Image: Bigstock

The Dow Jones Industrial Average Index has been underperforming the other two major indices this year. It has gained 1.5% so far this year, and SPDR Dow Jones Industrial Average ETF Trust (DIA - Free Report), which tracks the Dow Jones Industrial Average Index, is up 2.2%.

As the index is closely tied to the cyclical sectors, the banking turmoil hit hard the Dow last month. Recession fears have added to the woes.

The first-quarter 2023 earnings season will kick off this week, with the banking sector slated to report numbers. The picture of the earnings season seems bleak, given that the companies are struggling with a host of challenges, including inflation, rising interest rates and concerns about the health of the financial system in the wake of the two biggest bank failures since the 2008 financial crisis.

Total S&P 500 earnings are expected to be down 10% from the same period last year on 1.8% higher revenues, per the latest Earnings Trends. This would follow the 5.4% earnings decline in Q4 on 5.9% higher revenues. Though estimates have come down from the 4% earnings decline projected at the start of the first quarter, the magnitude of negative revision is smaller relative to the comparable periods for the preceding two quarters.

Of the 16 Zacks sectors, six are expected to post positive earnings growth in the first quarter, with the strongest gains in Transportation (55.6%). This would be followed by Consumer Discretionary (17.8%), Aerospace (14.9%), Energy (4.7%), Industrial Products (1.2%) and Finance (0.8%).

DIA in Focus

SPDR Dow Jones Industrial Average ETF Trust is one of the largest and most popular ETFs in the large-cap space, with an AUM of $28.3 billion and an average daily volume of 3.6 million shares. Holding 30 blue-chip stocks, the fund is widely spread across components, with each holding less than 10.3% share. Healthcare (20.5%), financials (20%), information technology (16.5%), industrials (14.3%), and consumer discretionary (13.7%) are the top five sectors.

SPDR Dow Jones Industrial Average ETF charges 16 bps in annual fees and has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk. 

Nearly one-fourth of the blue-chip firms are expected to announce results this week and the next. JPMorgan Chase (JPM - Free Report) and UnitedHealth (UNH - Free Report) are expected to report on Apr 14, while Johnson & Johnson (JNJ - Free Report) and Goldman (GS - Free Report) will announce earnings on Apr 18. International Business Machines (IBM - Free Report) is scheduled to report on Apr 19, while Dow Inc. (DOW) will report on Apr 25. Intel (INTC - Free Report) is expected to release earnings on Apr 27.

Let’s delve deeper into the first-quarter earnings picture that will likely aid the fund in the coming days.

Earnings Whispers

According to our methodology, the combination of a positive Earnings ESP and a Zacks Rank #1, 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. 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 -3.66%. The stock has seen a positive earnings estimate revision of a couple of cents over the past seven days for the to-be-reported quarter. Analysts increasing estimates right before earnings — with the most up-to-date information — is a good indicator for the stock. JPM delivered an earnings surprise of 3.35%, on average, in the last four quarters.

UnitedHealth has a Zacks Rank #3 and an Earnings ESP of -5.57%. The stock has witnessed a negative earnings estimate revision of 8 cents over the past seven days for the to-be-reported quarter and delivered an earnings surprise of 4.38%, on average, over the last four quarters.

Johnson & Johnson has a Zacks Rank #3 and an Earnings ESP of -1.75%. The stock has witnessed negative earnings estimate revision of a penny over the past 30 days for the to-be-reported quarter. JNJ’s earnings surprise track over the preceding four quarters was also robust, the average being 2.94%.

Goldman has a Zacks Rank #3 and an Earnings ESP of +2.62%. The stock has witnessed a negative earnings estimate revision of 10 cents over the past seven days for the to-be-reported quarter. GS’ earnings surprise track over the preceding four quarters was robust, the average being 2.31%.

International Business Machines has a Zacks Rank #3 and an Earnings ESP of 0.00%. The stock has seen no earnings estimate revision in the past 30 days for the to-be-reported quarter. IBM delivered an earnings surprise of 1.69%, on average, in the last four quarters.

Dow has a Zacks Rank #3 and an Earnings ESP of -15.25%. The stock has seen a negative earnings estimate revision of a couple of cents over the past seven days for the to-be-reported quarter. DOW came up with a beat in three of the last four quarters, the average being 3.06%.

Intel has a Zacks Rank #5 and an Earnings ESP of 0.00%. The stock has witnessed no earnings estimate revision over the past 30 days for the to-be-reported quarter and delivered a negative earnings surprise of 6.42%, on average, over the last four quarters.

Bottom Line

With some of the blue-chip companies having reasonable chances of coming up with an earnings surprise, investors should closely monitor the movement of the Dow ETF and grab any opportunity that arises from a surge in any of the 30 stocks.

More By This Author:

A Guide To The 10 Most-Popular Dividend ETFs
Tap The Rally In Sweetener Prices With Sugar ETFs
5 ETFs To Bet On From The Favorite Sectors For Q1 Earnings