The three major U.S. equity indexes closed slightly lower on Wednesday. The Dow Jones industrials ended the day down 0.1%%, the S&P 500 closed 0.33% lower and the Nasdaq retreated 0.09%. Seven of 11 sectors closed lower, with utilities (3.42%) and real estate (1.39%) posting the biggest losses. Energy and consumer staples posted the best gains, 0.75% and 0.48%, respectively.

The minutes of the Federal Reserve’s Federal Open Market Committee meeting were released in the afternoon and did not contain any surprises. The morning’s producer price index came in higher than expected, indicating that inflation continues among wholesalers.
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Thursday’s consumer price index (CPI) report for September also came in higher than expected, up 0.4% month over month. Inflation’s 12-month pace is up to 8.2%, above economists’ consensus of 8.1%. New claims for jobless benefits are forecast to rise slightly to 225,000.

UBS raised its rating on Norwegian Cruise Lines from Neutral to Buy on Wednesday, giving the company and its rivals, Carnival and Royal Caribbean, a double-digit share price boost.

All three major indexes were trading higher until the CPI report was released. They were trading lower at Thursday’s opening bell.

Before markets opened, BlackRock reported results that beat both top-line and bottom-line estimates. The asset management firm reported net inflows of $248 billion for the first nine months of 2022. The stock was trading down by about 3% Thursday.

Delta Air Lines missed the consensus earnings per share (EPS) estimate but did beat on revenue. Sales were up nearly 53% year over year. Guidance for the fourth quarter was in line with estimates, and the airline said that it is on track to hit fiscal 2024 targets of $7.00 in adjusted EPS and $4 billion in free cash flow. Shares traded up about 1.9% early Thursday.

Taiwan Semiconductor Manufacturing posted EPS about 4% above estimates and a revenue jump of 48%. TSMC raised fourth-quarter revenue guidance but lowered its capex budget by 10% to $36 billion. The company also said it received a one-year exemption from the new U.S. law prohibiting sales of advanced chips to China. The stock traded down about 0.3% Thursday.

Walgreens beat estimates on both the top and bottom lines. For fiscal 2023 (which ends next August), the company forecast EPS in line with estimates and core business growth of 8% to 10%. That number is hobbled by the strong dollar and an expected headwind of negative 15% to 17% from a lower volume of COVID-19 vaccinations. Shares traded up 1.6% Thursday morning.

Here are our previews of four big banks and one Dow health care provider that will be reporting quarterly results first thing Friday morning: Citigroup, JPMorgan, Morgan Stanley, UnitedHealth and Wells Fargo.
The following three companies are set to report quarterly results before Monday’s opening bell.

Bank of America

Shares of Bank of America Corp. (NYSE: BAC) have dropped by about 31.4% over the past 12 months. Like the other big banks, the decline in investment banking has hit revenue totals hard, and the mostly dormant IPO market is not expected to turn around in either the third or fourth quarters. Coupled with lower mortgage lending, expectations are not high, nor are expectations for the current quarter.
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Analysts are bullish on BofA, with 17 of 26 putting a Buy or Strong Buy rating on the shares. The rest rate the stock at Hold. At a recent price of around $29.90 a share, the implied gain based on a median price target of $40.00 is 33.8%. At the high price target of $55.00, the implied upside is almost 84%.

Third-quarter revenue is forecast at $23.48 billion, which would be up by about 3.5% sequentially and by 3.1% year over year. Adjusted EPS are expected to come in at $0.78, up 6.2% sequentially but down 8.2% year over year. For the full 2022 fiscal year, analysts forecast EPS of $3.18, down 11%, on revenue of $93.58 billion, up about 5%.

BofA’s stock trades at 9.4 times expected 2022 EPS, 8.1 times estimated 2023 earnings of $3.69 and 7.4 times estimated 2024 earnings of $4.04 per share. The stock’s 52-week trading range is $29.48 to $50.11. The low was posted Wednesday. BofA pays an annual dividend of $0.88 (yield of 2.96%). Total shareholder return for the past 12 months was negative 29.9%.

Bank of New York Mellon

Bank of New York Mellon Corp. (NYSE: BK) has dropped nearly 33% from its share price over the past 12 months and 36% to date in 2022. Like BofA, the bank posted a new 52-week low on Wednesday after receiving authorization from the Kansas City Fed to serve as a custody bank of cryptocurrency. Custodia, a crypto bank that has been waiting for nearly two years for the same designation, immediately filed suit. For BNY Mellon, it is not that big a deal, according to the Wall Street Journal. The bank has about $43 trillion in assets under custody or administration. The potential from crypto tops out at $920 billion.

Of the 17 analysts covering the stock, only eight awarded the shares a Buy or Strong Buy rating, and the other nine have Hold ratings. The median price target on the stock is $46.00, and at a recent price of around $37.30 the upside potential is around 23.3%. At the high target of $61.00, the potential upside is nearly 63.5%.
Third-quarter revenue is forecast at $4.2 billion, down about 1.7% sequentially almost 4% higher year over year. Adjusted EPS are expected to come in at $1.08, a decline of 5.8% sequentially and a dip of 3.4% year over year. For the full 2022 fiscal year, analysts anticipate EPS of $4.22, up 0.9%, on revenue of $16.61 billion, up 4.3%.
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The bank’s stock trades at 8.8 times expected 2022 EPS, 8.0 times estimated 2023 earnings of $4.68 and 7.1 times estimated 2024 earnings of $5.22 per share. The 52-week range is $37.27 to $64.63. BNY Mellon pays an annual dividend of $1.48 (yield of 3.85%). Total shareholder return for the past 12 months was negative 30.9%.

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Charles Schwab

Charles Schwab Corp. (NYSE: SCHW) has seen its share price fall by about 7% over the past 12 months. Since posting a 52-week high in mid-February, the shares have dropped by more than 25%. Analysts began boosting the stock in late August with new coverage and, in several cases, raised ratings. The company’s new net assets rose 37% month over month, and new brokerage accounts rose 17%.

The firm was sued earlier this month for violating California’s Invasion of Privacy Act for recording and using callers’ biometric voice prints to verify callers’ identities and determining whether they are making true statements without first asking for permission to do so.

Analysts are mostly bullish on the stock, with 12 of 18 rating the shares at Buy or Strong Buy and the rest having Hold ratings. At a share price of around $71.90, the upside potential based on a median price target of $86.50 is 20.3%. At the high target of $100.00, the upside potential reaches 39.1%.

Third-quarter revenue is forecast at $5.42 billion, up 6.3% sequentially and by about 18.6% year over year. Adjusted EPS are forecast to rise by 8.7% to $1.05 sequentially and by 25.0% year over year. The current estimates for the 2022 fiscal year call for revenue of $20.83 billion, up 12.5%, and EPS of $3.92, up more than 20%.

Schwab trades at 18.3 times expected 2022 EPS, 14.6 times estimated 2023 earnings of $4.92 and 13.3 times estimated 2024 earnings of $5.42 per share. The stock’s 52-week range is $59.35 to $96.24. Schwab pays an annual dividend of $0.88 (yield of 1.23%). Total shareholder return for the past year is negative 6%.

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