Investing

Earnings Previews: Halliburton, IBM, Steel Dynamics

Paul Ausick

Published: January 20, 2022 10:45 am

The news from U.S. airlines Thursday morning was mixed. United Airlines reported results that beat top-line and bottom-line estimates on Wednesday but issued downside guidance for both the first quarter and the fiscal 2022. Before Thursday’s opening bell, American Airlines reported similar results and guidance. Both traded down more than 1% shortly after the opening bell.
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Looking ahead to Thursday afternoon, we have previewed earnings reports due from CSX, Netflix and PPG Industries. We also have previewed reports due out Friday morning from Ally Financial, Huntington Bancshares and Schlumberger.

As usual, no earnings reports are scheduled for Friday afternoon. Here are our previews of three companies reporting results Monday.

Halliburton

Oilfield services firm Halliburton Co. (NYSE: HAL) is expected to report fourth-quarter results before markets open on Monday. The stock posted a new 52-week high on January 14, after bouncing all year long. The good news for Halliburton was that each bounce was higher than the previous one. If the reaction is like that given to competitor Baker Hughes Thursday morning, investors are going to be eyeing rising oil prices and the promise of added drilling more than the quarterly numbers. Halliburton’s share price is up almost 38% over the past 12 months.

Of 30 analysts covering the company, 22 rate the shares at Buy or Strong Buy and six have Hold ratings. At a recent price of around $28.20 a share, the upside potential based on a median price target of $30.50 is 8.2%. At the high target of $38, the implied gain is 34.8%.

Fourth-quarter revenue is forecast to come in at $4.09 billion, which would be up 5.9% sequentially and 26.2% higher year over year. Adjusted earnings per share (EPS) are forecast at $0.34, up 5.9% sequentially and 89% year over year. For the full year, analysts are forecasting EPS of $1.07, up nearly 65%, on sales of $15.10 billion, up 4.6%.

Halliburton stock trades at 26.5 times expected 2021 EPS, 16.4 times estimated 2022 earnings of $1.73 and 12.6 times estimated 2023 earnings of $2.25 per share. The stock’s 52-week range is $17.23 to $29.20, and the company pays an annual dividend of $0.18 (yield of 0.63%). Halliburton’s total shareholder return for the past year was 43.8%.

IBM

Shares of International Business Machines Corp. (NYSE: IBM) have added 12.7% over the past 12 months and were up nearly 17% in 2021. Both numbers include a share price plunge of 15% between mid-October and late November. IBM reports quarterly and full-year results after Monday’s closing bell.
The Kyndryl spinoff was completed in late October, likely contributing to IBM’s price drop. When it became clear that IBM had hived off something no one wanted, the move turned into a stroke of genius and Big Blue’s share price rose again. In the first few weeks of 2022, the stock has dropped by about 1.5%.

As might be expected, analysts remain in wait-and-see mode regarding IBM stock. Of 17 brokerages covering the firm, 11 have a Hold rating on the shares, and five rate the stock at Buy or Strong Buy. At a share price of around $131.60, the implied upside based on a median price target of $144.14 is about 9.5%. At the high price target of $170, the implied upside is about 29.2%.
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Fourth-quarter revenue is expected to come in at $13.09 billion, down 8.7% sequentially and 21.0% lower year over year. Adjusted EPS are forecast at $3.30, up 30.8% sequentially and 59.4% year over year. The current full-year estimates call for EPS of $9.99, up 15.2%, on sales of $70.24 billion, down 4.6%. These estimates reflect the Kyndryl spinoff.

IBM stock trades at 13.1 times expected 2021 EPS, 12.7 times estimated 2022 earnings $10.33 and 11.9 times estimated 2023 earnings of $11.00 per share. The stock’s 52-week range is $114.56 to $152.84. IBM pays an annual dividend of $6.56 (yield of 5.0%), and total shareholder return for the past 12 months is 11.3%.

Steel Dynamics

On August 13 of last year, Steel Dynamics Inc. (NASDAQ: STLD) posted an all-time high share price of nearly $75. Since then, the stock price has dropped by 18.5%, although shares are up more than 51% over the past 12 months. Prices for hot-rolled steel have fallen to their lowest level since last April, nearly $500 a ton below last year’s high posted in September. While the question at this time last year was how high would steel prices go, this year’s question is how low can it go. Steel Dynamics reports quarterly and full-year results after markets close Monday.

Analysts remain bullish on the stock, with eight of 12 rating the shares at Buy or Strong Buy and three more assigning a Hold rating. At a share price of around $59.40, the upside potential based on a median price target of $75 is 26.3%. At the high price target of $98, the upside potential is 65%.

The consensus fourth-quarter revenue estimate is $5.29 billion, up 3.9% sequentially and more than double year over year. Adjusted EPS are tabbed to come in at $5.78, up nearly 16.4% sequentially and five times higher than a year ago. For the full fiscal year, Steel Dynamics is expected to report EPS of $16.04, up more than 466%, on sales of $18.26 billion, up more than 90%.

The stock trades at 3.7 times expected 2021 EPS, 4.7 times estimated 2022 earnings of $12.50 and 8.9 times estimated 2023 earnings of $6.66 per share. The stock’s 52-week range is $33.77 to $74.37, and Steel Dynamics pays an annual dividend of $1.04 (yield of 1.75%). Total shareholder return over the past year was 50.7%.