A quick glance at the calendar for this week shows some 900 publicly traded companies are scheduled to report March quarter earnings this week. We’ve selected a couple of dozen to preview over the next few days from the nearly endless list.
Looking ahead to companies reporting earnings after Tuesday’s closing bell, we have previewed Alphabet, AMD, Microsoft and Texas Instruments in a Monday story. Four more, Boeing, Enphase, Shopify and Starbucks, were previewed in a second story posted Monday.
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The first of two preview stories for Tuesday was our look at the four companies scheduled to report results after the closing bell Wednesday: Apple, Facebook, Ford and Qualcomm. The four companies previewed in this story are scheduled to report earnings before markets open Thursday. Three of the four are Dow Jones industrial average components.
Altria
Marlboro cigarette maker Altria Group Inc. (NYSE: MO) trades more than 10 million shares on an average day. On April 19, the stock traded within a nickel of its 52-week high set in late March before, plunging by more than $5 following a report that the Federal Trade Commission has filed suit to unwind the company’s $12.8 billion deal for e-cigarette maker Juul.
Since the 2018 deal, Altria has written off about $8.6 billion of the value of its 35% stake in Juul. The FTC has been considering the action for the past year. Then a week ago, the Biden administration reportedly was considering lowering allowed levels of nicotine in cigarettes to the point where cigarettes are no longer addictive.
All that negativity has had little impact on eight sell-side analysts, who rate the stock a Buy or Strong Buy compared to just six who rate the stock at Hold. No analysts rate Altria a Sell. The consensus price target on the stock is $52.63 and shares trade at around $47, implying a potential upside of nearly 12%. At the high target of $66, the upside potential rises to more than 40%.
Analysts are looking for Altria to report Earnings per share (EPS) of $1.04, a decline of about 4.6% year over year, on sales of $4.98 billion, down about 1.4% year over year. For the full year, analysts forecast EPS of $4.57, up 4.89% year over year, on sales of $21.27 billion, up 2%.
At the current price, the stock trades at a multiple of 10.3 times expected 2021 EPS, 9.7 times estimated 2022 earnings and 9.1 times estimated 2023 earnings. Altria’s secret, of course, is its annual dividend of $3.44 per share. That works out to a yield of 7.29%, the third-highest among all S&P 500 components, outpacing both AT&T and Exxon Mobil, the other two behemoths in the top 10 dividend payers.
Caterpillar
After sinking to a yearly low in late March, Caterpillar Inc. (NYSE: CAT) ended 2020 with a gain of 27%. The stock has added another 27% since the beginning of the year, and for the past 12 months, the share price has more than doubled. The White House’s infrastructure plan is seen as a huge driver of demand for Caterpillar and other suppliers to the construction business. The 2020 fourth quarter was something of a disappointment, as demand was lower than expected but earnings and revenues were solid.
Brokerages are evenly split, with 11 touting Caterpillar as a Buy or Strong Buy and an equal number giving the stock Hold ratings. At a recent price of $229.50, the stock has already outrun its 12-month consensus price target of $224.36. The upside potential for the high target of $270 pencils out to 17.5%.
EPS for the company’s first quarter is forecast at $1.94, up by more than 21% year over year, with revenue forecast to increase by 4.3% to $11.09 billion. For the 2021 fiscal year, Caterpillar is expected to post EPS of $8.34, up 27% year over year, on sales of $46.55 billion, up 11.5% year over year.
At the current trading price, Caterpillar shares trade at 27.2 times expected 2021 EPS, 20.9 times estimated 2022 earnings and 17.5 times estimated 2023 earnings. The stock’s 52-week range is $100.22 to $237.78. The company pays an annual dividend of $4.12 (yield of 1.79%).
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McDonald’s
Fast-food purveyor McDonald’s Corp. (NYSE: MCD) is the second of three Dow 30 stocks in this preview. Like Caterpillar, Mickey D’s trades an average of more than 3 million shares a day.
As the U.S. economy shakes off the effects of the COVID-19 pandemic, McDonald’s is expected to see additional traffic and sharply rising comparable-store sales after last year’s disastrous second and third quarters. That’s the key because the comps are so weak. First-quarter 2020 sales were down 6.4% year over year and second-quarter sales were down more than 10%. For McDonald’s, same-store sales increases have to hit double digits, preferably in the mid-single digits.
Some two-thirds of brokerages covering the stock (23 of 33) have the stock rated as a Buy or Strong Buy. Shares trade at around $234.75, about 5.4% below the consensus price target of $247.32. At the high target of $280, the upside potential from the current price is more than 19%.
Analysts anticipate McDonald’s will post EPS of $1.81, up 23% year over year, on sales of $5.03 billion, up 6.7% compared to the first quarter of 2020. For the full fiscal year, the forecasts call for EPS of $8.46, up by nearly 40% year over year, on sales of $22.1 billion, a 15% year-over-year increase.
At the current price, shares traded at 27.7 times expected 2021 EPS, 25.2 times estimated 2022 earnings and 22.7 times estimated 2023 earnings. The stock’s 52-week range is $167.85 to $235.38, and the high was posted early Tuesday morning. McDonald’s pays an annual dividend of $5.16 (yield of 2.22%).
Merck
Pharmaceutical giant Merck & Co. Inc. (NYSE: MRK) is the third Dow component in this preview. The company trades an average of more than 12 million shares daily. While Merck has been conspicuous by its absence in the race to create a vaccine for COVID-19, it has shifted focus to a therapeutic candidate licensed from another firm that Merck hopes can be used as a treatment for coronavirus in the early stages of the disease. Merck also will manufacture the Johnson & Johnson COVID-19 vaccine and is boosting its capacity to produce the drug.
Merck’s Keytruda cancer drug did $14 billion in sales last year and could overtake AbbVie’s Humira arthritis treatment as the world’s top-selling drug.
Brokerages have split almost evenly on Merck stock, with 11 rating the shares at Buy or Strong Buy with 10 pasting on a Hold rating. At a price of around $77.40, the implied upside on the stock is nearly 24% at a consensus 12-month price target of $95.71. At the high target of $107, upside potential rises to more than 38%.
For the first quarter, Merck is expected to report EPS of $1.63, up 8.7% year over year, on revenue of $12.67 billion, up more than 5%. For the fiscal year, EPS is forecast at $6.57, an increase of 10.8% year over year, on sales of $52.51 billion, a jump of 9.4%.
At the current price, Merck stock trades at 11.9 times expected 2021 EPS, 10.8 times estimated 2022 earnings and 10.2 times estimated 2023 earnings. The stock’s 52-week range is $71.72 to $87.80 and the company pays an annual dividend of $2.60 (yield of 3.35%).
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