Investing

Earnings Previews: Facebook, GE, Lockheed Martin, Raytheon, UPS

Paul Ausick

Published: October 22, 2021 12:05 pm

Last Updated: October 22, 2021 12:24 pm

Of nearly 40 companies in our watch list that reported earnings late Thursday or before markets opened Friday, a full one-quarter posted negative earnings surprises, and just one met expectations exactly. Nearly half (17) missed revenue estimates, and two others matched analysts’ estimates.

Missing Wall Street’s revenue estimates is arguably a more serious offense than missing earnings estimates, as both Snap and Intel found out Friday morning.

We already have previewed three companies scheduled to report September-quarter results before markets open on Monday: Kimberly-Clark, Otis Worldwide and Restaurant Brands.

Here’s a look at one company scheduled to report results after markets close Monday and four more reporting before markets open Tuesday.

Facebook

After markets close Monday, Facebook Inc. (NASDAQ: FB) will report third-quarter 2021 results. The social media giant’s stock price has grown by about 28% over the past 12 months, but since reporting second-quarter results in late July, the stock is down nearly 8.5%.

Facebook has suffered from issues that are arguably of its own making. Comments from Snap CEO Evan Siegel following Snap’s quarterly report Thursday evening have weighed on Facebook shares Friday morning. Snap’s ad revenues took a hit in the third quarter, and the company lowered its revenue outlook for the fourth quarter, citing ad revenue declines due to Apple’s tracking transparency initiative. Investors appear to believe that Facebook faces the same headwind.

Analysts don’t appear to share those doubts. Of 52 brokerages covering Facebook, 33 have given the shares a Buy rating and 10 more have a Strong Buy rating on the stock. Of the remaining nine, seven have given the stock a Hold rating. At a recent price of around $327.80, the upside potential based on a median price target of $425 is nearly 30%. At the high price target of $500, the upside potential is 52.5%.

Facebook is expected to report third-quarter revenue of $29.53 billion, which would be up 1.5% sequentially and up 37.5% year over year. Adjusted earnings per share (EPS) is forecast at $3.17, down 12.2% sequentially but up 32% year over year. For the full year, revenue is currently forecast at $119.5 billion, up 39%, and EPS are expected to come in at $14.10, up nearly 40%.

Facebook stock trades at 24.2 times expected 2021 EPS, 21.4 times estimated 2022 earnings and 18.4 times 2023 earnings. The stock’s 52-week range is $244.61 to $384.33. Facebook does not pay a dividend.

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Over the past 12 months, shares of General Electric Co. (NYSE: GE) have added nearly 77% to their price. In late July, the company completed a reverse stock split, trading one new share for eight old ones. Since then, the stock has bounced around and currently trades down less than 1%. Rising costs and the continuing impact of COVID-19 on the aviation business are headwinds and headaches for GE. The company’s recent coronavirus vaccine mandate also has raised issues with GE’s labor unions.

Analysts remain mostly bullish on the stock. There are no Sell or Strong Sell ratings, while 12 of 20 brokerages rate the stock a Buy or Strong Buy. At a price of around $103.80, the potential upside to a median price target of $125 is more than 20%. At the high target of $136, the upside potential is 31%.

Third-quarter revenue is forecast at $19.17 billion, up 4.9% sequentially and down about 1.3% year over year. Adjusted EPS are forecast at $0.44, up 10% sequentially and down 8.3% year over year. Since the reverse split was completed, the third-quarter estimate of EPS has dropped from $0.57, or 22.8%. For the full year, analysts expect GE to report EPS of $1.90, nearly 2,300% higher, on sales of $76.43 billion, down 4%.

GE stock trades at 55.7 times expected 2021 EPS, 26.9 times estimated 2022 earnings and 19.00 times estimated 2023 earnings. The stock’s 52-week range is $56.72 to $115.36 (split-adjusted), and GE pays an annual dividend of $0.32 (yield of 0.31%).

Lockheed Martin

Lockheed Martin Corp. (NYSE: LMT) led all U.S. defense contractors in federally obligated payments in 2020, accumulating some $74.2 billion. The company’s share price has risen by less than 5% over the past 12 months, and that’s only thanks to an agreement on a federal defense budget that passed both houses of Congress in late September. Since then, Lockheed’s stock has risen nearly 12%.

