The three major U.S. equity indexes closed higher on Monday after bouncing lower in the early going. The Dow Jones industrials ended the day up 1.34%, the S&P 500 closed 1.19% higher and the Nasdaq rose 0.86%. Nine of 11 sectors closed higher, led by health care (1.91%) and consumer staples (1.79%). Materials and real estate posted losses on the day of 0.62% and 0.09%, respectively.
Tuesday’s main bit of economic news comes after markets open. The Conference Board’s Consumer Confidence Index is expected to slip from September’s reading of 108 to 105.5.
The advance estimate (first of three) on third-quarter gross domestic product is due before markets open Thursday. Economists’ consensus estimate calls for a year-over-year increase of 2.3%. On Friday, the monthly report on personal consumption expenditures (PCE) will be released before U.S. markets open. Income is expected to rise by 0.3%, and core PCE inflation is forecast to rise by 0.4%. Both estimates match August readings.
The three major indexes opened mixed Tuesday morning, with the Dow trading lower and the Nasdaq and the S&P 500 trading higher.
After U.S. markets closed Monday, Cadence Design reported that earnings per share (EPS) and revenue came in above estimates. Fourth-quarter guidance met the low end of EPS expectations, while fiscal-year guidance came in above expectations. The stock traded down about 4% about 90 minutes after Tuesday’s opening bell.
Discover Financial missed the consensus EPS estimate but did beat on revenue. Loan totals were up 17% year over year and 6% sequentially. Total net charge-off rate was 1.71%, up 25 basis points year over year. Thirty-day delinquencies came in at 2.11%, up 63 basis points year over year and 35 basis points sequentially. Shares traded up more than 3%.
Range Resources also missed on EPS but beat on revenue estimates. The company stuck to its flat production target for the year and expects capital spending at around $480 million, the high end of its previously announced range. The stock traded up 0.7% Tuesday morning.
Before markets opened Tuesday morning, Coca-Cola beat estimates on both the top and bottom lines. Coke expects to deliver organic revenue growth of 14% to 15% for the full fiscal year. Shares traded up about 1.1%.
UPS reported better-than-expected EPS but missed the consensus revenue estimate. The company reaffirmed fiscal 2022 guidance and shares traded up about 2.5% early Tuesday.
General Electric missed the consensus earnings estimate but easily topped revenue expectations. The company issued in-line guidance and said the spin-off of the health care business is on track for the first week of January. Shares traded down 2.2%.
General Motors posted better-than-expected revenue but missed on EPS. Inventory is rising slightly, but the company said that the chip shortage is improving. Demand is strong for its full-size trucks. Shares traded up about 3.3%.
Valero Energy beat both top-line and bottom-line estimates, but investors expected more. Shares traded down by about 1.6%.
Alphabet, Enphase, Microsoft and Visa are also reporting after U.S. markets close Tuesday. Before U.S. markets open on Wednesday, Boeing, Bristol-Myers Squibb and Kraft Heinz will report quarterly results. Look for Antero Resources, EQT, Ford and Meta Platforms to post their results later on Wednesday.
Here is a look at four companies set to report results first thing Thursday morning.
Altria
The maker and U.S. distributor of Marlboro cigarettes, Altria Group Inc. (NYSE: MO), has suffered an uncharacteristic share price decline of more than 5% over the past 12 months. The company said in July that its investment in e-cigarette maker Juul had vaporized 95% of a $13 billion investment. On Monday, the company ended its U.S. commercialization agreement with Philip Morris. The international maker and distributor of Marlboro cigarettes will pay Altria $3.7 billion for the right to commercialize the IQOS heat-not-burn device in the United States.
Sentiment on the company is positive but not strong. Of 18 analysts covering the shares, 11 have a Hold rating, while another six rate the shares at Buy or Strong Buy. At a recent price of around $45.40 a share, the implied gain based on a median price target of $50.50 is 10.1%. At the high price target of $68.00, the upside potential is about 50%.
Third-quarter revenue is forecast at $5.59 billion, which would be up 3.9% sequentially and by 1.0% year over year. Adjusted EPS are forecast to come in at $1.30, down 0.2% sequentially but up 6.6% year over year. For the full 2022 fiscal year, Altria is expected to report EPS of $4.84, up about 5%, on sales of $20.9 billion, down about 1%.
Altria stock trades at about 9.4 times expected 2022 EPS, 9.1 times estimated 2023 earnings of $5.03 and 8.7 times estimated 2024 earnings of $5.26 per share. The stock’s 52-week trading range is $40.35to $57.05, and Altria pays an annual dividend of $3.76 (yield of 8.28%). Total shareholder return over the past year is 2.86%.
