Comparing the Old Dow Components to the New

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This morning, the Dow Jones Industrial Average got three new components.  The $DJIA’s selection committee kicked out $BAC, $HPQ and $AA in favor of $V, $GS and $NKE.  Below is a comparison of some fundamental metrics for the old components vs. the new components.  The combined market cap of the Dow is now $65 B (1.5%) higher, but its combined revenues and operating income are $155 B (5.1%) and $12.5 B (2.7%) lower respectively.

As for growth, the new components are actually expected to grow earnings slightly less in 2014 than the old components would have because all three old components are coming off still cyclically depressed operating years in 2013.  The new components come out on top in terms of long term growth expectations though.  They’ll need to live up to those expectations in order to justify their higher multiples.  If not, their relatively large weightings could create a noticeable drag on the Dow.

Old Dow New Dow FaceoffSource: Compustat Data