An announced $4.4 merger with Aerojet Rocketdyne is still awaiting regulatory approvals, and the deal received backing from a bipartisan group of U.S. lawmakers last month. The company reports third-quarter results before markets open Tuesday morning.

It’s no surprise that analysts are bullish on the stock, with nine of 19 putting a Buy or Strong Buy rating on the shares and the other 10 giving the stock Hold ratings. At a price of around $375.10, the upside potential based on a median price target of $425 is 13.3%. At the high price target of $458, the upside potential is 22%.

Third-quarter revenue is forecast at $17.12 billion, up less than 1% sequentially and up about 3.8% year over year. Adjusted EPS are expected to come in at $5.33, down about 18% sequentially and nearly 15% year over year. For full fiscal 2021, Lockheed is expected to post EPS of $26.14, up 6.7%, on sales of $68.33 billion, up 4.5%.

Lockheed stock trades at 14.2 times expected 2021 EPS, 13.3 times estimated 2022 earnings and 12.7 times estimated 2023 earnings. The stock’s 52-week range is $319.81 to $396.99, and Lockheed pays an annual dividend of $11.20 (yield of 3%).

Since completing its merger last year with the largest portion of United Technologies, Raytheon Technologies Corp. (NYSE: RTX) has become the nation’s largest defense contractor measured by market cap. It ranked second on Bloomberg’s list of 2020 recipients of federal dollars, with total obligations of $27.4 billion. Over the past 12 months, Raytheon’s share price has increased by about 56%.

In September, Raytheon and Northrop Grumman completed the first test flight of their jointly developed hypersonic weapon. This could be a big deal sometime in the future. Raytheon reports third-quarter results before markets open Tuesday.

Of 19 analysts covering the stock, 15 rate the shares a Buy or Strong Buy, and the other four rate the stock at Hold. At a price of around $92.10, the upside potential based on a median price target of $104 is nearly 13%. At the high price target of $110, the upside potential is 19%.

Analysts expect Raytheon to report third-quarter revenue of $16.36 billion, which would be 3% higher sequentially and up nearly 11% year over year. Adjusted EPS are expected to reach $1.09, up 5.4% sequentially and nearly 88% year over year, thanks to the merger with UTC. For the full year, EPS are pegged at $4.06, up 16%, on revenue of $65.18, up 2.7%.

Raytheon stock trades at 22.6 times expected 2021 EPS, 18.2 times estimated 2022 earnings and 15.1 times estimated 2023 earnings. The stock’s 52-week range is $51.92 to $92.30, and the high was posted earlier this morning. Raytheon pays an annual dividend of $2.04 (yield of 2.23%).

UPS

At one time during the past 12 months, shares of United Parcel Service Inc. (NYSE: UPS) were up about 27.5%. As of Thursday’s closing bell, shares were up about 19% for the 12-month period. UPS reports quarterly results before markets open Tuesday morning.

Even more than usual, this year is raising questions about operating margins for UPS and its chief rival, FedEx. When FedEx reported quarterly earnings last month, the company said that staffing issues cost it about $320 million of a $450 million shortfall in operating profits. UPS expects to hire 100,000 seasonal employees this holiday season, and those employees are highly likely to cost the company more than the 100,000 seasonal workers it hired last year. And then there are rising fuel costs to consider as well.

Headwinds notwithstanding, analysts remain upbeat on the stock, with 18 of 30 giving the shares a Buy or Strong Buy rating and nine others rating the stock at Hold. At a price of around $202.30, the upside potential based on a median price target of $223 is 10.2%. At the high price target of $248, the upside potential is 22.6%.

Analysts expect UPS to report third-quarter revenue of $22.57 billion, down 3.6% sequentially and up about 6.3% year over year. Adjusted EPS are pegged at $2.55, down nearly 17% sequentially and up 11.8% year over year. For the fiscal year, analysts are looking for EPS of $11.22, up more than 36%, on sales of $95.2 billion, up 12.5%.

UPS stock trades at 17.4 times expected 2021 EPS, 16.7 times estimated 2022 earnings and 15.5 times estimated 2023 earnings. The stock’s 52-week range is $154.76 to $219.59. UPS pays an annual dividend of $4.08 (yield of 2.05%).