Cameco
Over the past year, uranium producer Cameco Corp. (NYSE: CCJ) has seen its share price slide by more than 9%. At its peak in mid-April, the stock was trading at a level it had not seen in nearly 11 years.
Since the April peak, uranium prices have dropped by about $11 a pound (more than 17%) and Cameco stock has dropped by about 24%, including last week’s drop of nearly 20% after announcing the acquisition of a nuclear power plant servicing business for about $7.9 billion and issue $650 million in new stock to help pay for the deal. The stock has recovered about half the loss over the past 10 days.
Analysts are solidly bullish on Cameco stock. All 10 brokerages covering the company have a Buy or Strong Buy rating. At a price of around $24.05 a share, the upside potential based on a median price target of $30.93 is 28.6%. At the high price target of $34.93, the upside potential is 45.2%.
Third-quarter revenue is forecast at $259.89 million, down 40.0% sequentially and by 8.9% year over year. Analysts expect Cameco to break even for the quarter, down 90.0% sequentially and better than the year-ago loss of $0.11 per share. For the full fiscal 2022 year, EPS are forecast at $0.25, better than the $0.20 per share loss last year, on sales of $1.37 billion, up 17.2%.
Cameco stock trades at 96.6 times expected 2022 earnings, 34.8 times estimated 2023 earnings of $0.69 per share and 39 times estimated 2024 earnings of $0.62 per share. The stock’s 52-week range is $18.03 to $32.49. Cameco pays an annual dividend of $0.09 (yield of 0.4%). Total shareholder return for the past year was negative 9.2%.
Caterpillar
After setting a new 52-week high in mid-April, shares of heavy equipment maker Caterpillar Inc. (NYSE: CAT) have dropped by more than 23%. For the past 12 months, the shares are down about 7%. The better news for the Dow stock is that demand for its equipment and parts appears to be solid, even as a recession looms. Caterpillar has been able to increase pricing with inflation due to low inventory and a high backlog of orders.
Of 29 brokerages covering the shares, 12 have a Hold rating and 15 have a Buy or Strong Buy rating. At a share price of around $192.30, the upside potential based on a median price target of $210.00 is 9.2%. At the high target of $284.00, the upside potential is 47.7%.
Caterpillar is expected to report third-quarter revenue of $14.38 billion, up 5.9% sequentially and 16.0% higher year over year. Adjusted EPS are forecast at $3.16, down 0.5% sequentially but up 18.8% year over year. For the full 2022 fiscal year, analysts are expecting EPS of $12.58, up 16.4%, on revenue of $57.49 billion, up 12.8%.
Caterpillar stock trades at 15.3 times expected 2022 EPS, 13.9 times estimated 2023 earnings of $13.83 and 12.4 times estimated 2024 earnings of $15.53. The stock’s 52-week range is $160.60 to $237.90. Caterpillar pays an annual dividend of $4.80 (yield of 2.52%). Total shareholder return for the past 12 months was negative 2.55%.
McDonald’s
Shares of McDonald’s Corp. (NYSE: MCD) have added about 7.9% to their price over the past 12 months. For the year to date, however, the stock is down almost 3%. The latest news is that the company’s popular McRib sandwich is about to make its farewell tour, beginning on Halloween. Mickey D’s recently added Krispy Kreme donuts at some of its locations, so all is not lost. On a more serious note, the company has rejected a request from franchise owners to delay until June implementation of new franchise rules. The rules are set to go into effect on January 1.
Analysts are solidly bullish on the stock, with 28 of 38 having a Buy or Strong Buy rating while the other 10 rate the shares at Hold. At a price of around $256.00 a share, the upside potential based on a median price target of $277.00 is 8.2%. At the high price target of $328.00, the upside potential is about 28.1%.
Third-quarter revenue is forecast at $5.7 billion, down 0.3% sequentially and 8.1% lower year over year. Adjusted EPS are pegged at $2.58, up 1.2% sequentially but down 6.5% year over year. For the full 2022 fiscal year, consensus estimates call for EPS of $9.79, up 5.5%, on revenue of $22.69 billion, down about 2.3%.
McDonald’s stock trades at about 26.2 times expected 2022 EPS, 24.5 times estimated 2023 earnings of $10.46 and 22.9 times estimated 2024 earnings of $11.21 per share. The stock’s 52-week range is $217.68 to $271.15. McDonald’s pays an annual dividend of $6.08 (yield of 2.39%). Total shareholder return over the past 12 months is 10.37%.
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