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The U.S. market has had a disappointing decade, but investors shouldn't give up on international diversification (STAN HONDA/Stan Honda/AFP/Getty Images)
The U.S. market has had a disappointing decade, but investors shouldn't give up on international diversification (STAN HONDA/Stan Honda/AFP/Getty Images)

TheStreet.com

Five Dow stocks likely to rise after earnings Add to ...

Some Dow stocks, such as Home Depot and Boeing, tend to perform better than others after reporting fourth-quarter earnings results.

The following five Dow stocks have notched, on average, the biggest gains in the trading day immediately after posting quarterly numbers in January and February over the past five years. Nothing is a sure bet, but history can be a guide.

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Earnings season can involve risks because of additional volatility. For instance, shares of Kraft Foods , DuPont , Chevron and Johnson & Johnson have declined after posting fourth-quarter financial results since 2005.

The so-called "Mutts of the Dow," namely Pfizer , Merck and Johnson & Johnson , have seen tepid results, at best.

Alcoa is another Dow member that has fallen on fourth-quarter results by an average of 2.5 per cent over the past five years. The aluminum company yesterday beat profit expectations for the fourth quarter, although Alcoa's revenue was lighter than analysts had expected.

Other Dow components, though, have a higher average advance on fourth-quarter results. TheStreet has ranked the top five winners based on that percentage rise.

5. Travelers Cos.

Company Profile: Travelers provides commercial and personal property and casualty insurance products and services to businesses, government units, associations and individuals.

Reporting Date: Jan. 25 (before market opens)

Historical Price Performance: Travelers shares have climbed an average of 1.9 per cent in the trading session immediately after the company posts fourth-quarter results, as the chart below shows. Travelers shares rose 6.2 per cent on Jan. 27, 2009, after the company reported fourth-quarter 2008 operating income of $939 million, or $1.58 a share.

Analyst Consensus: Travelers should report a fourth-quarter profit of $1.70 a share, based on a Thomson Reuters poll of 20 analysts. Revenue should come in at $5.3 billion, an increase of nearly 2 per cent from the year-earlier quarter. In the fourth quarter of 2009, Travelers had a profit of $2.12 a share on revenue of $5.2 billion

4. United Technologies

Company Profile: United Technologies provides high-technology products and services to the building systems and aerospace industries. Products include elevators, HVAC and refrigeration equipment and electronic security systems. The company's six segments include Otis, Carrier, UTC Fire & Security, Pratt & Whitney, Hamilton Sundstrand, and Sikorsky.

Reporting Date: Jan. 26 (before market opens)

Historical Price Performance: As the graphic above illustrates, United Technologies shares rose after reporting fourth-quarter results in 2006, 2007 and 2008. Following the financial crisis, share returns in 2009 and 2010 suffered. United Technologies has been tempering expectations already. In December, the company disappointed with its profit outlook for 2011, as the forecast for earnings of $5.05 to $5.30 a share on projected revenue between $56 billion and $57 billion was below the Thomson Reuters average estimate.

Analyst Consensus: Based on a poll of 19 analysts conducted by Thomson Reuters, United Technologies is expected to report a fourth-quarter profit of $1.29 a share on revenue of $14.7 billion. That compares to year-earlier earnings of $1.15 a share and revenue of $14.1 billion.

3. Home Depot

Company Profile: Home Depot is the well-known home-improvement retailer, selling an assortment of building materials, home improvement, and lawn and garden products.

Reporting Date: Feb. 22 (before market opens)

Historical Price Performance: Over the past five years after reporting fourth-quarter results, Home Depot shares have averaged a return of 2.3 per cent. That number may be misleading, though, due to a 10.5 per cent jump in the stock on Feb. 24, 2009. On that day, Home Depot reported a fiscal fourth-quarter loss of $54 million, although adjusted results, which stripped out the effects of shuttering four smaller home-improvement brands like YardBIRDS and HD Bath, topped analysts' expectations.

Analyst Consensus: Home Depot should report earnings of 30 cents a share, based on a poll of 25 analysts conducted by Thomson Reuters. That figure has climbed over the past month after several analysts increased their profit targets. Revenue should inch up to $14.7 billion, according to the poll of analysts. In the year-earlier quarter, Home Depot reported revenue of $14.5 billion and earnings of 24 cents a share.

2. Cisco Systems

Company Profile: Cisco makes Internet protocol-based networking and other products related to the communications and information technology industry. Cisco's most notable products include Internet routers, datacenter products like the Nexus 7000, the Flip pocket video recorder, and the TelePresence conference room link.

Reporting Date: Feb. 9 (after market closes)

Historical Price Performance: Over the past five years, Cisco has seen its stock price climb an average of 3% in the trading session after the company reports fiscal second-quarter results. A 7.2 per cent jump in 2006 skews the number higher, as the chart above shows, although Cisco shares have managed a gain in each of the past five years following quarterly numbers in February.

Analyst Consensus: A poll of 38 analysts by Thomson Reuters shows that Cisco is expected to report a fiscal second-quarter profit of 35 cents a share. Revenue should climb to $10.2 billion, according to the poll. That compares to year-earlier earnings of 40 cents a share and revenue of $9.8 billion.

1. Boeing

Company Profile: Boeing sells commercial jetliners, military aircraft, satellites and missile defense. Boeing is expected to commence delivery of the new 787 Dreamliner in the first quarter of 2011, after more than three years of delays.

Reporting Date: Jan. 24 (before market opens)

Historical Price Performance: As the chart above shows, Boeing shares typically shine after the company posts fourth-quarter results, as the stock has risen in each of the past five years for an average of 3.7 per cent. The biggest advance, totaling 7.3 per cent, came on Jan. 27, 2010, after the aircraft maker blew by fourth-quarter estimates and reported a 42 per cent boost in revenue.

Analyst Consensus: Boeing should report a fourth-quarter profit of $1.10 a share, according to a poll of 24 analysts by Thomson Reuters. That figure has moved up slightly over the past month after several analysts boosted their profit targets. A survey of 19 analysts by Thomson Reuters shows that, on average, they expect Boeing to post fourth-quarter revenue of $16.9 billion. A year ago, Boeing reported revenue of $17.9 billion and earnings of $1.75 a share.

 
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