Investing

DJIA Bull-Bear Case of 19,142 in 2015: GE, Boeing, Verizon, Caterpillar and More

Jon C. Ogg
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Now that 2015 is underway, 24/7 Wall St. wanted to see what the strategists and analysts expect for the stock market in 2015. We have derived our own estimate for the Dow Jones Industrial Average (DJIA) again in 2015, rising from the close of 17,823 for 2014 by roughly 7.4% to 19,142. Be advised that almost 2.7% of that expected 2015 return is from the average dividend yield of the DJIA stocks as of the end of 2014.

After the DJIA gained 7.5% to 17,823.07 at the end of 2014 and the S&P 500 was up 11.4% in 2014 total return, 24/7 Wall St. wants to know what lies ahead for the DJIA in 2015. Our methodology, and track record for prior years, for the 7.4% expected gain is listed on page 2 of this article.

First and foremost, the bull market is now nearly six years old, and the gains have now been exponential since that panic selling bottom in March of 2009. Outside of dividends, the 2013 gains were 26.5% in the DJIA and 29.6% for the S&P 500 Index.

So, where does that leave us for 2015? It turns out that the gains in late 2014 may have eaten into the potential gains of 2015. The same thing occurred in late 2013, with gains eating into the growth in 2014. Another issue is that there truly has not been a 10% firm market correction to speak of for too long. The September and October pullback in 2014 was so close to 10% that most strategists considered it a rounding error when looking for the formal 10% correction.

ALSO READ: The Bullish and Bearish Case for Cisco in 2015

After creating a bullish and bearish case for all 30 DJIA stocks in 2015, we wanted to highlight the expected winners for 2015. We also then have included links to our reviews of each DJIA stock, and some of the key S&P 500 stocks.

Caterpillar Inc. (NYSE: CAT) is actually expected to be the top gainer for the DJIA in 2015, according to analysts. The consensus analyst price target would imply a gain of 19.3%, if you include that 3.2% dividend yield in the mix. With this still being battered and considered a value stock, many of Caterpillar’s growth markets remain more than just challenging at the start of 2015.

Boeing Co. (NYSE: BA) is expected to be the second best gainer of 2015, according to the analysts’ consensus price target, with an expected rise of 17.7%. Roughly 2.9% of that gain is Boeing’s dividend yield. Boeing was expected to be the top gainer in 2014 as well, but that did not occur. Boeing shares were up a sharp 84% in 2013 as the best DJIA stock of that year, but the return was down by 2.6% in 2014. Boeing has to see its deliveries live up to par in 2015.

General Electric Co. (NYSE: GE) is expected to be the third best-performing DJIA stock in 2015, according to analysts. GE is expected to gain 17.5% in 2015, if the analysts end up being correct. Just keep in mind that nearly 3.8% of that gain is the dividend yield. Also keep in mind that GE is in the largest state of change we have seen in a generation or more, and the performance for 2014 was a loss of 6.6%, versus an early 2014 view that GE would rise almost 3%.

Verizon Communications Inc. (NYSE: VZ) is expected to be the fourth best gainer of 2015, if the average of the analysts is correct, with an expected gain of 17.0%. It seems hard to imagine that a telecom and wireless carrier would be one of the top DJIA stocks in the midst of a price war, but the reality is that Verizon trades at a big discount to the market and to utility stocks. Verizon’s 4.7% dividend yield is the second highest on the DJIA.

READ ALSO: The Bullish and Bearish Case for GE in 2015

For 2015, analysts expect that only four of the 30 DJIA stocks will lose money, when you take the dividend into consideration. Another two DJIA stocks are expected to have gains of less than 1%. Still, eight of the 30 DJIA stocks have expected returns from analysts above 10%, if you include the dividends.

Now that we have outlined what is nearly a full DJIA bull and bear case for 2015, here are links to each and every DJIA stock’s bullish and bearish outlook for the year:

ALSO READ: The Bullish and Bearish Case for Pfizer in 2015
As for the methodology, 24/7 Wall St. calculated the perceived upside including dividends for each DJIA component based on the consensus analyst price target from Thomson Reuters at the end of 2014. We then dropped the price-weighting of the DJIA and assign an equal-weighting on all components, after we averaged the upside and downside of all DJIA stocks. Despite the DJIA being price-weighted rather than cap-weighted like most other indexes, our view is that analysts have tended to get the broad direction right when you tally up all 30 DJIA stocks. Unfortunately, their analysis and expectations are often very off when it comes to each individual DJIA stock and its outlook for a year ahead.

So the average expected gain of about 7.4% in 2015 would imply that the DJIA could rise to roughly 19,142.

We also have included what the average gain in the S&P 500 Index is expected to be, according to Wall Street strategists. The average of the 13 targets below came to 2,216, which would imply a gain of 7.6% from the 2,058.90 closing price for the index at the end of 2014. Those estimates from each firm are as follows:

  • Barclays, 2,100
  • BMO Capital Markets, 2,250
  • Citigroup, 2,200
  • Credit Suisse, 2,200
  • Deutsche Bank, 2,150
  • Goldman Sachs, 2,100
  • J.P. Morgan, 2,250
  • Merrill Lynch, 2,200
  • Morgan Stanley, 2,275
  • Oppenheimer, 2,311
  • RBC, 2,325
  • UBS, 2,225
  • Wells Fargo, 2,222

ALSO READ: 2015 Bullish and Bearish Case of Exxon Mobil vs. Chevron

It seems a bit odd that the S&P 500 targets would imply a gain of 7.6% at a time when the methodology we use for evaluating the DJIA implied called for a gain of 7.4%. So, how has this effort compared to actual market returns in the past years? We have a montage here:

  • In 2014, the methodology indicated DJIA gains of 3.2%, prior to dividends, or just under 6% with the dividends. The DJIA gained 7.5%.
  • In 2013, the DJIA massively outperformed expectations, finishing the year much higher than the estimate of 14,590. This was the year that this methodology called for 11.34% gains, but the DJIA gain was 26.5% before dividends (and 29.6% for the S&P 500 Index, before dividends).
  • In 2012, the peak of 13,661.87 in the DJIA, compared to our projection of 13,678.
  • In 2011, the methodology called for a blended peak consensus of 13,042.06. While the DJIA closed 2011 up 5.5% at 12,217.56 for the year, the index’s peak that year was 12,928.50.
  • In 2010, the methodology called for a target of 11,455, and the DJIA closed out the year at 11,577.51.

ALSO READ: The Bullish and Bearish Case for IBM in 2015

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