After markets closed on Wednesday, Alcoa reported earnings that beat the consensus estimate but missed the revenue estimate. A no-growth outlook due to withdrawing from its Russian business hurt the stock, which traded down by about 9% early Thursday. Railroad operator CSX beat on both the top and bottom lines and shares traded higher by 5% in the morning. Pipeline and terminal operator Kinder Morgan also beat top-line and bottom-line estimates, and it increased its dividend payment to $1.11 annually. The current dividend yield is around 5.5%. Shares traded up by more than 1%.
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Tesla hammered estimates, beating both by substantial margins. The stock traded up about 11% Thursday morning. United Airlines traded up more than 11% even though it missed on analysts’ estimates. The big news was the announcement that the airline expects to post a profit in fiscal 2022, its first since 2019.
Before markets opened Thursday, American Airlines followed United’s example and beat on both the top and bottom lines. Total revenue in March marked the first time monthly sales surpassed pre-pandemic totals. Shares were trading up more than 9%. AT&T missed on both the top and bottom lines, but shares traded higher by more than 3%. The divestment of Warner Media confused things, but investors liked what they heard about the company’s telecom business.
Copper and gold miner Freeport-McMoRan beat both top-line and bottom-line estimates Thursday morning. The company’s capital expenditures outlook is more than double 2021 spending and exceeds by more than $1 billion growth in operating cash flow. That may be why the stock traded down by more than 6% early Thursday.
NextEra Energy posted a GAAP loss of $0.23 per share in the first quarter but managed to beat the adjusted earnings per share (EPS) estimate of $0.72. High natural gas prices drove up operating costs. The stock traded down over 2% Thursday morning.
We have had a look at three companies set to report earnings after markets close Thursday or before they open on Friday: FirstEnergy, Regions Financial, and Snap. Another five firms are set to report quarterly results before Friday’s opening bell: American Express, Cleveland-Cliffs, Newmont, Schlumberger, and Verizon.
Here is a look at three firms set to report March-quarter results before Monday’s opening bell.
Activision Blizzard
Shortly before Activision Blizzard Inc. (NASDAQ: ATVI) reported fourth-quarter results in January, Microsoft announced an all-cash offer of nearly $70 billion ($95 a share) to acquire the company. Since the deal was announced, Activision’s stock price has gone from around $65 a share to about $79. That’s not how share prices are supposed to behave when a cash-rich buyer offers a 45% premium.
Potential regulatory issues and a questionable trade in Activision options that may have involved CEO Bobby Kotick represent downside risks to the deal. Activision settled sexual harassment and discrimination allegations last month for about $18 million, and on Wednesday, a federal judge tossed a class-action lawsuit from shareholders who had alleged that they had been misled. Investors aren’t willing to back this horse fully yet.
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Of 26 brokerages covering the firm, fewer than half (11) have Buy or Strong Buy ratings on the stock. The other 15 have Hold ratings. That is essentially unchanged since the Microsoft deal was announced. At a recent share price of around $78.90, the upside potential based on Microsoft’s offer of $95 is 20.4%, unchanged since Activisions’ last earnings report. At the high price target of $100, the upside potential is 23.7%. Someone is obviously hoping for (not expecting) a higher offer for the company. What are the odds?
Analysts have forecast first-quarter revenue of $1.8 billion, which would be down about 27.5% sequentially and 13.0% lower year over year. Adjusted earnings per share (EPS) are forecast at $0.70, down 44.0% sequentially and 16.7% year over year. For the full 2022 fiscal year, consensus estimates call for EPS of $3.57, down 4.1%, on sales of $8.63 billion, up 3.3%.
Activision stock trades at 22.1 times expected 2022 EPS, 18.1 times estimated 2023 earnings of $4.35 and 17.6 times estimated 2024 earnings of $4.47. The stock’s 52-week range is $56.40 to $99.46, and the company pays an annual dividend of $0.47 (yield of 0.6%). Total shareholder return for the past year was negative 16%.
Coca-Cola
Long-time Warren Buffett favorite and Dow Jones industrial average component Coca-Cola Co. (NYSE: KO) has posted a share price gain of about 26% over the past 12 months. Since touching a recent bottom in early December, the stock is up 27%. Coke’s free cash flow per share in the fourth quarter was $0.64. In February, the company announced a dividend increase of 5% to $0.44 per share and said it expected to resume share buybacks this year totaling up to $500 million. Coca-Cola stock is among eight Dividend Aristocrats that made our recent buy list.
Analysts are bullish on the stock, with 18 of 26 analysts giving the stock a Buy or Strong Buy rating. Another seven rate the shares at Hold. At a share price of around $66.00, the upside potential based on a median price target of $68.00 is 3.0%. At the high price target of $76.00, the upside potential is 15.2%.
First-quarter revenue is forecast at $9.83 billion, up 3.8% sequentially and 9.0% higher year over year. Adjusted EPS are pegged at $0.58, up nearly 29% sequentially and 5.5% year over year. For full fiscal 2022, consensus estimates call for EPS of $2.45, up 5.7%, on revenue of $41.79 billion, up 8.1%.
Coca-Cola stock trades at 26.9 times expected 2022 EPS, 25 times estimated 2023 earnings of $2.63 and 23.6 times estimated 2024 earnings of $2.80 per share. The stock’s 52-week range is $52.28 to $66.24, with that high posted on Wednesday. Coca-Cola pays an annual dividend of $1.68 (yield of 2.67%). Total shareholder return for the past year was 25.5%.
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Otis Worldwide
Since Otis Worldwide Corp. (NYSE: OTIS) was spun off from the former United Technologies before the latter’s merger with Raytheon in April of 2020, the stock has appreciated by 71%, including a decline of nearly 18% since late last August. Last week, the company announced that a tender offer for its Spanish subsidiary has delivered 95.5% of the shares to Otis. Earnings growth has slowed slightly but is expected to increase in every quarter this fiscal year.
Of 15 brokerages covering the stock, eight have a Buy or Strong Buy rating on the shares and another six have Hold ratings. At a share price of around $75.50, the upside potential based on a median price target of $91.00 is 20.5%. At the high price target of $100, the upside potential is 32.5%.
First-quarter revenue is forecast to total $3.45 billion, down about 3.4% sequentially but up about 1.2% year over year. Adjusted EPS are forecast at $0.74, up 2.5% sequentially and 2.8% higher year over year. For 2022, EPS is forecast at $3.27, up 8.7%, on sales of $14.6 billion, up 2.2%.
Otis stock trades at 23.1 times expected 2022 EPS, 20.7 times estimated 2023 earnings of $3.66 and 19.2 times estimated 2024 earnings of $3.94 per share. The stock’s 52-week range is $69.83 to $92.84, and Otis pays an annual dividend of $0.92 (yield of 1.27%).
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