The three major U.S. equity indexes closed significantly higher on Monday, salving the wounds of Friday’s big sell-off. The Dow Jones industrials ended the day up 1.86%, the S&P 500 closed 2.65% higher and the Nasdaq jumped 3.43%. All 11 sectors closed higher, with consumer cyclicals (4.23%) and real estate (3.9%%) posting the biggest gains. Consumer staples (1.11%) and energy (1.22%) had the smallest gains.
The first economic data of note due this week is the monthly report on new housing starts and building permits on Wednesday. The monthly report on existing home sales is due Thursday.
All three major indexes were trading higher early in Tuesday’s regular session.
Before markets opened Tuesday morning, Goldman Sachs beat top-line and bottom-line estimates, but earnings per share (EPS) fell by more than 40% year over year and revenue dropped by 12%. CEO David Solomon also noted the bank’s restructuring, confirming that the investment banking and trading segments would be merged, as will the asset management and wealth management segments. Shares traded up more than 43%.
Johnson & Johnson beat estimates on both the top and bottom lines. The health care giant also guided fiscal-year EPS and revenues in line with consensus estimates. Shares traded down around 1%.
Lockheed Martin beat the consensus EPS estimate but fell short on revenue. The company still expects free cash flow of $6.1 billion, and it recently boosted its share buyback program to $14 billion. Shares traded higher by almost 3%.
After markets close on Tuesday, results from J.B. Hunt, Netflix and United Air Lines are due.
First thing Wednesday morning, Abbott Labs, ASML, Baker Hughes and Procter & Gamble will report quarterly results.
We also have previewed three companies (IBM, Kinder Morgan and Tesla) set to report earnings after U.S. markets close Wednesday.
Here is a look at three companies on deck to report results before U.S. markets open on Thursday.
American Airlines
Over the past 12 months, American Airlines Group Inc. (NASDAQ: AAL) has seen its share price decline by about 34%. Rival Delta reported quarterly results last week that were a bit soft but issued strong fourth-quarter guidance, especially for international and business travel. United Airlines, which reports results after markets close Tuesday, is expected to get a boost from its results, and last week, American raised its third-quarter revenue guidance. Travel is back (last Sunday’s 2.5 million passengers was the highest total since February 2020), and ticket prices are high. What more could an airline ask for going into the holiday travel season?
Analysts remain extremely cautious on American. Of 20 brokerages covering the stock, 14 have a Hold rating and just three have Buy or Strong Buy ratings. At a recent share price of around $13.20, the upside potential based on a median price target of $14.75 is 11.7%. At the high target of $28.00, the upside potential is 112%.
Third-quarter revenue is forecast at $13.46 billion, which would be up 0.3% sequentially and 50% higher year over year. American is expected to post adjusted EPS of $0.56, down 26.9% sequentially but much better than last year’s third-quarter loss of $0.95 per share. For the full 2022 fiscal year, the company is expected to post a loss of $0.74 compared to the year-ago loss of $8.38 on revenue of $48.16 billion, up 61.2%.
American stock trades at about 9.8 times estimated 2023 earnings of $1.35 and 5.1 times estimated 2024 earnings of $2.60 per share. The stock’s 52-week trading range is $11.65 to $22.35. The company does not pay a dividend. The company’s total return for the past 12 months was negative 33.9%.
AT&T
Shares of AT&T Inc. (NYSE: T) have declined by more than 40% over the past 12 months. Since posting a 52-week high in early June, the shares have dropped by around 29%.
The company plans to get back into the telecom business by grabbing its share of the nearly $100 billion in federal dollars earmarked for expanding high-speed network services to America’s small towns and rural areas. AT&T needs the help: its stock posted a 52-week low last week and has been sagging for nearly 18 months now. Unlike rivals T-Mobile and Verizon, AT&T plans to boost its fiber offerings rather than its wireless network. The costs are much higher, though.
Sentiment on the stock remains moderately positive. Of 31 brokerages surveyed, 12 have a Buy or Strong Buy rating while 17 rate the shares at Hold. At a share price of around $15.30, the implied upside based on a median price target of $22.00 is nearly 44%. At the high price target of $28.00, the upside potential is about 83%.
Third-quarter revenue is forecast at $29.86 billion, up 0.7% sequentially but down 25.3% year over year. Adjusted EPS are forecast at $0.61, down 5.7% sequentially and by about 30% year over year. For the full 2022 fiscal year, EPS are expected to come in at $2.55, down 25.1%, on sales of $126.01 billion, down about 25.4%.
AT&T stock trades at about 6.0 times expected 2022 EPS, 6.1 times estimated 2023 earnings of $2.52 and 5.9 times estimated 2024 earnings of $2.58. The stock’s 52-week range is $14.46 to $27.48. AT&T’s current annual dividend is $1.11 (yield of 7.4%). Total shareholder return for the past 12 months was negative 15.8%.
Freeport-McMoRan
Over the past 12 months, shares of copper and gold miner Freeport-McMoRan Inc. (NYSE: FCX) have dropped by about 25%. Both gold and copper prices have tumbled from their recent peaks of early March. Copper has fallen by about 25% over the past 12 months, all of the decline coming since June. Gold prices are down about 6.5% year over year but have slipped by nearly 11% since June.
Falling construction in China has weighed on copper prices, and bearish sentiment on the commodity is based on the global economic slowdown. The bull case is longer term, seeing a doubling of demand by 2035 with reasonably steady annual growth largely due to investment in clean energy from wind and solar.
Of 20 analysts covering the stock, nine have placed a Buy or Strong Buy rating and 10 more rate the shares at Hold. At a share price of around $28.80, the implied upside based on a median price target of $34.00 is 18%. At the high price target of $55.00, the upside potential reaches 91%.
Third-quarter revenue is forecast at $4.86 billion, down 10.3% sequentially and by 20.0% year over year. Adjusted EPS are forecast at $0.27, down 53% sequentially and nearly 70% lower year over year. For the full 2022 fiscal year, analysts are expecting EPS of $2.51, down 19.7%, on sales of $22.34 billion, down 2.2%.
The stock trades at about 11.5 times expected 2022 EPS, 14.6 times estimated 2023 earnings of $1.98 and 11.9 times estimated 2024 earnings of $2.42. The stock’s 52-week range is $24.80 to $51.99. The company pays an annual dividend of $0.60 (yield of 2.17%). Total shareholder return for the past 12 months was negative 24.1%.
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