Shortly after Monday’s opening bell, the Dow Jones industrials traded up 0.07%, the S&P 500 up 0.07% and the Nasdaq 0.17% higher.
Before markets opened on Monday, M&T Bank posted better-than-expected profits thanks to higher interest rates. Net interest income doubled to $1.83 billion year over year, even though deposits dropped by 3%. The stock traded down about 1.6% early Monday.
Charles Schwab beat the consensus earnings per share (EPS) estimate but missed slightly on revenue. Shares traded down about 2.6% Monday morning.
State Street failed to meet or beat EPS and revenue expectations. Net interest income rose about 50% year over year, but net income overall was down more than 9%. The stock was hammered Monday morning, down 16.5% in the early going.
Bank of America, BNY Mellon and Goldman Sachs are scheduled to report first-quarter earnings before U.S. markets open on Tuesday, along with Ericsson, Johnson & Johnson and Lockheed Martin.
Here is a look at three companies set to report first-quarter results after markets close on Tuesday.
Netflix
When Netflix Inc. (NASDAQ: NFLX) reported first-quarter earnings one year ago, sales came in less than 1% below the consensus estimate and profits jumped 21%. The stock price instantly fell by 35%.
Since then, shares have added nearly 50% after the company reported that its new ad-supported subscription plan gained some traction in the December quarter and Netflix’s announcement (finally) of a crackdown on password sharing. What the company has to say about subscription growth, particularly on the ad-supported plan and how it plans to boot freeloaders without making everyone mad, will count for more than the actual numbers, provided the numbers are not too weak.
Of 42 analysts covering the stock, 21 have a Buy or Strong Buy rating, while another 18 rate the stock at Hold. At a recent price of around $338.60 a share, the upside potential based on a median price target of $375.00 is 10.8%. At the high price target of $440.00, the upside potential is about 29.9%.
First-quarter revenue is forecast at $8.18 billion, which would be up 4.15% sequentially and by 3.9% year over year. Adjusted EPS are forecast at $2.86, up from $0.12 in the prior quarter but down 19% year over year. For the full 2023 fiscal year, analysts expect to see EPS of $111.42, up 14.8%, on sales of $34.37 billion, up 8.7%.
Netflix shares trade at 29.7 times expected 2023 EPS, 23.5 times estimated 2024 earnings of $14.40 and 18.9 times estimated 2025 earnings of $17.90 per share. The stock’s 52-week trading range is $162.71 to $379.43. Netflix does not pay a dividend. Total shareholder return for the past 12 months was negative 0.73%.
United Airlines
Over the past 12 months, United Airlines Holdings Inc. (NASDAQ: UAL) stock has slipped by about 7.7%, significantly less than the decline of more than 20% to rival Delta’s stock. And that is after United forecast a loss of $0.60 to $1.00 per share a month ago. The expected loss includes an earlier-than-expected accrual of a pay agreement with its pilots’ union. That will boost second-quarter earnings, and the airline expects full-year earnings to come in at its earlier forecast level.
Sagging first-quarter demand is expected to be overcome by stronger demand over the rest of the year. United’s story for the remainder of 2023 is likely to be more important than its actual first-quarter numbers.
Analysts are moderately bullish on the stock. Of 21 brokerages covering the firm, seven have Hold ratings, while 13 have a Buy or Strong Buy rating. At a share price of around $41.70, the upside potential based on a median price target of $62.00 is 48.7%. At the high price target of $81.00, the upside potential rises to 94.2%.
The consensus first-quarter revenue forecast calls for sales of $11.43 billion, down 7.8% sequentially but 51.0% higher year over year. Analysts anticipate an adjusted loss of $0.73 per share, sharply lower than EPS of $2.46 in the prior quarter and much better than the $4.24 per share loss in the year-ago quarter. For the full fiscal year, analysts expect EPS of $8.68, up from EPS of $2.52 posted a year ago. Revenue is forecast to rise by 17.9% to $53.01 billion.
The stock trades at 4.8 times estimated 2023 earnings, 4.0 times estimated 2024 earnings of $10.36 and 3.4 times estimated 2025 earnings of $12.40 per share. The stock’s 52-week range is $31.58 to $22.04, and United does not pay a dividend. Total shareholder return for the past 12 months was negative 7.67%.
Western Alliance Bancorp
Shares of Western Alliance Bancorp. (NYSE: WAL) have lost about 58% over the past 12 months, including a drop of 47% for the year to date. No secret here: the collapse of Silicon Valley Bank and Signature Bank hit all regional banks hard.
Fitch Ratings on Monday downgraded the stock by two notches from BBB+ to BBB-, the lowest investment-grade rating. The rating agency commented, “Over the near- to medium-term, WAL’s reduced funding flexibility and higher funding costs under tightened liquidity conditions presents execution risks on its asset liability management, which underpins the rating downgrade and Negative Rating Outlook.”
Analysts are solidly bullish on the stock. Of 14 brokerages covering the firm, 12 have a Buy or Strong Buy rating, while two have a Hold rating. At a share price of around $31.70, the upside potential based on a median price target of $57.50 is 81.3%. At the high price target of $77.00, the upside potential rises to almost 143%.
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