Blue chips are popular among investors, especially those closer to retirement or more risk-averse investors, because of their reliability. That doesn’t mean they are immune to market downturns, but it does mean they’ve shown a history of weathering these storms and bouncing back.
Thus, investors could consider buying fundamentally sound blue chip stocks, Apple Inc. (AAPL), Johnson & Johnson (JNJ), and American Express Company (AXP) for long-term security.
Blue chip stocks are the stocks of well-known industry leaders with high-quality businesses. Blue chip companies have solid business models and impressive track records of returns for investors. These returns often include regular and growing dividend payments.
While market fluctuations and fears of a recession persist due to weak employment data and a rise in unemployment to 4.3%, the general economic outlook remains cautiously optimistic. Although smaller and newer companies might face difficulties adapting to recessions and market shifts, blue-chip stocks typically endure and continue providing returns.
Considering these conducive trends, let’s take a look at the fundamentals of the three blue-chip stock picks.
Apple Inc. (AAPL)
AAPL designs, manufactures, and markets smartphones, personal computers, tablets, wearables, and accessories globally. It offers the iPhone, a line of smartphones; Mac, a line of personal computers; iPad, a line of multi-purpose tablets; and wearables, home, and accessories comprising AirPods, Apple TV, Apple Watch, Beats products, and HomePod.
On June 10, AAPL unveiled Apple Intelligence, the personal intelligence system for iPhone, iPad, and Mac, which combines the power of generative models with personal context to deliver intelligence that’s incredibly useful and relevant and is deeply integrated into iOS 18, iPadOS 18 and macOS Sequoia.
Apple Intelligence harnesses the power of Apple silicon to understand and create language and images, take action across apps, and draw from personal context to simplify and accelerate everyday tasks. With its unique approach, AAPL combines generative AI with a user’s context to deliver truly helpful intelligence.
Also, on the same day, AAPL launched a suite of innovative new tools and resources to allow developers globally to design more powerful and efficient apps across all Apple platforms. With Xcode 16 beta, developers can save time in their development process and access features like Swift Assist and predictive code completion.
AAPL’s annual dividend rate of $1 yields 0.45% on the current price level. The company’s dividend payouts have increased at CAGRs of 4.9% and 5.5% over the past three and five years, respectively. AAPL has ten years of consecutive dividend growth under its belt.
AAPL reported total net sales of $85.78 billion, up 4.9% year-over-year during the third quarter that ended June 29, 2024. The company’s net income and EPS came in at $21.45 billion and $1.40 for the quarter, up 7.9% and 11.1% year-over-year, respectively.
Analysts expect AAPL’s revenue for the fourth quarter (ending September 2024) to increase 5.2% year-over-year to $94.14 billion, and its EPS for the ongoing quarter is expected to grow 9.3% year-over-year to $1.60. Moreover, the company has topped the consensus revenue and EPS estimates in each of the trailing four quarters.
AAPL’s stock gained 13.8% over the past nine months to close the last trading session at $222.77.
AAPL’s POWR Ratings reflect its solid outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
AAPL has an A grade for Quality. It is ranked #17 among 40 stocks in the B-rated Technology - Hardware industry.
Click here to access the additional AAPL ratings (Momentum, Growth, and Value).
Johnson & Johnson (JNJ)
JNJ is engaged in researching, developing, manufacturing, and selling healthcare products primarily focused on human health and well-being. The company offers a diversified range of products through the Innovative Medicine and MedTech segments.
On August 20, JNJ announced its acquisition of V-Wave Ltd., a privately held company specializing in innovative heart failure treatment. This acquisition is set to enhance JNJ MedTech’s position in the cardiovascular space, broadening its portfolio of advanced heart failure treatment options.
On the same day, JNJ also announced that RYBREVANT® (amivantamab-vmjw) plus LAZCLUZE™ (lazertinib) received U.S. Food and Drug Administration (FDA) approval for the first-line treatment of adult patients with locally advanced or metastatic non-small cell lung cancer (NSCLC) with epidermal growth factor receptor (EGFR). This multitargeted formulation becomes the chemotherapy-free combination regimen for patients with EGFR-mutated NSCLC.
