Earnings Previews: Alibaba, ConocoPhillips, Nikola, Paramount Global

The three major U.S. equity indexes closed down slightly Monday. The Dow Jones Industrial Average dipped by 0.14%, the Standard & Poor’s 500 slipped by 0.28%, and the Nasdaq Composite fell by 0.18%. Seven of 11 sectors, led by energy (down 2.1%) and real estate (off 0.9%) closed lower while consumer staples (up 1.2%) and consumer cyclicals (an increase of 0.5%) were the leading gainers. The U.S. Labor Department released its report on June job openings and turnover (JOLTS) this morning. The number of job openings fell to 10.7 million in June from a revised total of 11.3 million in May. All three major indexes are down in the first half hour of trading Tuesday morning.

After markets closed Monday afternoon, Activision Blizzard traded up by less than 1% after missing analysts’ consensus earnings estimate. Shares still trade well below (around $80) the $95 per share acquisition price Microsoft will pay when (if) regulators approve the deal.

Devon Energy beat estimates on both the top and bottom lines and raised 2022 production guidance by 3% and lifted its estimated capital spending from around $2.1 billion to a new range of $2.2 billion to $2.4 billion. Shares traded down about 1% Tuesday morning.

Diamondback Energy also beat top- and bottom-line estimates, but shares traded up by about 1.3%. The company said capex for the current quarter would range between $470 and $510 million. Capex for the first half of the year was $905 million.

Before markets opened Tuesday morning, U.K.-based BP also beat earnings per share (EPS) and revenue estimates. Shares traded up about 1.7% at noon Tuesday.

Caterpillar topped the consensus EPS estimate but missed on revenue. The stock traded down about 3.2% on worries about dealer sales.

Marathon Petroleum beat top- and bottom-line estimates, and shares traded up more than 4%.

After U.S. markets close Tuesday afternoon, Airbnb, AMD, Coterra Energy, and Occidental Petroleum will be reporting quarterly results. Wednesday morning, before markets reopen, Livent, PayPal, Starbucks, and Under Armour are reporting.

Earlier this morning, we posted previews for four companies due to report results after markets close Wednesday afternoon: APA Corp., Energy Transfer, Lucid, and Robinhood.

Here are previews of four earnings reports due out before U.S. markets open Thursday morning.

Alibaba

Over the past 12 months, shares of Alibaba Group Holding Ltd. (NYSE: BABA) have lost about 24% of their value. The Chinese company said last week that it plans to seek a primary listing in Hong Kong and hopes to receive approval by the end of this year. The stock would then have dual primary listings in New York and Hong Kong. Last Friday, the U.S. Securities and Exchange Commission put Alibaba on its watchlist for possible U.S. delisting, and the shares fell by about 11%. On Monday, the shares rose by about 1.1% after the company said it would “strive” to maintain its dual listing, but since the SEC requires an independent audit (China’s government forbids such an audit) the outcome is really outside the company’s control.

There are 32 analysts covering the company, and 31 have ratings of Buy or Strong Buy on the stock. At a current price of around $94.30, the upside potential based on a median price target of $150.25 is about 59.3%. At the high price target of $229.18, the upside potential is 143%.

For Alibaba’s fiscal first quarter of 2023, analysts are expecting revenue of $30.15 billion, down 6.3% sequentially and down 3.2% year over year. Adjusted EPS is expected to come in at $1.56, up 24.8% sequentially and down by 36.3% year over year. For the full fiscal year that ends in March 2023, Alibaba is expected to report EPS of $7.44, down 4.8%, on sales of $136.52 billion, an increase of 8.3%.

The company’s stock trades at a multiple of 12.7 times expected 2023 EPS, 10.6 times estimated 2024 earnings of $8.79, and 9.3 times estimated 2025 earnings of $9.99 per share. The stock’s 52-week range is $73.28 to $203.38. Alibaba does not pay a dividend and the total shareholder return for the past year was negative 63.5%.

ConocoPhillips

Over the past 12 months, shares of ConocoPhillips (NYSE: COP) have added about 71.2% to their value. As with both Chevron and Exxon Mobil, the rise in the share price of the country’s largest independent oil and gas producer is closely tied to the rising price of oil. The company spent about $5.9 million on lobbying in the first half of this year, more than it has spent annually since 2011. Much of the spending was directed at opening Alaska’s National Petroleum Reserve to drilling.

