Top 7 Blue-Chip Stocks With The Best Return Potential Going Into 2025

The year 2024 saw the U.S. stock market make new records, with major indices breaching key milestones. While many stocks witnessed a stellar rally this year, analysts still expect some blue-chip equities to rise further as they forecast a better return potential.

Dow’s Performance In 2024

The Dow Jones Industrial Average index hit a record eight 1,000-point milestones this year. It started the year around the 37,000 level and breached the 45,000 level at the beginning of December. It took only seven trading days for the index to go from 44,000 to 45,000, the second fastest 1,000-point milestone ever.

Following that the index also saw one of its longest 10-day losing streak, the first ever since 1974. These 10 days of underperformance stems from a confluence of factors.

The Dow doesn’t include all “Magnificent 7” stocks like Tesla Inc TSLA and Alphabet Inc GOOG GOOGL. The recent inclusion of Nvidia Corporation NVDA in the Dow has also pulled the index down because of the stock’s underperformance.

Dow’s constituent UnitedHealth Group Inc UNH has experienced a substantial decline this month following the tragedy with its CEO’s shooting. Moreover, in essence, the Dow’s historical advantage of its price-weighted indexing has become a significant disadvantage in today’s market. This is because, unlike market capitalization-weighted indices, higher-priced stocks have more weight in the calculation of a price-weighted index.

Dow Jones Stocks With The Best And Worst Return Potential

Analysts still expect that a group of stocks led by Caterpillar Inc CAT, UnitedHealth and Sherwin-Williams Co SHW within the Dow will rise even more, according to estimates compiled by Benzinga. Others on the list are the Amazon.com Inc AMZN, Johnson & Johnson JNJ, Chevron Corp CVX and Merck & Co Inc MRK.

To be sure, analysts keep updating their forecasts based on company performance and may change their estimates as the new earnings season begins.

Selection Criteria:

• The thirty blue-chip stocks in Down Jones.

• The highest and lowest return potential is based on the average 12-month target prices from Benzinga Pro data.

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Caterpillar Inc

• Caterpillar Inc CAT has the highest return potential of 31.68% among the Dow Jones constituents.

• The 28 analysts tracking the company have a consensus price target of $331.35 per share, according to Benzinga.

• Truist Securities’ Jamie Cook raised the price target from $454 to $471 per share on Dec. 19, 2024 as he expects significant investments in infrastructure, likely driven by government initiatives and private sector projects to fuel demand for Caterpillar’s equipment.

• Citigroup analyst Kyle Menges maintained a ‘buy’ rating on the company and raised the price target from $435 to $460 apiece on Dec. 9, 2024.

• On Dec. 9, JPMorgan analyst Tami Zakaria also reaffirmed her bullish stance on Caterpillar, maintaining a ‘buy’ rating on the stock. Concurrently, she raised the firm’s price target for Caterpillar from $500 to $515 per share.

UnitedHealth Group

• UnitedHealth Group Inc UNH has the second highest return potential of 28.95% among the Dow Jones constituents.

• The 26 analysts tracking the company have a consensus price target of $331.35 per share, according to Benzinga.

• Oppenheimer raised its price target to $640 from $610 apiece on Dec.6, 2024. The primary reason for the price target increase is that the Oppenheimer analyst is updating their financial model. This update appears to be based solely on the publicly available information disclosed by UnitedHealth in their 8-K filing.

• Stephens & Co raised its target price to $675 from $605 per share on Dec. 5, 2024, after conducting a detailed review of the 2025 guidance metrics that UnitedHealth had shared before the fatal shooting of CEO Brian Thompson that led to the cancellation of their investor conference.

• Deutsche Bank also increased its target from $595 to $625 apiece as it believes investor positioning into the event is mostly neutral to positive, with almost no one expecting a negative revision versus the third quarter outlook.

Sherwin-Williams Company

• Sherwin-Williams Co SHW has a return potential of 24.08% going into 2025.

• A consensus price target of $371.19 per share was maintained by 25 analysts that track the company, as per Benzinga.

• Greg Melich from Evercore ISI raised the price target of the Ohio-based paints, coatings and related products manufacturer to $420 from $400 per share on Nov. 7, 2024.

• RBC Capital’s Arun Viswanathan lowered his target on the company from $455 to $446 per share on Oct. 24, 2024. While acknowledging that third-quarter results might not have met investor expectations, Viswanathan emphasized the company’s potential for market share gains and the positive impact of its upcoming price increase scheduled for January 2025.

