2 Best Buys on the Dow Right Now Bullish market sentiment drove the widely watched benchmark index, Dow Jones Industrial Average (DJIA), to a record high last month. And given the fav...
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Bullish market sentiment drove the widely watched benchmark index, Dow Jones Industrial Average (DJIA), to a record high last month. And given the favorable macroeconomic backdrop, the DJIA is expected to remain near its record high in the coming months. So, we think DJIA constituents Walmart (WMT) and McDonald's (MCD) are attractive bets now. Let's discuss.
Equity indices are currently hovering near their all-time highs owing to the U.S.' robust vaccination drive and fast-paced macroeconomic recovery. The second oldest U.S. benchmark index, the Dow Jones industrial Average (DJIA), hit its 35,091.56 all-time high on May 10, 2021. DJIA has gained 33.9% over the past year and 12% year-to-date. And given the current economic recovery, the widely watched benchmark index is expected to remain near its record high in the near term.
The benchmark indexes' latest surge can be attributed primarily to President Biden's declaration of the infrastructure deal with a bipartisan group of senators on June 24. Also, the Fed's ultra-loose monetary policy should continue to buoy stock markets in the near term.
Given this backdrop, we think two popular Dow Jones stocks, Walmart Inc. (WMT) and McDonald's Corporation (MCD) should be value additions to one's portfolio.
Walmart Inc. (WMT)
WMT is the largest retailer in the world, operating in 24 countries and e-commerce websites, offering a wide range of daily needs items. The company operates through three segments: Walmart U.S., Walmart International, and Sam's Club.
On June 24, WMT announced that the Walmart MoneyCard issued by Green Dot (GDOT) will now be offered as a demand deposit account to enhance customer convenience and offer exclusive cash back services.
On June 17, WMT's CEO unveiled its partnership with DroneUp to create a delivery network operated by drones. This should allow WMT to strengthen its e-commerce business and expand its market reach, while reducing its operating costs.
On May 27, WMT and Gap Inc. (GPS) announced a strategic partnership to launch Gap's new home collection exclusively on Walmart's retail platform, which was expected to be available from June 24. This partnership should enable WMT to attract more customers in the WMT zone with the addition of GAP's signature collection.
WMT's net sales increased 2.6% year-over-year to $137.16 billion in its fiscal first quarter, ended April 30. Its operating income grew 32.3% from its year-ago value to $6.91 billion. WMT's revenues came in at $138.31 billion, representing a 2.7% rise year-over-year. Its cash and cash equivalents balance rose 52.8% from the prior year quarter to $22.89 billion over this period.
A $567.47 billion consensus revenue estimate for the next year indicates a 2.5% increase year-over-year. The Street expects the company's EPS to rise 4.7% to $6.25 next year. WMT has an impressive earnings surprise history also; it beat the consensus EPS estimates in three of the trailing four quarters. Shares of WMT have gained 16.7% over the past year to close yesterday's trading session at $138.10.
It is no surprise that WMT has an overall A rating, which equates to Strong Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
The stock also has an A grade for Stability and Sentiment, and a B grade for Value and Quality. Among the 39 stocks in the A-rated Grocery/Big Box Retailers industry, WMT is ranked #2.
Beyond what we've stated above, we have also rated WMT for Momentum and Growth. Click here to view all WMT Ratings.
McDonald's Corporation (MCD)
MCD is one of the most popular food joints operating around the globe. The company's segments include U.S., International Lead Markets, High Growth Markets, and Foundational Markets and Corporate. MCD offers various food products and beverages, as well as a breakfast menu in more than 100 countries.
On May 20, MCD announced its new investment plans to accelerate the allocation of advertising dollars to diverse-owned media companies, production houses and content creators, which should contribute significantly to the company's overall marketing strategy and goals.
MCD's revenues increased 9% year-over-year to $5.12 billion in its fiscal first quarter, ended March 31. Its operating income grew 35% from its year-ago value to $2.28 billion, while its net income improved 39% year-over-year to $1.54 billion. The company's EPS increased 39% year-over-year to $2.05.
Analysts expect MCD's revenues to increase 47.9% year-over-year to $5.56 billion in its fiscal second quarter, ending June 2021. A $2.09 consensus EPS for the current quarter indicates a 216.8% rise from the same period last year. Shares of MCD have gained 28.6% over the past year, and 7.7% year-to-date.
MCD has an overall A rating, which equates to Strong Buy in our proprietary POWR Ratings system. The stock also has an A grade for Quality, and a B grade for Growth, Stability, Sentiment, and Momentum. Among the 45 stocks in the A-rated Restaurants industry, MCD is ranked #5.
To see more of MCD's component grades, click here.
WMT shares were trading at $137.62 per share on Tuesday afternoon, down $0.48 (-0.35%). Year-to-date, WMT has declined -3.75%, versus a 15.05% rise in the benchmark S&P 500 index during the same period.
About the Author: Subhasree Kar
Subhasree's keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master's degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics.
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