Investing

Earnings Previews: AT&T, Freeport-McMoRan, Cleveland-Cliffs, Valero Energy

Paul Ausick

Published: April 20, 2021 12:42 pm

Of the March quarter earnings reports released Tuesday morning, most showed better earnings than analysts were looking for. Two exceptions were Xerox and Dow 30 component Travelers.

After markets close Tuesday, we’ll hear from, among others, Netflix, Tenet Healthcare, and Intuitive Surgical. Before markets open Wednesday, Verizon, NextEra Energy, and ASML are all on tap to report results.

We’ve also previewed five more firms reporting Wednesday afternoon and Thursday morning: Lam Research, Kinder Morgan, Chipotle, Alaska Airlines, and American Airlines.

Here’s a look at four more companies reporting results before markets open Thursday morning.

AT&T

Telecom giant AT&T Inc. (NYSE: T) has moved up the ladder of dividend leaders among the S&P 500 stocks since the beginning of the year. The shares are now the fourth-highest dividend payer, up from eighth at the end of 2020. Less welcome is the dividend yield, now around 7% compared with 7.29% at the end of the year. AT&T shares dropped more than 21% last year but have added 7.6% so far in 2021, more than making up for the lower yield so far this year.

The majority of analysts rate the stock a Hold–20 of 30 ratings–with 9 having a Buy or Strong Buy rating on the shares. The consensus price target on the stock is $29.53 and shares recently traded just above that at around $29.90. At the high target of $36, upside potential on the stock reaches about 20%.

Analysts are expecting the company to report earnings per share (EPS) of $0.78 for the quarter, about 9.5% below last year’s result, on revenue of $42.4 billion, essentially flat with last year. For the full year, analysts have estimated EPS of $3.14, down 4 cents year over year, on revenue of $171.82 billion, again essentially flat with 2020 revenue.

AT&T’s stock trades at 9.5x both 2021 and 2022 estimated EPS and 9.4x estimated 2023 earnings. The stock’s 52-week range is $26.35 to $33.24 and the company pays a dividend of $2.08 (yield of 6.99%).

Freeport-McMoRan

Copper and gold miner Freeport-McMoRan Inc. (NYSE: FCX) has seen its share price rise by about 326% over the past 12 months as commodity prices for gold and copper have soared. Since January of 2019, gold futures have increased by 48% and copper prices have soared by 80% over the past 12 months. If the Biden administration gets its way with the $2.3 trillion infrastructure plan, copper prices are expected to remain high.

But counting on the political winds to be always at your back is not a sound investment policy. Most analysts rate Freeport’s stock as a Hold (17 of 23) while 7 rate the shares a Buy or Strong Buy. The consensus price target on the stock is $38.19 and shares recently traded at around $32.50, implying a potential upside of 17%. At the high target of $55, upside potential reaches 69%.

For the March quarter, analysts have a consensus EPS estimate of $0.50, far ahead of a $0.16 per-share loss a year ago. Revenue is forecast to rise by nearly 75% to $4.88 billion. For the full year, current estimates call for $2.64 in EPS and $21.15 billion in revenue.

Freeport’s stock trades at 13.4x expected 2021 earnings, 11.8x estimated 2022 EPs, and 14.1x estimated 2023 earnings. The stock’s 52-week range is $7.30 to $39.10 and the mining company pays an annual dividend of $0.30 (yield of 0.79%).

Cleveland-Cliffs

Cleveland-Cliffs Inc. (NYSE: CLF) is another commodity extraction firm, but one that is trying to move up the value chain. Long a miner and seller of iron ore, Cleveland-Cliffs acquired AK Steel and ArcelorMittal USA last year and hope to parlay those acquisitions into a new business. Over the past 12 months, the stock has added about 345%.

Analysts are cool on the stock, with five of nine rating the shares a Hold while just two have Buy or Strong Buy ratings on the stock. The consensus price target on the stock is $20.38, implying a potential upside of about 23%. At the high target of $22.09, upside potential reaches nearly 34%. In a review we did earlier this month, Goldman Sachs rated the stock at Neutral with a price target of $20.

For the March quarter, analysts expect Cleveland-Cliffs to post EPS of $0.34, much better than the loss of $0.19 per share a year ago. Revenue is expected to rise by more than 1,200% to $4.22 billion, largely on the strength of the acquisitions. For the full year, EPS is forecast at $3.40 on sales of $18.27 billion.

Shares trade at about 4.9x expected 2021 EPS, 5x estimated 2022 earnings, and 10.3x estimated 2023 earnings. The stock’s 52-week range is $3.30 to $20.87 and the company does not pay a dividend.

Valero Energy

Oil refiner Valero Energy Corp. (NYSE: VLO) has added about 42% to its share price over the past 12 but it hasn’t been easy. The stock dropped almost 36% in 2020 as demand for gasoline and other motor fuels evaporated due to the lockdowns related to the coronavirus pandemic. The stock was up nearly 50% for the year by mid-March, but those gains have been pared back to around 23% as of Tuesday.

Of the 21 analysts covering the stock, 12 rate the shares as Hold, and 9 have Buy or Strong Buy ratings on the stock. The consensus price target of $86.63 is just over $18 above a recent price of around $68.50, implying an upside potential of 26%. At the high target of $110, upside potential reaches nearly 61%.

Analysts are forecasting a net loss per share of $1.89 for the March quarter on revenue of $18.65 billion. For the full year, however, current estimates call for EPS of $0.48 on revenue of $87.28 billion. EPS estimates for the rest of the year are positive and revenue estimates also surpass year-ago totals.

At current trading levels, Valero stock trades at nearly 154x expected 2021 EPS, 12.7x estimated 2022 earnings, and 10.9x estimated 2023 earnings. The stock’s 52-week range is $35.44 to $84.39 and Valero pays an annual dividend of $3.92 (yield of 5.41%).