Investing

Earnings Previews: Bank of America, Morgan Stanley, Procter & Gamble, UnitedHealth

Paul Ausick

Published: January 18, 2022 9:28 am

Last Friday, investors got their first look at how the country’s biggest banks fared in the fourth quarter of 2021. Judging by their reactions, Wells Fargo deserved a share price boost and JPMorgan deserved to get punished. Citigroup and BlackRock closed lower on Friday, but they avoided the punishment JPMorgan received.

Following Monday’s Dr. Martin Luther King Jr. holiday, Goldman Sachs and Truist reported results before markets opened Tuesday. Truist beat on both the top and bottom lines, while Goldman missed the consensus earnings estimate.

More financial sector results are coming up this Wednesday and the rest of this week, as well as reports from consumer product, industrial, and transportation firms. It is going to be a busy week.

Here are four earnings reports due out before markets open on Wednesday.

Bank of America

Bank of America Corp. (NYSE: BAC) has seen a share price boost of 46% over the past 12 months. Revenue rose by almost 21% over the period and operating income has jumped by nearly a third. Part of that boost in operating income came as a result of reduced costs and, in the second half of the year especially, a significant part came from reserve releases. That is less impressive.

Analysts are bullish on BofA, with 16 of 26 putting a Buy or Strong Buy rating on the shares. Another seven rate the stock at Hold. At a recent price of around $47.90 a share, the implied gain based on a median price target of $51.75 is 8.0%. At the high price target of $64, the implied upside is 33.6%.

Fourth-quarter revenue is forecast at $22.19 billion, which would be down by 2.5% sequentially but by 9.7% higher year over year. Adjusted earnings per share (EPS) are expected to come in at $0.76, a drop of nearly 11% sequentially but up 28.8% year over year. For the full fiscal year, analysts currently forecast EPS of $3.45, up almost 85%, on revenue of $89.42 billion, up about 3.9%.

This stock trades at 13.9 times expected 2021 EPS, 15.2 times estimated 2022 earnings of $3.16 per share and 13.1 times estimated 2023 earnings of $3.67 per share. The stock’s 52-week range is $29.57 to $50.08. BofA pays an annual dividend of $0.84 (yield of 1.75%). Total shareholder return for the past 12 months was 47.9%.

Morgan Stanley

Morgan Stanley (NYSE: MS) is the fourth-largest U.S. bank by market capitalization. The bank’s share price has improved by 34% over the past 12 months, but higher interest rates this year are probably a mixed blessing. Another question mark going forward is trading revenue. What the bank has to say about 2022 probably will be more important than what happened last year.

Sentiment remains bullish on the stock, with 18 of 28 brokerages assigning the shares a Buy or Strong Buy rating. Another nine rate the stock at Hold. At a share price of around $98.90, the upside potential based on a median price target of $115 is 16.3%. At the high target of $140, the upside potential is nearly 42%.
The consensus estimate for Morgan Stanley’s fourth-quarter revenue is $14.59 billion, down about 1.1% sequentially but up about 7.7% year over year. Adjusted EPS are forecast at $1.96, down 3.7% sequentially and 2% higher year over year. For the full year, analysts are looking for revenue of $59.61 billion, up more than 23%, and EPS of $8.08, up nearly 23%.

Morgan Stanley stock trades at 12.2 times expected 2021 EPS, 13.1 times estimated 2022 per-share earnings of $7.57 and 11.9 times estimated 2023 earnings of $8.33. The stock’s 52-week range is $66.85 to $106.47, and the bank pays an annual dividend of $2.80 (yield of 2.83%). Total shareholder return over the past year was 34.6%.

Procter & Gamble

Dow stock Procter & Gamble Inc. (NYSE: PG) has posted a share price gain of 19.4% over the past 12 months, including a spike of 11.4% in the first two weeks of December. The stock has pulled back somewhat since then, but investors appear to have more of an appetite now for large-cap, blue-chip stocks, like consumer staples giant P&G. The company so far has been able to pass along price increases to customers, but that may have to change.

Of 23 analysts covering the stock, 12 rate the shares a Buy or Strong Buy and 10 more have a Hold rating. At a share price of around $159.80, the stock has outrun its median price target of $159.50. At the high price target of $185, the implied gain is 15.8%.

Analysts expect P&G to report second-quarter fiscal 2022 revenue of $20.34 billion, which would be flat sequentially and up 3% year over year. Adjusted EPS are pegged at $1.65, flat sequentially and up a penny year over year. For the full fiscal year, current estimates call for EPS of $5.91, up 4.4%, on sales of $79.16 billion, up 4%.

Shares trade at 27.0 times expected 2022 EPS, 25.1 times estimated 2023 earnings of $6.36 and 23.5-times estimated 2024 earnings of $6.79 per share. The stock’s 52-week range is $121.54 to $165.32. P&G pays an annual dividend of $3.48 (yield of 2.18%). Total shareholder return for the past year was 21.6%.

UnitedHealth

The country’s largest health insurer, UnitedHealth Group Inc. (NYSE: UNH), has posted a share price increase of nearly 34% over the past 12 months. That’s good enough to rank seventh among the 30 Dow Jones industrials for the period. UnitedHealth is Jim Cramer’s pick as the most likely Dow stock to repeat its 2021 performance in 2022.

Analysts remain bullish on the stock, with 22 of 26 assigning a rating of Buy or Strong Buy and three more rating the shares at Hold. At a share price of around $468.70, the upside potential based on a median price target of $525 is 12%. At the high target of $575, the upside potential is 22.3%.

The consensus estimate for fourth-quarter revenue is  $72.86 billion, up by less than 1% sequentially and by 11.3% year over year. Adjusted EPS are tabbed at $4.31, down about 4.7% sequentially and up 71% year over year. For the full year, analysts are forecasting EPS of $18.84, up 11.6%, on revenue of $286.83, also up 11.6%.

UnitedHealth stock trades at 24.9 times expected 2021 EPS, 21.7 times estimated 2022 earnings of $21.65 and 19.0 times estimated 2023 earnings of $24.65 per share. The stock’s 52-week range is $320.35 to $509.23. The Dow component pays an annual dividend of $5.80 (yield of 1.24%). Total shareholder return for the past 12 months was 35.3%.