Investing

5 Dow Stocks Getting Slammed in 2016 Have Not Even Reported Earnings Yet

Jon C. Ogg

Published: January 30, 2016 10:50 am

Last Updated: January 13, 2020 1:52 pm

2016 has not seen a good start to the year for investors. There are many positives, but the negatives are still winning and caution is in the air. Only six of the 30 Dow Jones Industrial Average stocks are actually up so far this year. That doesn’t sound good, nor does it sound good that five Dow stocks are down 10% to 22%, nor that 10 Dow stocks (including the double-digit drops) are down more than 8%.

The Dow itself is down a sharp 5.5% so far in 2016, after closing out 2015 at 17,425.03. The only good news is that the 2.5% gain on Friday to 16,466.30 is actually 1,000 above the Dow’s low in January of 15,450.56.

Some of the Dow stocks that are down in 2016 haven’t even reported earnings. This is the market bracing for bad news, but one cannot wonder if that means that the earnings bar is being lowered handily. If earnings are not atrocious, perhaps these five Dow stocks could enjoy significant recoveries.

Unfortunately, there are other hurdles to consider here. That pesky strong dollar is hurting exports, and Japan and Europe are now both at negative interest rates. Growth markets like Brazil, Russia, China, India and so on are not living up to their potential. The oil market is weighing heavily on almost everyone now, and the four top presidential candidates all have policies which either are up front or could easily be bad for many big companies and investors. The threats of deflation and capital spending woes have to be considered. Again, a lot of hurdles exist for companies and the economy in 2016.

24/7 Wall St. has identified the year-to-date performance of the five Dow stocks that are down handily so far in 2016 but have yet to enter the earnings confessional. We included past performance, dividend information and what analysts think, as well as gave a reference to these for what was expected at the start of 2016 in the Dow’s bullish and bearish case.

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Probably none too happy about 2016 so far, Cisco Systems Inc. (NASDAQ: CSCO) is the worst performing Dow technology stock, with a drop of 11.7% year to date. It has not reported earnings but is slated to do so on February 10 after the market closes. Whatever happens here, it’s now Chuck Robbins in charge rather than John Chambers, and the market may still be trying to figure out how to accept new management and a new structure. In November, Robbins said he feels good about how Cisco is positioned for the second half of the year.

China’s major slowdown is of course a huge worry here for Cisco, as are other growth markets. It still seems odd that Cisco is down more than IBM, Intel and Apple without even having reported earnings.

Trading at $23.79, Cisco has a consensus analyst price target of $30.55. As a reminder, Cisco’s last cash balance was $59.1 billion and it had $15.2 billion in deferred revenue. Most importantly, Cisco’s lifetime share buybacks total 4.5 billion, averaging $20.92 per share, for a grand total of $93.9 billion spent. Cisco’s dividend yield is even over 3.5% now. Cisco’s bullish and bearish outlook at the start of 2016 called for a gain of almost 16%.
Walt Disney

An incredible performer ahead of Star Wars, Walt Disney Co. (NYSE: DIS) has seen a definite “sell the news” reaction, even if it is buying back its own stock. In fact, Disney shares are down 8.8% so far in 2016. That might not feel right, and blaming Star Wars is just because the stock rose so much ahead of the movie. Keep in mind that Star Wars will lead to billions of dollars for Disney for years and years — the company can make these endlessly, and the only franchise risk might be if actual aliens land on earth and science fiction becomes reality TV.

Frozen, Marvel, theme parks and merchandise all are ongoing winners; the real drag is that the cord-cutters aren’t going to be taking enough ESPN content.

At $95.82, Disney is now down 21.5% from its 52-week high of $122.08. Its consensus price target is $112.38. Disney’s bullish and bearish case at the start of 2016 saw a gain of almost 14% this year.

Pfizer

Look for Pfizer Inc. (NYSE: PFE) to report earnings on Tuesday, February 2, 2016. Unfortunately, the Big Pharma giants are still marred by patent cliffs, and Pfizer is involved in a tax inversion merger. That being said, its shares are down 5.55% so far in 2016.

Unfortunately for Pfizer and defensive stock investors, it is an election year and the next phase of government health care domination is pointed toward the drug companies over their pricing power. Pfizer shares are also down about 13.3% from this time a year ago.

Pfizer closed out January at $30.49, and it has a consensus analyst target of $40.19. It also has a 3.9% yield. Pfizer’s 2016 bullish and bearish outlook somehow called for a 29% total return this year.

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“Why us?” is probably what Home Depot Inc. (NYSE: HD) is wondering in 2016. People are still spending on homes and there is a vast housing supply shortage for buyers, so any improvements should go far. We don’t even show Home Depot earnings until February 23. And isn’t Home Depot supposed to be one of the winners from all the gas savings?

Its drop so far in 2016 has been 4.9%. Before investors get too upset here, they might want to consider that Home Depot is still up a sharp 19.2% from this time a year ago.

Closing out January at $125.76, Home Depot has a consensus price target of $141.57 and a 52-week range of $135.47. Maybe the market doesn’t like Home Depot being valued at just over 20 times next year’s earnings estimate. Home Depot’s bullish and bearish case at the start of the year called for an 8.4% total return in 2016.

Merck

With a political climate against drug company pricing power and the ongoing patent cliff, Merck & Co. Inc. (NYSE: MRK) suffers some of the same woes of Pfizer. Still, its shares were down 4.1% so far in 2016, and it would have been even worse had it not been for a 3% rally on Friday after positive news of FDA approval for its hepatitis C treatment Zepatier.

Merck shares are also down almost 16% from this time a year ago, even considering its 3.6% dividend yield.

At $50.67 at the end of January, Merck has a consensus price target of $60.53. Its earnings date is coming very soon, February 3. Merck’s 2016 bullish and bearish outlook saw a total return north of 21% this year.