JNJ’s annual dividend rate of $4.96 yields 2.97% on the current price level. The company’s dividend payouts have increased at CAGRs of 5.5% and 5.6% over the past three and five years, respectively. WMT has 61 years of consecutive dividend growth under its belt.
For the second quarter of 2024, which ended on June 30, JNJ’s sales to customers increased 4.3% year-over-year to $22.45 billion. Its gross profit rose 3.5% from the year-ago value to $15.58 billion.
The company’s adjusted net earnings from continuing operations amounted to $6.84 billion, representing a marginal increase from the same period last year. Also, its adjusted net earnings per share from continuing operations for the quarter increased 10.2% year-over-year to $2.82.
As per the updated guidance for the fiscal year 2024, JNJ forecasts operational sales between $89.20 billion and $89.60 billion, reflecting a 6% increase from 2023, primarily driven by recent acquisitions. The company also expects adjusted EPS between $9.97 and $10.07.
The consensus revenue estimate of $22.47 billion for the fiscal fourth quarter (ending December 2024) represents a 5% increase year-over-year. The consensus EPS estimate of $2.30 for the same quarter indicates a marginal improvement year-over-year. The company has an impressive earnings surprise history; it surpassed the consensus EPS estimates in each of the trailing four quarters.
Over the past three months, the stock has surged 13.6%, closing the last trading session at $167.16.
JNJ’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
JNJ has a B grade for Value, Stability, and Quality. It is ranked #19 out of 158 stocks in the Medical - Pharmaceuticals industry.
Click here to see the additional ratings for JNJ (Growth, Momentum, and Sentiment).
American Express Company (AXP)
AXP operates as an integrated payments company operating internationally. It operates through four segments: U.S. Consumer Services; Commercial Services; International Card Services; and Global Merchant and Network Services.
On August 14, 2024, AXP announced plans to open a new Centurion Lounge at Salt Lake City International Airport (SLC). AXP is the first credit card issuer to announce plans to open a proprietary lounge at SLC.
The lounge would give eligible members a place to relax, work, and enjoy a delicious meal before boarding their flight, an outdoor terrace with views of the Wasatch Mountains, a full bar with alcoholic and non-alcoholic beverages, a dedicated wellness room and other signature Centurion Lounge amenities.
On June 21, 2024, AXP acquired Tock, a reservation, table, and event management technology provider, from Squarespace, the design-driven platform helping entrepreneurs build brands and businesses online.
The company also announced an agreement to acquire Rooam, a technology company that powers mobile payments, ordering, and integrations with point of sale, marketing, and loyalty systems used by restaurants and entertainment venues.
AXP’s annual dividend rate of $2.80 yields 1.10% on the current price level. The company’s dividend payouts have increased at CAGRs of 14.8% and 10.8% over the past three and five years, respectively.
For the fiscal second quarter that ended June 30, 2024, AXP’s FX adjusted total revenues increased 9% year-over-year to $16.33 billion. The company’s net income came in at $3 billion and $4.15 per share, up 36.4% and 43.6% year-over-year, respectively.
Analysts expect AXP’s revenue for the fiscal third quarter ending September 2024 to increase 8.3% year-over-year to $16.65 billion. For the same period, Street expects its EPS to be $3.28. The company surpassed its EPS estimates in three of the trailing four quarters, which is promising.
AXP’s stock has soared 7.8% over the past three months to close the last trading session at $254.31.
AXP’s POWR Ratings reflect bright prospects. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.
The stock has a B grade for Sentiment, Stability, and Momentum. It is ranked #11 in the 47-stock Consumer Financial Services industry.
Beyond what is stated above, we’ve also rated AXP for Growth, Quality, and Value. Get all AXP ratings here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
AAPL shares were trading at $219.42 per share on Wednesday afternoon, down $3.35 (-1.50%). Year-to-date, AAPL has gained 14.40%, versus a 16.79% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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