3 Blue-Chip Stocks to Part Ways with ASAP
Recent months have brought struggle to many well-known, blue-chip stocks as the broader market has been lifted higher. This is disappointing, especially as many of the biggest under-performers are stocks that have traditionally been long-term winners for investors.
And yet, many previously reliable blue-chips are lagging the expanded market. For them, poor performance is due to significant, often structural, problems that have no quick fixes. Investors would be best advised to sell these securities. Here are three blue-chip stocks to part ways with as soon as possible (ASAP).
At the end of June, Nike (NYSE:NKE) reported its first earnings miss in three years due to stagnant inventories and reduced profit margins. This was not the news analysts and investors were hoping for, and it further depressed the price of NKE stock.
Consequently, shares of the Dow component are now down nearly 10% on the year, with no rebound in sight. The stock fell 3% immediately after NKE reported earnings of 66 cents per share versus the 67 cents that was the consensus expectation on Wall Street.
And yet, latest quarter revenue beat expectations, coming in at $12.83 billion compared to $12.59 billion that was forecast by analysts. However, Nike said that its gross margins fell 1.4 percentage points to 43.6% during the latest quarter. In addition, the company offered weak forward guidance, expecting revenue to grow only by mid-single digits for fiscal 2024. Analysts had expected year-over-year growth of 6.3%, according to Refinitiv data.
Nike added that its inventory value came in at $8.5 billion at the end of its most recent fiscal Q4, which translates flat compared with the previous year. The company continues an effort to boost lagging sales in China and improve its inventory situation. NKE stock continues to be a blue-chip under-performer.
Boeing Co. (BA)
The shares of commercial aircraft manufacturer Boeing (NYSE:BA) might look like they’re recovering, up 9% on the year.
In reality, BA stock is currently trading 40% lower than where it was five years ago, highlighting the long-term problems with the company and its underperforming stock. The latest issue to hit Boeing was news that the company had temporarily halted deliveries of some of its marquee 737 MAX airplanes due to technical problems.
Specifically, Boeing said that it has run into quality problems with the parts of the 737 MAX aircraft that are manufactured by Spirit AeroSystems (SPR). True, the issue is being resolved and orders of Boeing’s other aircraft continue unaffected,. But the 737 delivery halt certainly hasn’t inspired any confidence. This is happening while Boeing tries to put several high profile crashes of its aircraft behind it.
Given the ongoing and long-term problems with BA stock, investors would be best advised to part ways with this blue-chip name.
Procter & Gamble (PG)
For a company that is supposed to be a hedge against inflation, consumer goods giant Procter & Gamble (NYSE:PG) has been a real disappointment. Year-to-date, PG stock is down 2% compared with an 18% increase in the benchmark S&P 500 index.
This, despite the essential nature of the Procter & Gamble products, which include Tide laundry detergent, Pampers diapers and Gillette razor blades. In truth, the stock has struggled to gain traction. So naturally, the underperformance has no doubt left stockholders frustrated.
In this year’s first quarter, Procter & Gamble reported quarterly earnings that beat analysts’ expectations across the board. The company announced earnings per share of $1.37 versus $1.32 that had been forecast among analysts. Revenue came in at $20.07 billion versus $19.32 billion that was anticipated.
However, P&G’s Q1 sales volume fell 3% as consumers chose cheaper alternatives to its products. It was the fourth consecutive quarter of sales decline. The company will report earnings July 28.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.