over 12% so far in 2016. The stock is also up about 17% over a year ago.

Shares of 3M were trading at $169.95, with a consensus price target of $180.87 and a 52-week range of $134.64 to $182.27. The market cap is $103 billion. Other issues to consider on 3M are as follows:

A Shocker on Big Oil

Exxon Mobil Corp. (NYSE: XOM) and Chevron Corp. (NYSE: CVX) are included here for a special mention. Their performance has managed to outperform expectations when you consider expected dividends. If you consider how poor the oil patch was at the start of 2016 and into February (when oil challenged $30 per barrel), this almost seems amazing and too good to be true.

Analysts were calling for a 10.90% expected total return for Exxon in 2016 and a 15.40% total return for Chevron. Now Exxon is up 14% and Chevron up 16%. These may not seem like massive outperformers, but they have to be kept in mind on a relative basis.

Shares of Exxon were at $86.77. The consensus price target is $71.55, and the 52-week range is $71.55 to $95.55. The company has a total market cap of $360 billion. Chevron shares were at $102.70, in a 52-week range of $75.33 to $107.58. The consensus price target is $111.87. The market cap is$192 billion.

Other key calls and articles for Exxon and Chevron were seen as follows:

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As of Tuesday’s closing bell, the Dow was trading at 18,161.94. That is still down 3% from the 52-week high of 18,722.61, but it is also up 4.2% from the December 31, 2015, closing price of 17,425.03. Stay tuned.