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.
Here is a look at three companies set to report results after U.S. markets close Wednesday.
IBM
Shares of International Business Machines Corp. (NYSE: IBM) have slipped by around 9.1% over the past 12 months. The stock’s 52-week low and 52-week high were both posted about a year ago, and the shares have been trading in a fairly narrow range ever since.
Big Blue has acquired six companies so far this year, the most recent being a Dallas-based digital product engineering and services firm. In the two and a half years that CEO Arvind Krishna has led the company, IBM has acquired more than 25 companies, about half in the company’s consulting business.
Of 17 brokerages covering IBM stock, 10 have a Hold rating and six rate the shares at Buy or Strong Buy. At a recent share price of around $121.50, the implied upside based on a median price target of $140.00 is about 15.2%. At the high price target of $160.00, the implied upside is 31.7%.
24/7 Wall St.Third-quarter revenue is expected to come in at $13.56 billion, which would be down 12.7% sequentially and 23.2% lower year over year. Adjusted EPS are forecast at $1.80, 22.1% sequentially, and down 28.6% year over year. The current full-year estimates call for EPS of $9.30, up 17.8%, on sales of $59.82 billion, up about 4.3%.
IBM stock trades at about 13.1 times expected 2022 EPS, 12.2 times estimated 2023 earnings of $9.97 and 11.5 times estimated 2024 earnings of $10.53 per share. The stock’s 52-week trading range is $114.56 to $144.94. IBM pays an annual dividend of $6.60 (yield of 5.43%), and total shareholder return for the past 12 months is negative 7.5%.
Kinder Morgan
Energy infrastructure company Kinder Morgan Inc. (NYSE: KMI) has added more than 10% to its share price over the past 12 months. Late last month, the company sold a 25.5% stake in its Elba Liquefaction business to an unnamed buyer for $565 million. Kinder Morgan plans to use the money to pay down short-term debt and make further acquisitions. Among the popular acquisition targets for energy firms are renewable natural gas (RNG) producers. Kinder Morgan acquired one in August for $135 million, and BP purchased a much larger one, Archaea, on Monday for $3.3 billion in cash.
Of 21 brokerages covering Kinder Morgan stock, 14 have Hold ratings and just five have Buy or Strong Buy ratings. At a share price of around $17.50, the upside potential based on a median price target of $20.00 is 14.3%. At the high price target of $25.00, the implied upside is 42.9%.
Consensus estimates call for third-quarter revenue of $4.56 billion, down 11.4% sequentially but up 19.4% year over year, and adjusted earnings per share (EPS) of $0.29, up 6.1% sequentially and by 31.8% year over year. For the full 2022 fiscal year, analysts forecast EPS of $1.17, down 11.3%, on sales of $18.33 billion, up 10.4%.
Kinder Morgan stock trades at about 14.9 times expected 2022 EPS, 14.6 times estimated 2023 earnings of $1.20 and 14.3 times estimated 2024 earnings of $1.22. The stock’s 52-week range is $15.01 to $20.20. Kinder Morgan pays an annual dividend of $1.11 (yield of 6.46%). Total shareholder return over the past 12 months was 0.8%.
Tesla
Shares of Tesla Inc. (NASDAQ: TSLA) reached an all-time high last November. Since then, the stock price has dropped by nearly 38%. Even so, the shares are up more than 1,150% over the past three years.
While revenue and profits are going to continue growing, Tesla is trailing far behind China’s BYD (Berkshire Hathaway owns 19% of BYD), which Tuesday morning reported net profit growth of up to 365% year over year to $820 million. BYD’s market cap is now greater than that of GM and Ford combined, but at around $100 billion it is less than a sixth of Tesla’s.
Sentiment toward Tesla remains mixed. Of 37 analysts covering the stock, 22 have a Buy or a Strong Buy rating and 11 more rate the shares at. At a share price of around $219.40, the implied upside based on a median price target of $316.33 is 44.2%. Based on a high price target of $530.00, the upside potential is about 142%.
Analysts expect Tesla to post third-quarter revenue of $21.96 billion, up nearly 30% sequentially and almost 60% higher year over year, and adjusted EPS of $1.01, up 33.6% sequentially and by 62.9% year over year. For the full 2022 fiscal year, current estimates call for EPS of $4.26, up nearly 89%, on sales of $84.64 billion, up 57.3%.
Tesla stock trades at about 51.5 times expected 2022 EPS, 37.5 times estimated 2023 earnings of $5.84 and 30.8 times estimated 2024 earnings of $7.12. The stock’s 52-week range (split-adjusted) is $204.16 to $414.50. Tesla does not pay a dividend. Total shareholder return over the past year is negative 21.9%.
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