The three major U.S. equity indexes closed higher Friday. The Dow Jones industrials ended the day up 1.26%, the S&P 500 closed 1.36% higher and the Nasdaq saw a gain of 1.28%. All 11 sectors closed higher, with materials (3.41%) and financials (1.87%) posting the biggest gains. Utilities and healthcare (both 0.57%) had the smallest gains.
This week’s economic calendar includes the monthly report on the consumer price index (CPI). Economists are expecting the Thursday morning release to show that the index increased month over month in October by 0.7%. Core CPI (excluding food and energy) is expected to tick down from 0.6% to 0.5%. The weekly report on new claims for unemployment insurance will be released Wednesday. New claims are expected to rise from last week’s 217,000 to 220,000.
The three major indexes traded mixed during the noon hour Monday.
Before markets opened, Palantir Technologies reported a one-penny miss on EPS and revenue in line with expectations. The company lowered fourth-quarter revenue guidance to a new range of $603 to $505 million. Analysts had a consensus estimate of $506.6 million. The stock traded down more than 12% in Monday’s premarket.
NiSource reported adjusted earnings per share (EPS) that met the consensus estimate, while revenue of $1.09 billion was better than expected. The company lowered full-year EPS guidance from a prior range of $1.50 to $1.57 to a new range of $144 to $1.46. NiSource also announced a growth plan that it expects to boost adjusted EPS by 6% to 8% annually through 2027. Shares traded down 5.6% Monday.
Ballard Power reported inline EPS and missed on revenue. Shares traded down by 1.1% Monday.
Activision Blizzard and Lyft take their turns in the earnings spotlight after U.S. markets close on Monday. Before U.S. markets open on Tuesday, Constellation Energy and GlobalFoundries are on deck to report quarterly earnings.
Our first of two stories on companies reporting quarterly results after markets close on Tuesday included previews of Affirm, AMC Entertainment and Disney. The second covered what analysts expect to hear when Lucid, Occidental Petroleum and Plug Power report.
Here is a preview of three companies set to report quarterly results first thing Wednesday morning.
Canopy Growth
Marijuana grower and cannabis products maker Canopy Growth Corp. (NASDAQ: CGC) has seen its share price drop by nearly 73% over the past 12 months. The stock added 22% on October 6, the day President Biden announced a general pardon for small-time drug offenses and directed the Department of Justice to review the classification of marijuana as a dangerous drug. All that gain was gone by the end of the month.
The company recently announced the formation of a U.S. holding company to give Canopy Growth a leg up when the federal government finally reclassifies marijuana. Or is that if?
Analysts have mostly soured on the stock. Of 20 brokerages covering it, nine have a Hold rating, and nine more have a Sell or Strong Sell rating. Only two rate shares at Buy. At a recent price of around $3.30 a share, the stock trades above its median price target of $3.76. At the high price target of $10.37, the upside potential is about 215%.
Analysts estimate that Canopy Growth’s second-quarter revenue for fiscal 2023 will come in at $84.64 million, which would be down 1.05% sequentially and 22.5% lower year over year. The consensus estimate calls for an adjusted loss per share of $0.16, better than an adjusted loss of $0.19 in the prior quarter and worse than the year-ago loss of $0.13 per share. For the full fiscal year ending in March, analysts expect a loss of $0.82 per share, far worse than last year’s EPS of $0.42. Full-year revenue is forecast at $351.96 million, down about 15.4%.
Canopy Growth is not expected to post a profit in 2023, 2024 or 2025. The enterprise value to sales multiple is expected to be 5.3 in 2022. Based on average estimated sales of $435.19 million and $641.76 million for 2023 and 2024, respectively, the multiple is 4.3 for 2023 and 2.9 for 2024. The stock’s 52-week trading range is $2.13 to $15.96. Canopy Growth does not pay a dividend, and the total shareholder return for the past year is negative 72.7%.
D.R. Horton
Homebuilder D.R. Horton Inc. (NYSE: DHI) posted its all-time high stock price in mid-December of 2021. Rising mortgage rates, inflation and recession fears have devastated the housing market since then, and the stock has retreated more than 20% over the past 12 months. The soft housing market is widely expected to last well into next year, largely due to mortgage rates. It is not exactly a bubble popping, but buyers are scarce on the ground.
Of 20 brokerages covering D.R. Horton, 15 have a Buy or Strong Buy rating. The others rate the shares at Hold. At a share price of around $73.80, the upside potential based on a median price target of $85.00 is about 15.2%. At the high price target of $112.00, the implied upside is 51.8%.
Fiscal fourth-quarter revenue is forecast to total $9.97 billion, up 13.4% sequentially and by 22.9% year over year. Adjusted EPS are forecast at $4.52, up 12.2% sequentially and by 42.9% year over year. For fiscal 2022, which ended in September, EPS are forecast at $16.93, up nearly 48.2%, on sales of $33.81 billion, up about 21.7%.
D.R. Horton stock trades at 4.3 times expected 2022 EPS, 2.7 times estimated 2023 earnings of $12.90 and 5.8 times estimated 2024 earnings of $12.78 per share. The stock’s 52-week range is $59.25 to $110.45. The company pays an annual dividend of $0.90 (yield of 1.2%). Total shareholder return for the past year was negative 19.6%.
Hecla Mining
Idaho-based Hecla Mining Co. (NYSE: HL) is the largest U.S. producer of silver. Over the past 12 months, the stock price has dropped by about 20%. Silver prices have bounced around in the past year, and the bounces have led to a price decline of about 14.7% over the past year. Last month the company said it produced 3.6 million ounces of silver in the third quarter and 44,747 ounces of gold. Hecla also increased production guidance for its Greens Creek mine in Alaska.
Of nine brokerages covering the stock, three have Hold ratings and six have Buy or Strong Buy ratings. At a trading price of around $4.80, the upside potential to the median price target of $6.00 is 25%. At the high price target of $7, the upside potential is 45.8%.
Third-quarter revenue is forecast to drop 14.7% sequentially and decline by 15.7% year over year to $163.11 million. Hecla is expected to post a per-share loss of $0.02, down from EPS of $0.04 in the prior quarter and EPS of $0.05 in the year-ago quarter. For the full 2022 fiscal year, EPS are currently forecast to decline by 67.3% to $0.05, and revenue is expected to decrease by 8.9% to $735.49 million.
Hecla stock trades at a 102.0 times estimated 2023 EPS and 41.0 times estimated 2024 earnings of $0.12. The stock’s 52-week range is $3.41 to $7.66, and the company pays an annual dividend of $0.03 per share (yield of 0.58%). Total shareholder return in the past year is negative 19.9%.
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