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While Wall Street is scaling multiple highs on Trump’s pro-growth reforms, the Dow Jones Industrial Average has been an outperformer since election last year. This is because a strong rotation in leadership in the large-cap domestic space has benefited Dow Jones more than its other large-cap counterparts like the S&P 500 (read: High Beta ETFs & Stocks for Market-Beating Returns).

Notably, the Dow Jones has returned 24.2% since the Election Day compared to a gain of 18.9% for the S&P 500. With this, the Trump rally is now closer to become the greatest in 85 years. As investors are gearing up for the Q3 earnings season, its proxy version, SPDR Dow Jones Industrial Average ETF (DIA - Free Report) , is in the spotlight.

DIA in Focus

This is one of the largest and most popular ETFs in the large cap space with AUM of over $18.7 billion and average daily volume of 2.5 million shares. Holding 30 blue chip stocks, the fund is widely spread across components with none holding more than 7.8% share. Industrials (22.5%), financials (16.9%), information technology (16.9%), consumer discretionary (14.4%) and healthcare (13.1%) are the top five sectors. DIA charges 17 bps in annual fees and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.   

Let’s delve into the Q3 earnings picture that will likely set up the movement of the fund in the coming days.

Q3 Earnings Trends

Total Q3 earnings are expected to be up 2.3% from the same period last year on 5% higher revenues. With double-digit growth in each of the first two quarters of the year and earnings growth last quarter of the year currently expected to be in high single digits, Q3 growth is on track to be the lowest this year.

The earnings season has gotten underway with nearly one-fourth of the blue chip firms expected to announce their results this week and in the next. JPMorgan Chase (JPM - Free Report) is expected to release its results on Oct 12 (read: Buy These ETFs & Stocks as Q3 Earnings Unfold).

International Business Machines (IBM - Free Report) is scheduled to report on Oct 16 while Goldman (GS - Free Report) , UnitedHealth Group (UNH - Free Report) , and Johnson & Johnson (JNJ - Free Report) will report on Oct 17. Other companies like American Express (AXP - Free Report) will come up with their earnings report on Oct 18 while General Electric (GE - Free Report) and Procter & Gamble Company (PG - Free Report) have their earnings release slated for Oct 20.

Earnings Whisper

According to the our methodology, a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) when combined with a positive Earnings ESP increases our chances of predicting an earnings beat, while a Zacks Rank #4 or 5 (Sell rated) are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

JPMorgan has a Zacks Rank #3 and an Earnings ESP of -0.53%, indicating less chances of beating estimates this quarter. The company delivered positive earnings surprises in the last four quarters, with an average beat of 14.62% and saw no earnings estimate revision over the past 90 days for the to-be-reported quarter. However, the stock has a VGM Style Score of D.

International Business Machines has a Zacks Rank #3 and an Earnings ESP of +0.92%, indicating a reasonable chance of beating estimates this quarter. The stock delivered positive earnings surprises in the last four quarters, with an average beat of 3.86%. However, it saw negative earnings estimate revision of nine cents in the past 90 days for the to-be-reported quarter. The stock has a VGM Score of C.

Goldman has a Zacks Rank #3 and an Earnings ESP of 0.00%, which makes surprise prediction difficult. Though the earnings surprise track over the past four quarters is robust with an average positive surprise of 11.61%, the company witnessed negative earnings estimate revision of a couple of cents over the past 90 days for the yet-to-be-reported quarter. It has a miserable VGM Style Score of F (read: Fed Reverses QE: Financial ETFs & Stocks to Buy).

UnitedHealth has a Zacks Rank #3 and an Earnings ESP of -0.18%, indicating less chances of beating estimates this quarter. The stock has seen downward earnings estimate revision of a penny for the yet-to-be-reported quarter but delivered a positive earnings surprise of 4.59% in the last four quarters. The stock has a good VGM Style Score of B.

Johnson & Johnson also has less chances of beating estimates this quarter with a Zacks Rank #3 with an Earnings ESP of -0.29%. It witnessed positive earnings estimate revision of three cents in the past three months for the to-be-reported quarter but delivered a negative earnings surprise of 0.32% in the last four quarters. The stock has a solid VGM Style Score of B.

American Express also has a Zacks Rank #3 and an Earnings ESP of -0.04%, indicating less chance of beating estimates this quarter. The company delivered positive earnings surprises in three of the last four quarters, with an average beat of 6.85% and saw positive earnings estimate revision by a penny over the past three months for the to-be-reported quarter. The stock has a VGM Style Score of D.

General Electric has a Zacks Rank #4 and an Earnings ESP of -0.50%. However, the earnings surprise track over the past four quarters is robust with an average positive surprise of 9.69%. The company also witnessed solid earnings estimate revision of four cents in the past 90 days for the yet-to-be-reported quarter. It has a miserable VGM Style Score of F.

Procter & Gamble Company has a Zacks Rank #2 and an Earnings ESP of +0.75%, indicating high chances of beating estimates this quarter. The earnings surprise track over the last four quarters is good, with an average beat of 4.52%. Nevertheless, the stock witnessed negative earnings estimate revision of three cents in the past 90 days for the to-be-reported quarter and has a VGM Style Score of F (read: 5 Winning ETF Strategies for Q4).

Bottom Line

With earnings of most blue chip companies scheduled over the coming weeks and the stock market extending their bull run, investors should closely monitor the movement of the Dow ETF and grab any opportunity from a surge in any of the 30 stock prices.

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