The three major U.S. equity indexes closed sharply higher on Thursday, following a sharply lower opening. The Dow Jones industrials ended the day up 2.83%, the S&P 500 closed 2.6% higher and the Nasdaq saw a gain of 2.23%. All 11 sectors closed higher, with financials (4.14%) and energy (4.08%) posting the biggest gains. Consumer cyclicals (0.98%) and consumer staples (1.61%) posted the smallest gains.

The consumer price index (CPI) for September came in hotter than expected, but investors appear to have treated that as a good entry point for equities.

Retail sales were flat month over month in September, missing the consensus estimate for a rise of 0.2%.

All three major indexes were trading lower about 90 minutes after the opening bell.

Before markets opened on Friday, UnitedHealth reported better-than-expected adjusted earnings per share (EPS) and revenues. The company also reported fiscal 2022 guidance in line with expectations. The stock traded up about 2.6%.

Wells Fargo also reported beats on both the top and bottom lines and a provision for credit losses of $385 million. Shares traded up nearly 2.9%.

JPMorgan topped both top-line and bottom-line estimates. The bank set aside $808 million to backstop potential loan losses. Shares traded 1.7% higher Friday morning.

Citigroup posted better-than-expected EPS and revenue as well. Its provision for loan losses totaled $370 million. The stock traded up by about 1.3%.

Morgan Stanley missed estimates on both the top and bottom lines. The bank’s provision for loan losses was $34 million, but a 30% drop in investment banking revenue sealed its fate. Shares traded down some 4%.

We already have previewed what to expect when Bank of America, BNY Mellon and Charles Schwab  report quarterly results before markets open on Monday.

Here is a preview for four companies set to report quarterly results first thing Tuesday morning.

Albertsons

Grocery store operator Albertsons Companies Inc. (NYSE: ACI) has added about 3.6% to its share price over the past 12 months. Over the past six months, however, Albertsons stock is down 13.7%, while shares of rival Kroger are down more than 20%.

The big news Friday is the company’s $24.6 billion merger with Kroger announced Friday morning. The culmination of that deal is not expected for nearly 18 months, and it is sure to be closely watched for all that time. Albertsons’ sales growth has slowed since the pandemic, but inflation tends to help grocers because people spend first on food and shelter, and raising food prices also can raise margins.
Of 20 analysts covering Albertsons stock, 10 have a Hold rating and eight rate the shares at Buy or Strong Buy. At a recent price of around $28.60 a share, the upside potential based on a median price target of $32.00 is 11.9%. Based on a high price target of $44.00, the upside potential is about 5.38%. The merger deal has pretty much set the price target, so these numbers do not mean much.

Fiscal 2023 second-quarter revenue is forecast at $17.69 billion, which would be down 24% sequentially but about 7.1% higher year over year. Adjusted EPS are tabbed at $0.64, down 35.7% sequentially and by 19% year over year. For the full fiscal year ending in February, Albertsons is expected to post EPS of $2.91, down 5.3%, on sales of $76.16 billion, up by almost 6%.

Albertsons stock trades at 9.3 times expected 2023 EPS, 9.0 times estimated 2024 earnings of $2.99 and 9.1 times estimated 2025 earnings of $2.97 per share. The stock’s 52-week trading range is $24.34 to $37.99. Albertson’s pays an annual dividend of $0.48 (yield of 1.85%). Total shareholder return for the past year was negative 1.2%.

Goldman Sachs

Goldman Sachs Group Inc. (NYSE: GS) has posted a 12-month share price decline of about 19.5%. The continued slowdown in IPOs and M&A likely hit will the firm’s investment banking revenue harder than the rise in net interest income will boost its overall revenue. A new initiative launched this week with Apple to offer a high-yield savings account to Apple Card holders is unlikely to bear fruit for a few quarters. Even then, it is unlikely to make up the revenue declines in investment banking.

