Multi-decade high inflation, the Russia-Ukraine crisis, rising oil and gas prices, and the possibility of aggressive interest rate hikes by the Federal Reserve drove severe market instability earlier this year. However, investors absorbed the negatives, and the stock market has recovered over the past few weeks. The Dow Jones Industrial Average (DJIA) has gained close to 7% since March 14, 2022.
Furthermore, the U.S. government recently announced it is releasing one million barrels of oil per day from its strategic petroleum reserve for six months beginning in May to help combat elevated energy costs. In addition, robust March jobs growth should provide further stability to the economy. With a string of positive economic reports, the DJIA is expected to continue recovering in the coming months.
Given this backdrop, we think it could be wise to scoop up shares of Dow Jones components Dow Inc. (DOW) and Travelers Cos. Inc. (TRV), which are each up more than 10% year-to-in price date and have more room to run.
Dow Inc. (DOW)
DOW in Midland, Mich.,provides various materials science solutions for consumer care, infrastructure, and packaging markets. It operates through three segments: Packaging & Specialty Plastics; Industrial Intermediates & Infrastructure; and Performance Materials and Coatings. In addition, it participates in the property and casualty insurance and reinsurance business.
On Feb. 10, 2022, DOW declared a 70-cent dividend per share, payable March 11, 2022, to shareholders of record on Feb. 28, 2022. This marks the 442nd consecutive dividend paid by the company or its affiliates since 1912.
DOW’s net sales increased 34.2% year-over-year to $14.36 billion for the quarter ended Dec. 31, 2021. Its operating EBITDA increased 64% year-over-year to $2.92 billion, and its net income has grown 40.4% year-over-year to $1.76 billion. In addition, the company’s operating EPS increased 165.4% year-over-year to $2.15.
Analysts expect DOW’s revenue to come in at $55.54 billion in its fiscal year 2022, representing a 1% year-over-year increase. It surpassed the Street’s EPS estimates in each of the trailing four quarters. The stock has gained 12.9% in price year-to-date to close yesterday’s trading session at $64.01.
DOW’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting. It has an A grade for Value and a B grade for Sentiment.
Click here to access DOW’s ratings for Momentum, Stability, Growth, and Quality as well. DOW is ranked #10 of 88 stocks in the A-rated Chemicals industry.
Travelers Cos. Inc. (TRV)
New York City-based TRV provides commercial and personal property and casualty insurance products and services internationally. The company operates through three segments: Business Insurance, Bond & Specialty Insurance, and Personal Insurance.
On Feb. 23, 2022, TRV acquired Trōv, one of the earliest and most widely recognized insurtechs. Michael Klein, President of Personal Insurance at TRV, said, "We're excited about the important innovation we have underway, and Trōv's sophisticated technology and talented team will help accelerate our ongoing efforts to provide customers with personalized solutions in their channel of choice."
TRV’s revenue has increased 91.4% year-over-year to $9.01 billion for the fourth quarter, ended Dec. 31, 2021. Its net written premiums increased 10% year-over-year to $8 billion. And its net income grew 2% year-over-year to $1.33 billion. Also, the company’s EPS increased 5% year-over-year to $5.37.
For its fiscal year 2023, analysts expect TRV’s EPS to come in at $14.41, representing a 12.8% year-over-year increase. It surpassed the Street’s EPS estimates in each of the trailing four quarters. In addition, the company’s revenue is expected to increase 12% year-over-year to $8.64 billion for the quarter ending June 30, 2022. The stock has gained 16.2% in price year-to-date to close yesterday’s trading session at $181.82.
TRV’s POWR Ratings reflect this promising outlook. The company has an overall rating of B, which translates to Buy in our proprietary rating system.
The stock has a B grade for Momentum, Sentiment, and Stability. Within the B-rated Insurance - Property & Casualty industry, TRV is ranked #10 out of 55 stocks. To see TRV’s rating for Growth, Value, and Quality, click here.
DOW shares were trading at $63.92 per share on Tuesday morning, down $0.09 (-0.14%). Year-to-date, DOW has gained 14.05%, versus a -4.01% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles.
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