Financial markets across the world are keenly waiting for the outcome of the Fed’s September FOMC meeting to be announced today at 2 PM EST. At present, the CME FedWatch is showing that market participants are almost certain that the central bank will keep the Fed fund rate at the existing range of 5.25-5.5% with an assigned probability of 98%. The CME FedWatch is also showing that there exists just 28% chance that interest rate will be hiked by another 25 basis points in the November FOMC meeting.
Despite these positives, investors remained concerned about the Fed’s future course of actions in the past one and a half months. Volatility returned to Wall Street in early August after an impressive bull run in the first seven months of this year. In this regard, the post-FOMC statement of Fed Chair Jerome Powell will be scrutinized word-by-word to find out the future course of the Fed’s monetary policies.
At this stage, it will be prudent to invest in blue-chip stocks (components of the Dow 30) with a favorable Zacks Rank. These companies have a robust business model, a solid financial position, and globally acclaimed brand value. Moreover, these companies are regular dividend payers, which will act as an income stream during market’s downturn.
Our Top Picks
We have narrowed our search to five blue-chip stocks with strong upside potential for the rest of 2023. These stocks have seen positive earnings estimate revisions in the last 60 days. Each of our stock carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows the price performance of our five picks in the past three months.
Image Source: Zacks Investment Research
Caterpillar Inc. CAT has seen year-over-year revenue and earnings growth for nine straight quarters thanks to its cost-saving actions, strong end-market demand and pricing actions that offset the impact of supply-chain snarls and cost pressures. We expect the company’s adjusted earnings per share for 2023 to grow 19.5% and revenues to rise 7.6%.
Zacks Rank #1 Caterpillar has an expected revenue and earnings growth rate of 11.9% and 43.2%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.2% over the last 30 days. CAT has a current dividend yield of 1.85%.
International Business Machines Corp. IBM is witnessing sales growth in the software segment driven by healthy hybrid cloud adoption and solid demand trends across RedHat, automation, data in AI and security. A strong foundation of research and innovation, a broad portfolio that caters to various industry requirements and a diverse global market presence set IBM apart from its competitors.
IBM is also poised to benefit from the Watsonx platform. The buyout of Apptio will likely bolster IBM’s IT automation capabilities, empowering enterprise leaders to generate incremental value across the technology domain.
Zacks Rank #2 International Business Machines has an expected revenue and earnings growth rate of 1.6% and 3.3%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.2% over the last 30 days. IBM has a current dividend yield of 4.58%.
McDonald's Corp. MCD continues to impress investors with robust comps growth. MCD’s increased focus on menu innovation and loyalty program expansion is commendable. MCD is also making every effort to drive growth in international markets. Robust digitalization is likely to boost McDonald's long-term growth and capture market share. MCD plans to open more than 1,900 restaurants globally in 2023.
Zacks Rank #2 McDonald’s has an expected revenue and earnings growth rate of 9.8% and 14.1%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.3% over the last 30 days. MCD has a current dividend yield of 2.19%.
Walmart Inc. WMT has been benefiting from its robust omnichannel operations due to its efforts to enhance store and online experience. WMT has been particularly gaining from its efforts to boost delivery services. Increased market share in grocery continued to boost U.S. comps in the first quarter of fiscal 2024. Strong comps growth globally, expense leverage and e-commerce growth across all units favored the company. WMT raised its guidance for fiscal 2024.
Zacks Rank #2 Walmart has an expected revenue and earnings growth rate of 9.2% and 2.2%, respectively, for the current year (ending January 2024). The Zacks Consensus Estimate for current-year earnings has improved 0.2% over the last 30 days. WMT has a current dividend yield of 1.40%.
The Procter & Gamble Co. PG has benefitted from robust pricing and a favorable mix, along with strength across segments. PG’s products play a key role in meeting the daily health, hygiene and cleaning needs of consumers around the world. PG has witnessed continued strong momentum as reflected by the underlying strength in brands and appropriate strategies, which aided its organic sales growth.
Procter & Gamble remains focused on productivity and cost-saving plans to boost margins. PG’s continued investment in the business alongside its efforts to offset macro cost headwinds and balance top and bottom-line growth underscores its productivity efforts. PG is witnessing cost savings and efficiency improvements across all facets of the business.
Zacks Rank #2 Procter & Gamble has an expected earnings growth rate of 4.4% and 8.1%, respectively, for the current year (ending June 2024). The Zacks Consensus Estimate for current-year earnings has improved 0.9% over the last 60 days. PG has a current dividend yield of 2.44%.
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