There are 27 brokerages covering the company and 23 have ratings of Buy or Strong Buy on the stock. The rest rate the stock a Hold. At a current price of around $94.90, the upside potential based on a median price target of $123.00 is about 29.6%. At the high price target of $148.00, the upside potential is about 56%.

For the second quarter, analysts are expecting revenue of $19.71 billion, up 17.7% sequentially and 93% year over year. Adjusted EPS is expected to come in at $3.85, up 41.7% sequentially and 203% year over year. For the full 2022 fiscal year, Conoco is expected to report EPS of $14.89, up 147.8%, on sales of $77.26 billion, up 59.8%.

Conoco stock trades at a multiple of 6.4 times expected 2022 EPS, 7.1 times estimated 2023 earnings of $13.37, and 9.1 times estimated 2024 earnings of $10.41 per share. The stock’s 52-week range is $51.41 to $124.08. The company pays an annual dividend of $1.92 (yield of 1.97%). The total shareholder return for the past 12 months was 76.7%.

Nikola

Over the past 12 months, electric and hydrogen-powered truck maker Nikola Corp. (NASDAQ: NKLA) has seen its share price tumble by 37.8%. Since reaching a peak in early June of 2020, just a week after the IPO, Nikola stock is down by about 91%. The company announced Tuesday morning that it will acquire battery maker Romeo Power for $144 in Nikola stock. The company recently asked a federal judge to quash a subpoena from founder and former CEO Trevor Milton who is defending himself against criminal fraud charges.

Just eight analysts cover the stock and seven of those have given it a Hold rating. The other one rates the stock a Buy. At the current price of around $7.00, the upside potential based on a median price target of $8.00 is 14.3%. At the high price target of $15.00, the implied gain is 114.3%.

Analysts are forecasting second-quarter revenue at $16.58 million and expect Nikola to report a loss per share of $0.27. In the prior quarter, Nikola reported a loss of $0.21 per share and no revenue. For the full year, the company is expected to lose $1.09 per share, more than the loss per share of $0.79 in 2021. Analysts also expect Nikola to report $114.85 million in revenue for the full fiscal year. The company did not report any revenue last year.

Nikola is not expected to post a profit in 2022, 2023, or 2024. The enterprise value to sales multiple for 2022 is 22.8. For 2023 and 2024, the multiple is 4.2 and 1.7, respectively. The stock currently trades at an estimated sales to enterprise value multiple of 18.3 times for 2022 and 3.2 times for 2023. The stock’s 52-week range is $4.42 to $15.56. Nikola does not pay a dividend. The total shareholder return for the past 12 months is negative 37%.

Paramount Global

Media giant Paramount Global (NASDAQ: PARA) has dropped about 40% from its share price over the past 12 months. In the past week, the company once known as ViacomCBS has received two analysts’ downgrades to Sell and one from Outperform to Market Perform. Five of five analysts cut price targets on the stock. As is the case with many media companies, analysts are concerned about a slowdown in ad sales as consumers slow their spending and advertisers follow suit.

Analysts are essentially neutral on the stock. Of 28 brokerages covering the company, 12 have Hold ratings, seven have Sell or Strong Sell ratings, and nine have Buy or Strong Buy ratings. At a current price of around $24.70, the upside potential to the median price target of $30.00 is about 21.5%. At the high price target of $60.00, the upside potential is 143%.

Paramount is expected to post second-quarter revenue of $7.55 billion, up 3% sequentially and 15% year over year. Adjusted EPS is forecast at $0.57, down 5% sequentially and down 41% year over year. For the full 2022 fiscal year, analysts are looking for EPS of $2.60, down 25.3% year over year, on revenue of $30.64 billion, up 7.2%.

The stock trades at a multiple of 9.7 times expected 2022 EPS, 12.3 times estimated 2023 earnings of $2.04, and 10.3 times estimated 2024 earnings of $2.43 per share. Paramount’s 52-week range is $23.15 to $42.17. The company pays an annual dividend of $0.96 (yield of 4.06%). Total shareholder return for the past 12 months was negative 37.4%.

By Paul Ausick