Investing

Earnings Previews: American Airlines, AT&T, Cleveland-Cliffs, Freeport-McMoRan

Paul Ausick

Published: July 20, 2021 12:45 pm

The second week of June-quarter earnings results has been a good one so far. Of nearly 50 companies reporting results through Tuesday morning, only three have missed per-share earnings estimates and only four have missed revenue estimates.

On Monday, we previewed three firms that are reporting quarterly results after Tuesday’s closing bell: Chipotle Mexican Grill, Netflix and United Airlines. In a separate report, we previewed five firms set to report before Wednesday’s opening bell: ASML, Coca-Cola, Harley-Davidson, Johnson & Johnson and Verizon.

Earlier today, we posted previews of four companies reporting earnings after markets close on Wednesday: CSX, Kinder Morgan, Las Vegas Sands and Texas Instruments.

Here’s a look at four reports due out before markets open Thursday.

American Airlines

Shares of American Airlines Group Inc. (NASDAQ: AAL) still trade more than a third lower than before the COVID-19 pandemic. For the past 12 months, however, shares are up 67% and for the year to date, the stock is up about 27%. Since early June, prospects have dimmed for a speedy recovery from the pandemic and the stock is down about 26.5%.

There isn’t much enthusiasm among analysts for the stock. Of 22 brokerages covering the firm, 10 rate the stock a Hold, and nine have put either a Sell or Strong Sell rating on the shares. At the recent price of around $19.90, the stock trades above its median price target of $19. At the high target of $29, the upside potential is almost 46%.

Second-quarter revenue is forecast to reach $7.48 billion, up almost 87% sequentially and 362% year over year. The adjusted loss per share in the quarter is forecast at $1.71, down from $4.32 in the prior quarter and $7.82 in the same quarter last year. For the full year, American is expected to post a per-share loss of $7.55, compared with the year-ago loss of $19.66. Revenue is forecast to rise by 68%, from $17.34 billion to $29.09 billion.

American Airlines stock is not expected to post a profit in either 2021 or 2022. At the current price, the shares trade at 7.5 times estimated 2023 earnings. The stock’s 52-week trading range is $10.63 to $26.09. The airline has suspended its dividend.

AT&T

AT&T Inc. (NYSE: T) pays the second-highest dividend of any S&P 500 stock. Over the past 12 months, the stock has dipped by less than 1%. In May, it was up by more than 17% for the year to date, but that gain has slowly trickled away and the stock currently trades up 2.5% for the year. The company’s May sale of its media businesses (CNN, HBO and Warner Bros. Studios) is not widely viewed positively.

The surveyed analysts are cautious on the shares. Fifteen of 28 brokerages rate the stock a Hold, with nine Buy or Strong Buy ratings and four Sell ratings to complete the picture. At a price of around $28, the upside potential based on a median price target of $33 is about 18%. At the high target of $43, upside potential reached nearly 54%.

For the second quarter, analysts expect AT&T to report revenue of $42.73 billion, down about 2.7% sequentially and down about 4.3% year over year. Adjusted EPS is forecast to fall by nearly 7% sequentially and 3.6% year over year. For the full year, EPS is expected to dip by 1.2% and revenue is forecast to rise by 1.3% to $173.93.

AT&T stock currently trades at a multiple of 13.9 times expected 2021 EPS, 13.5 times estimated 2022 earnings and 13.6 times estimated 2023 earnings. The stock’s 52-week range is $26.35 to $33.88. The company pays an annual dividend of $2.08 (yield of 7.48%).

Iron ore miner and steelmaker Cleveland-Cliffs Inc. (NYSE: CLF) has seen its share price soar by 245% over the past 12 months. In mid-June, the stock posted a new 52-week high, and the stock has a year-to-date gain of around 35%. The company’s steel production acquisitions have positioned it well to take advantage of the so-called steel supercycle. The stock also has generated significant interest from retail investors who follow Reddit’s WallStreetBets subgroup.

Coverage of the stock is fairly light, with just eight analysts surveyed. Four rate the shares a Hold and the other four are evenly split between Buy and Strong Buy ratings. At a price of around $19.70, the upside potential based on a median price target of $27 is 37%. At the high target of $39, upside potential reaches 98%.

Second-quarter revenue is forecast to reach $4.95 billion, up 22% sequentially and up 350% year over year. Adjusted EPS is forecast to come in at $1.51, or 400% sequentially and miles better than a per-share loss of $0.46 in the same quarter last year. For the full year, EPS is forecast at $5.55 compared with a per-share loss of $0.47 in 2020.

Cleveland-Cliffs stock trades at a multiple of 3.6 times expected 2021 EPS, 6.1 times estimated 2022 earnings and 10.5 times estimated 2023 earnings. The stock’s 52-week range is $5.16 to $24.77. The company does not pay a dividend.

Freeport-McMoRan

Copper and gold miner Freeport-McMoRan Inc. (NYSE: FCX) has posted a share price gain of 145% over the past 12 months. The year-to-date gain has been a more modest 28%, even though shares were once up more than 70%. When copper prices peaked at around $4.80 a pound in early May, so did Freeport’s share price. Since then the trend has been down, although copper prices have steadied in the past months to trade in a narrow band around $4.30 a pound.

Of 17 analysts covering the stock, 11 rate the shares a Buy or Strong Buy and another five rate the stock a Hold. At a price of around $33.30, the stock’s upside potential is 20% based on a median price target of $43. At the high price target of $60, the upside potential is 80%.

Analysts have forecast second-quarter revenue at $5.81 billion, a jump of 90% year over year and about 20% sequentially. Adjusted EPS is tabbed at $0.75, up by almost 50% sequentially and 2,400% year over ($0.03 in the year-ago-quarter). For the full year, analysts currently forecast EPS at $2.95, up almost 450% year over year, on revenue of $22.17 billion, up 56%.

Freeport’s stock currently trades at a multiple of 11.2 times expected 2021 EPS, 10.0 times estimated 2022 earnings and 11.7 times estimated 2023 earnings. The stock’s 52-week range is $12.44 to $46.10. The company pays an annual dividend of $0.30 (yield of 0.93%).