Of the 26 analysts covering the firm, 18 have a rating of Buy or Strong Buy and seven more have Hold ratings. At a share price of around $305.40, the upside potential based on a median price target of $370.00 is 21.2%. At the high price target of $483.00, the implied upside is 58.2%.

Third-quarter revenue is forecast to come in at $111.53 billion, a decline of about 2.8% sequentially and a drop of 15.3% year over year. Adjusted EPS are forecast at $7.51, down 2.8% sequentially and 98.8% lower year over year. The current estimates for the 2022 fiscal year call for revenue of $47.26 billion, down 20.4%, and EPS of $33.67, down about 43.4%.

The stock trades at 9.1 times expected 2022 EPS, 8.2 times estimated 2023 earnings of $37.34 and 7.4 times estimated 2024 earnings of $41.60. Its 52-week trading range is $277.84 to $426.16. Goldman Sachs pays an annual dividend of $10.00 (yield of 3.4%). Total shareholder return for the past 12 months was negative 19.4%.

Johnson & Johnson

Over the past 12 months, pharmaceuticals giant and Dow component Johnson & Johnson (NYSE: JNJ) has added about 3.3% to its share price. Two weeks ago, the company announced that its spin-off consumer health company will be named Kenvue. The spin-off is widely regarded as a good move for what will be left behind. Johnson & Johnson’s pharmaceutical and medical device businesses are growing much faster than the market for Band-Aids and Tylenol. A major overhang is also gone with Kenvue: thousands of lawsuits related to its baby powder, a consumer product.
Of 20 brokerages covering Johnson & Johnson stock, eight have Buy or Strong Buy ratings and the rest rate the shares at Hold. At a share trading price of around $165.10, the upside potential based on a median price target of $181.90 is about 10.2%. At the high target of $215.00, the upside potential is 30.2%.

Third-quarter revenue is forecast at $23.5 billion, down 2.2% sequentially and up 0.6% year over year. Adjusted EPS are expected to come in at $2.50, down 3.4% sequentially and by 3.8% year over year. For the full 2022 fiscal year, analysts expect EPS of $10.05, up 2.5%, on sales of $95.26 billion, up 1.6%.

The shares trade at 16.4 times expected 2022 EPS, 15.6 times estimated 2023 earnings of $10.57 and 15.0 times estimated 2024 earnings of $11.00 per share. The stock’s 52-week range is $155.72 to $186.69. The company pays an annual dividend of $4.52 (yield of 2.78%). Total shareholder return for the past year was 5.5%.

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Lockheed Martin

Over the past 12 months, shares of Lockheed Martin Corp. (NYSE: LMT) have added about 9.7%, but they are down 13.6% since posting a 52-week high in early March and down 5.6% since mid-September. The defense giant’s second-quarter results were disappointing, to put it mildly. Sales were down nearly 10% year over year, and operating profit was down more than 10%. The company blamed supply chain issues and contract negotiation timing. Will an expected turnaround materialize in the third quarter?

Just five of 20 brokerages have a Buy or Strong Buy rating, compared to 13 that rate the shares at Hold. At a share price of around $396.10, the upside potential based on a median price target of $448.50 is 13.2%. At the high price target of $539.00, the upside potential is 36.1%.

Third-quarter revenue is forecast at $16.69 billion, up about 8.1% sequentially and 3.9% higher year over year. Adjusted EPS are expected to come in at $6.73, up 6.5% sequentially but down 2.9% year over year. For the full 2022 fiscal year, Lockheed is expected to post EPS of $26.71, down 2.8%, on sales of $65.32 billion, down 2.6%.

Lockheed stock trades at 14.8 times expected 2022 EPS, 14.1 times estimated 2023 earnings of $27.97 and 13.8 times estimated 2024 earnings of $28.66 per share. Shares have traded in a 52-week range of $324.23 to $479.99, and Lockheed pays an annual dividend of $12.00 (yield of 2.96%). Total shareholder return over the past 12 months was 12.1%.

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