Of 30 companies in our watchlist that reported earnings late Monday or before markets opened Tuesday, two posted a negative surprise on earnings and one met expectations exactly. Six missed revenue estimates and seven others hit sales estimates exactly. All in all, a good performance.
We already have previewed five companies scheduled to report September-quarter results after markets close Tuesday and before they open again Wednesday: Baker Hughes, Netflix, NextEra Energy, United Airlines and Verizon.
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Here are previews of four companies reporting quarterly results after markets close Wednesday.
IBM
Shares of International Business Machines Corp. (NYSE: IBM) have added nearly 19% over the past 12 months. That’s somewhat better than the 15.8% gain for the stock since before the pandemic and a gain of more than 17% since January of this year.
Next month, IBM is going to spin off its managed infrastructure business into a new publicly traded firm called Kyndryl. Big Blue announced the spin-off a year ago, noting that the deal would leave it more focused on its hybrid cloud initiatives. Although revenue will drop following the spin-off, free cash flow is expected to remain the same. That’s always good news for shareholders, provided, of course, that it actually happens.
As might be expected, analysts are in wait-and-see mode regarding IBM stock. Of 17 surveyed brokerages covering the firm, 11 have a Hold rating on the shares and five rate the stock a Buy or Strong Buy. At a recent price of around $141.70, the implied upside based on a median price target of $150 is about 5.9%. At the high price target of $176, the implied upside is about 24%.
Third-quarter revenue is expected to come in at $17.81 billion, which would be down 5% sequentially but up 1.4% year over year. Adjusted earnings per share (EPS) are forecast at $2.52, up 8% sequentially and down 2.3% year over year. The current full-year estimates call for EPS of $10.70, up 23.4%, on sales of $75.2 billion, or 2.1% higher.
IBM stock trades at 13.5 times expected 2021 EPS, 12.2 times estimated 2022 earnings and 11.4 times estimated 2023 earnings. The stock’s 52-week range is $105.92 to $152.84. IBM pays an annual dividend of $6.56 (yield of 4.54%).
Kinder Morgan
Energy infrastructure company Kinder Morgan Inc. (NYSE: KMI) has added more than 54% to its share price over the past 12 months, about equal to the 55% gain put up by rival Enterprise Products Partners and well short of the 81.6% boost at Energy Transfer.
The company generates just over two-thirds of its profits from moving natural gas through its pipelines. The pipelines are fully (or nearly so) committed, which is both good and not so good. It’s good for obvious reasons; it’s not so good because it means Kinder Morgan must expand in order to grow and, outside of Texas and Louisiana, new pipelines face a lot of hurdles.
The growth issue probably contributes significantly to the lukewarm analyst outlook. Of 25 brokerages covering the company, 14 rate the stock a Hold and another seven have Buy or Strong Buy ratings. That’s not a ringing vote of confidence. At a price of around $18.50, the upside potential based on a median price target of $19 is 2.7%. At the high price target of $22, the implied upside is 15.9%.
Consensus estimates call for third-quarter revenue of $3.22 billion, up 2.3% sequentially and 10.2% year over year, and EPS of $0.25, up 6.7% sequentially and 19% year over year. For fiscal full 2021, analysts currently forecast EPS of $1.32, up 50.3%, on sales of $14.98 billion.
The stock trades at 14.0 times expected 2021 EPS, 17.9 times estimated 2022 earnings and 16.7 times estimated 2023 earnings. The stock’s 52-week range is $11.45 to $19.29. Kinder Morgan pays an annual dividend of $5.85 (yield of 5.85%). It’s worth noting that Enterprise Products and Energy Transfer pay higher distributions because they are organized as limited partnerships.
Las Vegas Sands
The sale of all its properties in Las Vegas earlier this year left Las Vegas Sands Corp. (NYSE: LVS) without any action in the city it is named for. Over the past 12 months, the company’s share price is down about 11%. For the year to date, shares are down by about a third.
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The sale committed the Sands to focus on its Macau operations, but 2020 was a terrible year for the gambling haven. Since April, revenues have increased sharply, up 75% for the year to date, according to the Macau gambling regulator. Unfortunately, that is not as much as had been expected, and new restrictions related to COVID-19 threaten to slow the recovery even further.
Of 15 analysts covering the stock, eight have rated the shares a Buy or Strong Buy. The rest have a Hold rating on the stock. At a price of around $40.00, the upside potential based on a median price target of $53 is 32.5%. At the high price target of $73, the upside potential is 82.5%.
Analysts have a consensus third-quarter revenue estimate of $1.25 billion, up 6.6% sequentially and 113% higher year over year. The consensus also calls for a loss per share of $0.23 in the third quarter, slightly less than the prior quarter loss of $0.26 per share, and far less than the year-ago loss of $0.67 per share. For the full fiscal year, Las Vegas Sands is expected to post a loss per share of $0.81, compared with a loss per share of $2.12 a year ago. Sales are forecast to rise by 43.6% to $5.19 billion.
Las Vegas Sands stock trades at 25.6 times estimated 2022 earnings and 13.6 times estimated 2023 earnings. The stock’s 52-week range is $35.59 to $66.77, and Sands does not pay a dividend.
Tesla
Tesla Inc. (NASDAQ: TSLA) delivered 241,000 electric vehicles (EVs) in the third quarter, a record number and 10% higher than the consensus estimate. Year-over-year growth was 73%, down from 122% in the prior quarter. Both totals were skewed due to the COVID-19 pandemic.
As analysts Gene Munster and David Stokman of Loup Funds put it: “[W]e believe [Tesla’s growth] is the combination of consumer readiness for EVs, along with Tesla’s value proposition.” They note that Tesla’s delivery growth year over year for the third quarter was 73%, compared to a decline of 27% in the same period for Ford, GM, Honda and Toyota. Their conclusion:
While chip shortages dragging on production and inventory is the biggest factor in the drop in sales for traditional automakers, the loss of share to EV makers (mostly Tesla) is no doubt compounding the delivery decline for the broader industry.”
Sentiment toward Tesla tilts slightly to the downside. Of 33 analysts covering the stock, 11 rate the shares a Buy or a Strong Buy, and 11 also rate the stock a Hold. Six rate the stock a Strong Sell and two more have Sell ratings on the stock. At a price of around $867.90, the stock has outrun the median price target of $755. Based on a high price target of $1,200, the upside potential is 38.2%.
Analysts expect Tesla to post third-quarter revenue of $13.64 billion, up 14% sequentially and 55.5% year over year, and EPS of $1.57, up 8.3% sequentially and 115% year over year. For the full year, current estimates call for EPS of $5.61, up 150%, on sales of $50.92 billion, up 61.5%.
Tesla stock trades at 150.2 times estimated 2021 EPS, 114.1 times estimated 2022 earnings and 92.0 times estimated 2023 earnings. The stock’s 52-week range is $379.11 to $900.40. Tesla does not pay a dividend.
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