Investing

5 Dow Stocks That Analysts Grossly Overestimated for 2016

Jon C. Ogg

Published: October 18, 2016 1:10 pm

Last Updated: January 13, 2020 2:14 am

It is very rare for a year to go exactly as analysts and investors might expect. After all, predicting a move a day or a week out is hard enough — and this is also an election year when the Federal Reserve wants to raise interest rates.

It turns out that many of the so-called consensus expectations have really missed the mark so far in 2016. Just keep in mind that there are still almost three months before 2016 formally ends, so anything can happen.

In less than a month we should know who will be the next president and which party will control the House and Senate. We will also know whether the Fed will be aggressive or just maintain its hike-threat pose we have endured literally the entire year.

When 2016 was off to its start, our methodology, using each of the 30 Dow Jones Industrial Average stock consensus analyst price targets, implied that the Dow could rise as much as 13.2% – but so far the Dow’s high is about 1,000 points shy. Then the bull market was interrupted by a global slowdown and major sell-off at the start of the year — only to recover handily. Then came the post-Brexit scare, followed by a sell-off — only to recover handily.

Can the Dow make another massive recovery and make all those analysts right? We are currently awaiting the presidential election to finally come to an end, and half of the country (or more) is going to be very unhappy by either outcome. And we are waiting to see whether the Fed can deliver its mere second rate hike in a decade. Before writing any company off forever, or betting good times will never end, remember this: for every saint there is a past, and for every sinner there is a future.

24/7 Wall St. has identified five of the 30 Dow Stocks that analysts really got wrong in 2016. Again, this can change as earnings season is hardly underway. We have also included fresh outlooks ahead to show investors what might be ahead that can derail or confirm the current underperformance of these Dow stocks. The total returns are calculated using the dividends and share price gains combined, and the year-to-date returns represented here do include the dividends. We have also included four more Dow stocks which may be up for the year or have fresh news but which are lagging earlier expectations.

American Express

American Express Co. (NYSE: AXP) was expected to see an 18.00% total return in 2016. A lot of things went wrong inside and outside of the company this year. Amex shares have been the third worst Dow stock of 2016 and were last seen trading down by 12.2% this year. Its trends may not look bad, but loss of larger deals and more and more payment options for consumers are all adding up to a serious problem.

Shares of American Express were last seen at $60.33, with a consensus analyst price target of $67.18 and a 52-week trading range of $50.27 to $77.61. The company has a total market cap of $55.7 billion. One fresh issue worth considering for American Express ahead could be why one analyst predicts another leg down for AmEx shares.

Apple

Though Apple Inc. (NASDAQ: AAPL) may have come back in favor of late, analysts, at least so far, were way too ambitious at the start of 2016. They were calling for an average 42.60% total return in 2016. The company is still up 13.6% so far in 2016, so it’s hard to beat up on Apple too much. Still, analysts were much too positive at the start of 2016. The question to ask is whether all those fresh target hikes and estimate hikes from analysts is a fortune or an omen.

Shares of Apple were recently trading at $118.17. The consensus price target is $127.90, and the 52-week range is $89.47 to $123.82. The company has a total market cap of $636.8 billion. Some fresh Apple issues to consider:

• Will Apple sell 70 million iPhones this holiday season?
• Apple analysts have started hiking target prices and estimates again.
• Does Apple have trouble selling Macs now?
• Apple remains the world’s most valuable brand.

Boeing

Boeing Co. (NYSE: BA) was expected to have clear skies for a 15.8% expected total return in 2016, but its shares were down 4.9% so far this year. Boeing had enjoyed major success for its 787, but the global growth slowdown is keeping a serious lid on Boeing’s upside to orders. It still has many defense and space opportunities, and we have seen the cycles swing wildly for Boeing in the past.

Boeing shares were trading at $135.30, within a 52-week range of $102.10 to $150.59. The consensus price target is $148.71, and the market cap is $84.4 billion. Fresh Boeing issues to consider:

• Will spacecraft delays keep hurting?
• Boeing lands $19 billion in orders from Qatar.
• Does an Airbus restructuring pressure Boeing to do the same?
• How Boeing saved its jet fighter business.
• Credit Suisse remains cautious on Boeing.

Nike

Nike Inc. (NYSE: NKE) has run into its share of disappointing future sales trends in 2016. At the end of 2015, it gave news of a dividend hike, buyback and split that sounded perfect. Well, that was then. Nike shares were expected to generate 18.15% total return in 2016, yet the stock is currently the biggest disappointment of them all and the worst Dow stock so far in 2016. Nike has generated a negative return of 17.7% so far this year, and that’s even including what should be a positive from its dividend.

Shares of Nike recently traded at $51.34. The total market cap is $86 billion. The stock has a consensus price target of $63.71 and a 52-week range of $50.96 to $68.19.

Disney

At the start of this year, Walt Disney Co. (NYSE: DIS) was expected to generate a total return of 13.87% for 2016. Well, Disney shares now have a negative return of 12.9%, including the dividend. At the end of 2015, the Mouse House was flying high on the Millennium Falcon from the Star Wars hype, and now that baseline has been seen. Bob Iger’s replacement sure-bet has also now become an unknown, and valuations have played a part here in this disappointment. Before throwing in the towel, note that Disney is still one of 10 stocks to own for the decade even if it is suffering from cord-cutter trends.

Disney was last trading at $91.63, with a consensus price target of $107.14 and a 52-week range of $86.25 to $120.65. The market cap is $147.3 billion.

These five stocks were far from the only disappointments seen so far in 2016. Some were just way off the mark, and some are performing quite poorly in general, whether the market looks stable or not. Here are some of the other disappointing Dow stocks compared to estimates:

• General Electric Co. (NYSE: GE) was looking for a 4.95% expected total return, but its shares were last seen at −5.2% this year.
• Goldman Sachs Group Inc. (NYSE: GS) was expected to post a 17.36% total return. Its shares were down 5% year to date on last look.
• Home Depot Inc. (NYSE: HD) was expected to have a 8.40% total return in 2016, but even with a dividend and buyback effort, its shares are down almost 4% year to date.
• Pfizer Inc. (NYSE: PFE) has greatly lagged peer Merck in 2016. It was projected to have a 29.00% expected total return this year and was up only 3.5% on last look.

Again, saints can have pasts and sinners can have futures.