The Dow Jones Industrial Average is up 12.01% year-to-date, lagging the S&P 500 and the Nasdaq, but Dow components such as American Express NYSE: AXP, Goldman Sachs Group NYSE: GS and Walgreens Boots Alliance NASDAQ: WBA are outperforming the index.
The Dow differs from the S&P 500 and the Nasdaq, in that it’s a price-weighted, rather than market-cap weighted index. That makes UnitedHealth Group NYSE: UNH the most heavily weighted stock in the index, comprising 7.741% of the Dow. It’s up a not-too-shabby 15.48% year-to-date.
Fortunately, Goldman Sachs is the second heaviest-weighted stock in the index clocking in with an index weighting of 7.0496%. It boasts a year-to-date return of 39.84%
Top-performing Dow component American Express advanced 40.15% year-to-date, 19.40% over the past three months and 7.24% over the past month.
The company is rebounding from a slump in consumer spending on travel and entertainment during the pandemic. Earnings and revenue slowed in every quarter last year. About one-third of the company’s billings originate from travel and leisure spending, which of course was crushed by Covid restrictions.
Although American Express is a credit card issuer, the vast majority of its income comes from non-interest sources. For example, its largest source of income is the rate charged to merchants who accept payment from American Express-issued cards.
Investors are cheering the company’s 2021 revenue outside of the travel and leisure segments, which has returned to pre-Covid levels. Analysts expect earnings per share of $7.47 for the full year, up 40% from an admittedly easy year-over-year comparison.
American Express shares closed Monday at $164.71, down 2.80% as the stock sold off in lighter-than-normal trading volume.
The broader index closed at 34,283.27, down 0.44%, also in light turnover.
Goldman Sachs shares are up 13% in the past three months, but down 0.89 in the past month. The stock began correcting on June 7, after retreating from a high of $393.26.
Thus far, the stock has corrected 11.5% from peak to trough. It appears to be shaping the right side of a cup pattern. If that holds, the current correction could end up as a flat base.
The stock regained both its 10-day and 50-day lines on June 24 and is currently 1.4% above the 10-day average and 1.6% above the 50-day.
Although both Goldman Sachs and American Express are both heavily weighted in the Dow and the S&P financials sector, they have quite different business models.
Its key business areas are investment banking, investing and lending, investment management and institutional client services. Trading revenue is a huge part of the company’s business.
The Covid-19 pandemic was a boon to the company’s revenue as companies issued equity and debt to shore up their capital structures. Trading fees also boosted Goldman Sachs’ revenue in 2020.
Analysts pegged 2021 revenue at $45.01 per share, which would be a 65% year-over-year gain.
Walgreens Boots Alliance has been forming a flat base since early April, correcting 11% so far.
Shares are up 33.26% year-to-date, 1.24% in the past three months, and down 0.85% over the past month.
Despite being a Dow price leader so far in 2021, Waltreens’ earnings growth has been non-existent since 2019. Analysts are eyeing earnings per share of $4.68 this year, a 4% increase. That’s seen rising an additional 10% next year.
The company has a global retail presence, with more than 21,000 stores in over 25 countries. It employs more than 450,000 people, including nearly 40,000 pharmacists.
That gives it leverage to form dynamic strategic partnerships, including those with insurance companies Humana and UnitedHealth, diagnostics company LabCorp, grocer Kroger, pharmaceutical distributor AmerisourceBergen and others.
One advantage to these partnerships is that Walgreens can shift inventory management and other operational tasks to other companies. For example, its pharmaceutical distribution agreement with Amerisource, which currently runs through 2029, allows direct delivery to Walgreens retail stores, which helps with inventory management by reducing the need for other distribution and warehouse facilities. That, in turn, cuts costs for Walgreens.
The company reports earnings on Thursday, with analysts expecting $1.12 per share, up from $0.83 per share a year ago.
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