• Citigroup adjusted its price target from $430 to $420 apiece on Oct. 24 as it anticipates choppy demand in the first half of 2025, which could hinder the rapid pass-through of interest rate cuts.

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Amazon.com Inc

• Amazon.com Inc AMZN has a return potential of 23.82% going into 2025.

• A consensus price target of $247.05 per share was maintained by 39 analysts that track the company, as per Benzinga.

• Tigress Financial’s Ivan Feinseth umped is price target from $245 to $290 apiece on Dec.20, 2024 as it believes Amazon is well-positioned for continued success, driven by robust retail trends, effective utilization of generative AI and its fulfillment network, and the strategic integration of AI across its entire business.

• The expectations of strong long-term growth driven by operational efficiency and sustained momentum across its business segments led Bernstein to raise its target price from $235 to $265 per share on Dec. 18, 2024.

• According to JPMorgan analyst Douglas Anmuth, Amazon is a best idea for 2025, and confidence in AWS growth in the months to come is a major reason for that. He raised its target price from $250 to $280 apiece on Dec. 18, 2024.

Johnson & Johnson

• Johnson & Johnson JNJ has the fifth highest return potential in Dow of 22.41% going into 2025.

• The 21 analysts tracking the company have a consensus price target of $168 apiece, according to Benzinga.

• Citigroup’s Joanne Wuensch lowered Johnson & Johnson’s price target from $185 to $175 per share while maintaining a ‘buy’ rating on Dec. 11, 2024.

• BofA Securities reinstated coverage of Johnson & Johnson with a ‘neutral’ rating and a $166 price target on Dec. 10, 2024. BofA notes that J&J’s current valuation premium to peers may limit upside potential. However, the analyst acknowledges a “fairly interesting” pipeline and anticipates that resolving the talc litigation in 2025 would be beneficial. This analysis was part of BofA’s broader coverage initiation of 11 large-cap U.S. pharmaceutical and biotechnology companies.

• Wolfe Research analyst Alexandria Hammond commenced coverage of Johnson & Johnson with an ‘outperform’ recommendation and established a price target of $190 per share on Nov. 15, 2024

Chevron Corporation

• Chevron Corporation CVX has a return potential of 21.42% going into 2025.

• The 24 analysts tracking the company have a consensus price target of $179.36 apiece, according to Benzinga.

• Piper Sandler analyst Ryan Todd reduced his price target on the company from $184 to $173 per share on Dec. 19, 2024, while maintaining a ‘buy’ rating. Piper Sandler suggests the valuation gap between Exxon Mobil Corporation XOM and Chevron implies a probability of over 65% of the Hess Corporation HES deal failing out. This scenario presents a potential 15%-25% upside, while a successful deal offers a 5%-10% downside ahead of the upcoming arbitration.

• Despite this deal uncertainty, Piper expects Chevron to deliver strong portfolio performance in 2025, driven by project starts and controlled capital expenditures. This is projected to result in a significant free cash flow increase of $6-$7 billion.

• Wells Fargo analyst Roger Read raised his target price from $171 to $188 apiece on Dec. 9, 2024

• Truist Securities raised its price target on Chevron to $160 from $155 while maintaining a ‘hold’ rating, on Dec. 6, 2024. The analyst highlights Chevron’s significant inventory, including ample royalties, and expects improved capital efficiency to drive a cash flow inflection in the coming year.

Merck & Co Inc

• Merck & Co Inc MRK has the seventh highest return potential in Dow of 20.76% going into 2025.

• The 27 analysts tracking the company have a consensus price target of $126.24 apiece, according to Benzinga.

• BMO Capital Markets downgraded Merck to ‘market perform’ from ‘outperform’ lowering the price target from $136 to $105 apiece, on Dec. 20, 2024. The downgrade reflects concerns about the company’s Gardasil franchise in China and the potential revenue gap as Keytruda faces increased competition from biosimilars and generic drugs.

• Tim Anderson from BofA Securities maintains his bullish stance on Merck with a ‘buy’ rating, while adjusting the price target downward to $121 from $127 per share, on Dec. 10, 2024.

• Truist analyst Robyn Karnauskas reaffirms a ‘buy’ rating for Merck on Nov. 7, 2024, but lowers the price target to $130 from $132 apiece.

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