Investing

Earnings Previews: Altria, Comcast, McDonald's, Southwest Airlines

Paul Ausick

Published: January 25, 2022 1:26 pm

Tuesday morning trading, it appears to be the latter. IBM got a nice bump after reporting a beat on both the top and bottom lines, and the stock traded up by around 2.7% shortly before noon on Tuesday. Steel Dynamics also scored a twin beat, but the stock traded down by 2.2%, even though guidance was strong.

As for companies that reported before markets opened Tuesday, American Express beat both profit and revenue estimates and traded higher by about 9.2%. GE beat on profits but missed on revenue and issued disappointing guidance. The stock got hammered and traded down about 6.5% Tuesday morning.

We already have previewed four more also scheduled to report results after Tuesday’s closing bell (Capital One, Microsoft, Navient and Texas Instruments) and four more reporting before the opening bell on Wednesday (Abbott Labs, AT&T, Boeing and Freeport-McMoRan). Earlier in the morning, we previewed four companies reporting results after markets close on Wednesday (Intel, Lam Research, Las Vegas Sands and Tesla).

Here is a look at four firms scheduled to report results first thing Thursday morning.

Altria

The maker and distributor of Marlboro cigarettes, Altria Group Inc. (NYSE: MO) has added about 27% to its share price over the past 12 months. The stock dropped sharply between September and late November but has risen by about 18% since then. Cigarettes are both inflation-proof and high dividend payers. Sad, perhaps, but true.

Sentiment on the company is positive, but not strong. Twelve of 18 analysts have put a Hold rating on the stock while the other six have rated the shares a Buy or Strong Buy. At a recent price of around $49.40 per share, the upside potential based on a median price target of $51.50 is about 4.3%. At the high price target of $68, the upside potential is nearly 37.7%.

Fourth-quarter revenue is forecast at $5.0 billion, down 9.6% sequentially and down 1% year over year. Adjusted earnings per share (EPS) are forecast to come in at $1.08, down 11.2% sequentially and up about 10% year over year. For the full 2021 fiscal year, Altria is expected to report EPS of $4.61, up about 5.7%, on sales of $21.04 billion, up 1%.

Altria stock trades at about 10.7 times expected 2021 EPS, 10.2 times estimated 2022 earnings of $4.84 and 9.6 times estimated 2023 earnings of $5.37 per share. The stock’s 52-week range is $40.46 to $52.59, and Altria pays an annual dividend of $3.60 (yield of 7.21%). Total shareholder return over the past year is 26.5%.

Comcast

Since early September, Comcast Corp. (NASDAQ: CMCSA) has seen its share price fall by nearly 20%. The good news is that’s better than Disney or ViacomCBS. Shares got a little boost on Monday following an upgrade from RBC Capital from Sector Perform to Outperform while maintaining a price target of $60. Free cash flow fell by about $1.3 billion sequentially in the third quarter. Not a good signal to investors.

Analysts are decidedly bullish on the stock, with 29 of 36 giving the shares a Buy or Strong Buy rating and another six have given the stock a Hold rating. At a share price of around $49.10, the upside potential based on a median price target of $62.50 is 27.3%. At the high price target of $75, the upside potential is 52.7%.

Fourth-quarter revenue is forecast to come in at $29.64 billion, down 2.2% sequentially and up 6.9% year over year. Adjusted earnings per share (EPS) are forecast at $0.74, down 15.3% sequentially and up 32% year over year. For the full 2021 fiscal year, analysts are expecting Comcast to report EPS of $3.20, up 22.4%, on sales of $115.67, up 11.7%.

Comcast stock trades at about 15.3 times expected 2021 EPS, 13.2 times estimated 2022 earnings of $3.7, and 11.7 times estimated 2023 earnings of $4.20 per share. The stock’s 52-week range is $46.29 to $61.80. Comcast pays an annual dividend of $1.00 (yield of 2.00%). Total shareholder return over the past year is 1.9%

Shares of Dow component McDonald’s Corp. (NYSE: MCD) have added about 19.3% to their share price over the past 12 months, including a drop of about 7.8% since January 6. That’s the best performance among five top restaurant brands, including Starbucks. Over the past two years (pre-pandemic) McDonald’s stock is up 32%, again the best among its top competitors.

Analysts are solidly bullish on the stock with 28 of 37 giving the stock a Buy or Strong Buy rating while the other nine rate the shares at Hold. At a share price of around $249.10, the upside potential based on a median price target of $280 is 12.4%. At the high price target of $314, the upside potential is about 26%.

Fourth-quarter revenue is forecast at $6.03 billion, down 2.7% sequentially and up 13.6% year over year. Adjusted EPS are pegged at $2.34, down 15% sequentially and up 37.6% year over year. For the full 2021 fiscal year, consensus estimates call for EPS of $9.41, up 55.5%, on revenue of $23.24 billion, up 21%.

McDonald’s stock trades at about 26.5 times expected 2021 EPS, 24.5 times estimated 2022 earnings of $10.17 and 22.5 times estimated 2023 earnings of $11.07 per share. The stock’s 52-week range is $202.73 to $271.15. McDonald’s pays an annual dividend of $5.52 (yield of 2.18%). Total shareholder return over the past 12 months is 19.6%.

Southwest Airlines

Shares of Southwest Airlines Co. (NYSE: LUV) have dropped more than 8% over the past 12 months, including a spike to a gain of more than 30% in early April. A resurgence in the coronavirus pandemic and rising fuel costs have weighed on the shares since the middle of last year. Recent flight cancellations and still-rising fuel costs continue to dent Southwest’s comeback. Of the five major U.S.-based airlines, Southwest is the best performer since the pandemic began some two years ago. Since January of 2020, the airline’s stock is down 18.7% while runner-up Jet Blue is down 27.5% during the same period.

Analysts are upbeat on the stock, however, with 14 of 22 giving the shares Buy or Strong Buy ratings and another two assigning a Hold rating to the stock. At a share price of around $43.40, the upside potential based on a median price target of $58.50 is 34.8%. At the high price target of $70, the upside potential is 61.3%.

Fourth-quarter revenue is forecast at $4.99 billion, up 6.7% sequentially and up 148% year over year. Analysts expect Southwest to post EPS of $0.07, better than the $0.23 per share loss in the prior quarter, and much better than the $1.29 loss per share a year ago. For the full 2021 fiscal year, analysts are expecting the company to report a loss per share of $2.20 compared to last year’s per-share loss of $6.22. Revenue is forecast to rise nearly 74% to $15.73 billion.

Southwest stock trades at about 23.9 times estimated 2022 earnings of $1.83 and 12.2 times estimated 2023 earnings of $3.58 per share. The stock’s 52-week range is $38.66 to $64.75, and Southwest does not pay a dividend. Total shareholder return over the past 12 months is negative 4.3%.