Investing

Earnings Previews: Reports Coming Thursday Morning From Comcast, Merck, UPS, Valero Energy

Paul Ausick

Published: October 24, 2023 11:23 am

Last Updated: October 24, 2023 11:26 am

Two of the seven stocks that have contributed 17% of the S&P 500’s gains this year will report earnings after markets close on Tuesday. Two more will release their earnings reports later this week. After Tesla’s weak report, investors will be taking a close look at these other giants. We also have four new earnings previews for companies reporting quarterly results Thursday morning.

Monday Afternoon Earnings Reports

After U.S. markets closed on Monday, Cleveland-Cliffs reported earnings per share (EPS) above consensus estimates. The iron ore miner and steelmaker also said it expects to chop another $15 per ton from its steelmaking unit costs, with more reductions to come next year. The stock was up about 8% in mid-morning trading on Tuesday.

Tuesday Morning Earnings Reports

Before markets opened on Tuesday, 3M beat consensus estimates on the top and bottom lines. Revenue was down 3.6% year over year. The company also raised fiscal year EPS guidance and reduced its expected revenue decline. Shares traded up 5%.

Halliburton posted a beat to its EPS estimate while missing analysts’ consensus revenue target. Sales did rise by more than 8% year over year, and profits rose by 32%. Not good enough, apparently. The stock traded down 2.6%.

RTX beat estimates on the top and bottom lines and then boosted its share buyback program by $10 billion. The company said it is committed to returning $36 billion to $37 billion to shareholders by the end of 2025. Music to investors as it drove ‌shares up 6.4%.

General Electric reported revenue almost 20% higher than a year ago and beat the EPS estimate by more than 46%. The company also sharply raised fiscal year EPS guidance. The stock traded up almost 6.8%.

General Motors hammered consensus EPS and revenue estimates, beating the profit estimate by 22% and the revenue estimate by 4%. Revenue was up 5.4% year over year. GM withdrew its guidance for 2023, citing the impact from the United Auto Workers union strike. Worse, perhaps, GM also dumped its guidance for 2024’s EV production. The stock traded down 0.3%.

NextEra Energy beat top-line and bottom-line estimates and issued guidance in line with consensus estimates for 2023 and 2024. The company also said it expects dividend growth of roughly 10% annually through the end of next year. Shares were up 5.3% in Tuesday morning trading.

ADM beat the consensus EPS estimate but fell short on revenue. The food products company saw revenue fall by more than 12% year over year. Shares traded down about 1.7%.

Coca-Cola posted revenue that was up 8.1% year over year and about half a point better than analysts estimated. Profits also came in higher than the consensus and were flat year over year. Warren Buffett’s favorite soft drinks maker also raised EPS guidance and said organic revenue growth would be up 10% to 11% for 2023. Shares traded about 3%.

Verizon offered a mixed report, missing the revenue estimate and beating the consensus for EPS. For the 2023 fiscal year, Verizon expects operating cash flow of $36.25 billion to $37.25 billion and free cash flow of more than $18 billion. That gave the stock a boost of more than 8%.

On Deck

Here is a look at several stocks included in our earnings previews for this week.

After U.S. markets close on Tuesday, Alphabet, Microsoft, Snap, Texas Instruments and Visa will release their earnings reports for the quarter. Look for results from Boeing, General Dynamics and T-Mobile the following morning. Then later on Wednesday, Meta Platforms, IBM and Baker Hughes are expected to share their results.

Below is a look at four earnings reports on the calendar for Thursday morning.

Comcast

Comcast Corp. (NASDAQ: CMCSA) has added more than 40% to its share price in 2023, but the stock dropped more than 5% over the past month.

With less than four months to go, Disney’s coming acquisition of Comcast’s 33% stake in Hulu is the key. The two companies began negotiations over the price at the end of September. Under the existing agreement, Disney must buy Comcast’s stake for at least $9 billion. Comcast CEO Brian Roberts thinks its stake in Hulu is worth much more, perhaps as much as $30 billion. The interesting bit about all this is that Disney is struggling, and financing a deal of any size will be costly.

Analysts remain bullish on Comcast stock, with 19 of 32 brokerages having a Buy or Strong Buy rating on it and another 13 rating it at Hold. At a recent price of around $43.00 per share, the upside potential based on a median price target of $50.00 is 16.3%. At the high price target of $60.00, the upside potential is 39.5%.

Third-quarter revenue is forecast to come in at $29.72 billion, which would be down 2.6% sequentially and basically flat year over year. Adjusted EPS are forecast at $0.95, down 16% sequentially and a penny lower year over year. For the 2023 fiscal year, analysts expect Comcast to report EPS of $3.78, up 3.8%, on sales of $120.2 billion, down 1.0%.

