Despite concerns over the spread of the COVID-19 Delta variant and supply chain issues, the benchmark equity indices have been performing well, driven mainly by healthy corporate earnings. The Dow Jones Industrial Average (DJIA) surged nearly 6% in October, registering its best month since March. The DJIA climbed 140 points on Tuesday, trading above the 36,000 mark for the first time, indicating that the market’s bullish sentiment is far from over. “Earnings are healthy and so are the outlooks. There is strong consumer demand as companies work through supply chain constraints,” said Larry Adam, chief investment officer with Raymond James.
In addition, Democrats expect to finalize a $1.75 trillion human infrastructure spending deal this week. The bill’s passage could potentially boost the overall economy.
Given this backdrop, last month’s best-performing DJIA stocks, Microsoft Corporation (MSFT), UnitedHealth Group Incorporated (UNH), NIKE, Inc. (NKE), and Merck & Co., Inc. (MRK), could be worthy additions to one’s watchlist.
Microsoft Corporation (MSFT)
Redmond, Wash.-based MSFT is a software behemoth that provides software services, solutions, and devices worldwide. The company has a more than $2 trillion market capitalization.
On November 2, a diversified power generation and utility company, The AES Corporation (AES), announced that it had signed a 15-year agreement with MSFT. The company expects to secure renewable energy supply and attain its 100% renewable energy commitment by 2025.
On November 1, MSFT partnered with data-driven commerce platform Bango to enable Telcos, data providers, banks, and retailers to bundle MSFT offerings as a part of their customer offers. The partnership is expected to improve MSFT’s offering by leveraging the Bango platform to offer bundled Microsoft 365 subscriptions.
MSFT’s total revenue increased 22% year-over-year to $45.32 billion in its fiscal first quarter, ended September 30. Its operating income climbed 27.5% from the prior-year quarter to $20.24 billion. Its net income and EPS stood at $20.51 billion and $2.71, respectively, registering 47.6% and 48.9% increases year-over-year.
Analysts expect MSFT’s EPS to improve 14.3% year-over-year to $9.20 in the current year (fiscal 2022), while the Street’s $196.70 billion revenue estimate for the current year indicates a 17% rise from the prior year. In addition, the stock has beaten consensus EPS estimates in each of the trailing four quarters.
MSFT’s stock has gained 64.7% in price over the past year to close yesterday’s trading session at $333.13. It gained 14.7% in October. It is currently trading above its 50-day and 200-day moving averages of $302.13 and $279.73, respectively.
UnitedHealth Group Incorporated (UNH)
UNH in Minnetonka, Minn., is a diversified healthcare company that provides health benefit plans, access to networks of care providers, advisory consulting arrangements, and pharmacy care services for its customers. The company operates through the broad segments of United Healthcare, OptumHealth; OptumInsight; and OptumRX.
On November 2, it was reported that the Minnesota Department of Human Services had chosen UNH to administer the Medicaid program, effective from January 1, 2022. The partnership is expected to enable the company to serve approximately 600,000 eligible adults and children in Minnesota.
On October 27, UNH announced its individual and family healthcare plans for 2022, including several benefits designed to meet customer needs. The plans should increase the company’s customer base to fit a growing number of people that are searching for affordable healthcare.
For its fiscal third quarter, ended September 30, UNH’s total revenue increased 11.1% year-over-year to $72.34 billion. Its earnings from operations improved 22.8% from the prior-year quarter to $5.71 billion. Its adjusted net earnings attributable to UNH common shareholders and adjusted EPS came in at $4.32 billion and $4.52, respectively, up 27.8% and 28.8% from the same period last year.
A $4.31 consensus EPS estimate for the current quarter (ending December 2021) indicates a 71% year-over-year increase. Likewise, the $72.51 billion consensus revenue estimate for the current quarter reflects a 10.8% improvement from the prior-year quarter. Furthermore, UNH has an impressive surprise earnings history; it has topped consensus EPS estimates for each of the trailing four quarters.
The stock has gained 44.8% in price over the past year to close yesterday’s trading session at $452.04. In October, the stock gained 17.3%. It is currently trading above its $50-day moving average of $419.63 and 200-day Moving Average of $412.29.
NIKE, Inc. (NKE)
NKE is a worldwide designer, developer, and seller of athletic footwear, equipment, apparel, and accessories. The company offers its products in the categories of running, NIKE basketball, the Jordan brand, football, training, and sportswear. NIKE is headquartered in Beaverton, Ore.
On November 3, DICK’S Sporting Goods (DKS) and NKE created a partnership to enhance the shopping experience for DICK’S and NIKE customers. The collaboration is expected to enable NKE to reach more customers.
On August 5, the NKE board of directors declared a $0.275 quarterly dividend per share on the company’s outstanding class A and class B common stock, which was to be paid to shareholders on October 1. The declaration reflects the company’s ability to pay back its shareholders.
NKE’s revenues increased 15.6% year-over-year to $12.25 billion in its fiscal first quarter, ended August 31. Its Gross profit rose 20.1% from the same period last year to $5.70 billion. Its net income improved 23.5% from the prior-year quarter to $1.87 billion. And its EPS went up 22.1% year-over-year to $1.16.
The Street’s $4.75 EPS estimate for the next year (fiscal 2023) reflects an improvement of 32.3% from the current year. Likewise, the Street’s $53.77 billion revenue estimate for the coming year indicates a 14.1% year-over-year rise. NKE has beaten consensus EPS estimates in each of the trailing four quarters.
NKE’s stock has gained 37.1% in price over the past year to close yesterday’s trading session at $167.83. It gained 13.8% in October. It is currently trading above its 50-day and 200-day moving averages of $156.13 and $151.53.
Merck & Co., Inc. (MRK)
MRK is a global healthcare company operating through the segments of Pharmaceuticals and Animal Health. Its pharmaceuticals segment markets human health pharmaceuticals and vaccines, while the Animal Health segment offers veterinary pharmaceuticals, vaccines, and monitoring products. MRK is based in Kenilworth, N.J.
On October 22, MRK announced that the European Commission had approved KEYTRUDA, MRK’s breast cancer treatment solution. The approval authorizes marketing the treatment in 27 European Union member states, which is expected to bolster MRK’s sales. On October 13, the company announced that the Food and Drug Administration (FDA) had approved the drug, with chemotherapy, to treat metastatic cervical cancer.
On October 12, MRK commenced its tender offer to acquire Acceleron Pharma Inc. (XLRN) after the companies entered a definitive agreement. After the acquisition, XLRN is expected to operate as a subsidiary of MRK, which should improve MRK’s operational capability.
For its fiscal third quarter of 2021, MRK’s sales were up 20.4% year-over-year to $13.15 billion. Its non-GAAP net income from continuing operations improved 27.3% from the prior-year quarter to $4.44 billion. Its non-GAAP EPS from continuing operations increased 27.7% from the same period last year to $1.75.
Street expects MRK’s EPS to improve 67.3% year-over-year to $1.64 in the current quarter (ending December 2021), while the Street’s $13.61 billion revenue estimate for the current quarter indicates an 8.8% rise from the prior-year quarter.
The stock has gained 21.6% in price over the past year to close yesterday’s trading session at $89.02. It gained 8.2% in October. MRK is currently trading above its 50-day moving average of $78.60 and 200-day moving average of $76.49.
MSFT shares were trading at $334.00 per share on Wednesday afternoon, up $0.87 (+0.26%). Year-to-date, MSFT has gained 51.15%, versus a 25.51% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research. More…