Comcast stock trades at 11.4 times expected 2023 EPS, 10.2 times estimated 2024 earnings of $4.21 and 9.3 times estimated 2025 earnings of $4.59 per share. The 52-week trading range is $30.04 to $47.45. Comcast pays an annual dividend of $1.16 (yield of 2.7%). Total shareholder return over the past year is 46.57%.

Merck

Dow Jones industrial average component Merck & Co. Inc. (NYSE: MRK) has added about 8% to its stock price over the past 12 months, but the shares have been sinking for six months.

A recent Phase-3 trial has produced “tremendous” and “astonishingly good” results for a cocktail of Merck’s Keytruda and Seagen’s Padcev to treat bladder cancer. Along with other treatments and its animal health business,  analysts expect Merck to perform well for investors for some time to come.

Analysts are solidly bullish on Merck stock. Of 28 brokerages covering it, 20 have a Buy or Strong Buy rating and the rest have Hold ratings. At a share price of around $103.00, the implied upside on the stock is 21.4% at a consensus 12-month price target of $125.00. At the high target of $135.00, upside potential rises to 31.1.

For the third quarter, analysts expect Merck to report sales of $15.27 billion, up 1.6% sequentially and by 2.1% year over year. Adjusted EPS are expected to reach $1.95, after posting a second-quarter loss of $2.06 per share. Year over year, analysts expect EPS to rise by 5.4%. For the 2023 fiscal year, EPS is forecast at $303, a decrease of 59.4% year over year, on sales of $59.27 billion, essentially flat.

Merck stock trades at 34.0 times expected 2023 EPS, 12.2 times estimated 2024 earnings of $8.43 and 10.8 times estimated 2025 earnings of $9.58 per share. The 52-week trading range is $96.27 to $119.65, and the company pays an annual dividend of $2.92 (yield of 2.83%). Total return over the past 12 months was 10.69%.

UPS

United Parcel Service Inc. (NYSE: UPS) stock has dropped by nearly 10% over the past 12 months, including a decline of 14.3% so far in 2023. The delivery service’s new contract with the Teamsters union has weighed on the stock price, but its own forecast for third-quarter earnings made things worse. UPS effectively lowered its EPS guidance by 25% when it reported second-quarter results. Analysts have forecast an even larger EPS decline for the third quarter.

Analysts remain somewhat bullish on the stock, though. Fifteen of 32 have a Buy or Strong Buy rating and 14 others rating the stock a Hold. At a share price of around $149.00, the implied upside based on a median price target of $180.00 is 20.8%. At the high price target of $221.00, the upside potential is 48.3%.

Analysts expect UPS to report third-quarter revenue of $21.47 billion, down 2.7% sequentially and by 11.1% year over year. Adjusted EPS are pegged at $1.56, down 38.7% sequentially and 47.8% lower year over year. For the 2023 fiscal year, analysts are looking for EPS of $9.25, down 28.5%, on sales of $92.74 billion, down 7.6%.

UPS stock trades at 16.1 times expected 2023 EPS, 14.5 times estimated 2024 earnings of $10.31 and 13.2 times estimated 2025 earnings of $11.29 per share. The 52-week trading range is $147.89 to $197.80. UPS pays an annual dividend of $6.48 (yield of 4.26%). Total shareholder return for the past 12 months was negative 6.55%.

Valero Energy

Oil refiner and product marketer Valero Energy Corp. (NYSE: VLO) has seen its share price increase by a mere 2.1% over the past year. Shares have added more than 9% over the past six months, mainly the result of recently falling crude oil prices. Between July and late September, crude prices rose by about $25 a barrel. Since then, prices have fallen by about $10 a barrel. That swing does not appear to stack up to a share price gain of 9% in six months, but Valero’s solid dividend and cash flow forgive many minor sins.

Of the 21 analysts covering the stock, 14 have rated a Buy or Strong Buy rating and six have a Hold rating. At a share price of around $130.00, the upside potential based on a median price target of $150.50 is 15.8%. At the high price target of $176.00, the upside potential is around 35.4%.

Analysts are forecasting third-quarter revenue of $41.5 billion, up 20.3% sequentially but down 6.6% year over year. Adjusted EPS are pegged at $7.32, up 35.6% sequentially and by 2.5% year over year. For the 2023 fiscal year, estimates call for EPS of $25.41, down 12.9%, on revenue of $150.06 billion, down 14.9%.

Valero stock trades at 5.1 times expected 2023 EPS, 8.4 times estimated 2024 earnings of $15.51 and 10.1 times estimated 2025 earnings of $12.94 per share. The 52-week trading range is $104.18 to $152.20. The company pays an annual dividend of $4.04 (yield of 3.08%). Total shareholder return for the past 12 months was 4.51%.