Before U.S. markets opened on Thursday, the U.S. Bureau of Economic Analysis reported that U.S. gross domestic product rose by 4.9% in the third quarter. In its first advance estimate for the quarter, the BEA also reported underlying inflation slowed to 3.5%. Economists were looking for quarterly growth of 4.0% to 4.5%, with the chained deflator dropping by 2.7%.
Tomorrow brings the BEA’s personal consumption and spending report. The consensus forecasts call for income growth of 0.4%, spending growth of 0.5% and core PCE inflation of 0.3%.
Wednesday Afternoon Earnings Reports
After U.S. markets closed, Meta Platforms crushed the consensus estimate for earnings per share (EPS), nearly tripling the total from the third quarter of last year. Revenue rose 23.2% year over year. Comments about hiring more people but at a slower rate, and a forecast for capital spending of $27 billion to $29 billion this year, have spooked investors. Note that Meta’s capital spending tops Exxon’s 2023 capex guidance of $23 billion to $25 billion. Meta’s stock traded down 4.9% shortly after Thursday’s opening bell.
IBM beat analysts’ consensus estimates on both the top and bottom lines. Revenue was up 4.6% year over year. Big Blue also affirmed prior guidance, including an expectation for a pretax margin improvement of 0.5%. Shares traded up 4.1%.
Baker Hughes beat consensus EPS and revenue estimates and topped year-ago revenue by nearly 24%. The oilfield services company said it expects global liquefied natural gas supply to remain tight. That translates into more drilling, a plus for the company. The stock traded up 2.2%.
Thursday Morning Earnings Reports
Before markets opened, Comcast reported EPS and revenue higher than consensus estimates. The bad news was a drop of 18,000 broadband subscribers, compared with expectations for a gain of 3,600. Growth in the company’s wireless business was also below expectations. The stock traded down 6.3%.
Merck posted solid beats on both the top and bottom lines. Sales of its Keytruda cancer drug rose 17% year over year, and its COVID-19 treatment, Lagevrio, jumped 47%. The former generated revenue of $6.3 billion; the latter, $640 million. Margin matters. Shares traded up 2.2%.
UPS beat the consensus EPS estimate but missed on revenue, reporting a year-over-year decline of 12.8%. The delivery company also issued downside revenue guidance. Shares traded down 3.2% in the early going Thursday.
Valero Energy reported better-than-expected EPS and missed the revenue estimate by less than 1%. The stock traded down by about 2.7%.
On Deck
On Thursday afternoon, Amazon, Ford, Intel and U.S. Steel are expected to release third-quarter earnings results after markets close. Then AbbVie, Chevron and Exxon Mobil share their results first thing Friday morning. No earnings reports are scheduled for Friday afternoon.
Here is a look at what analysts expect to hear when these three companies report results before markets open on Monday.
McDonald’s
Shares of McDonald’s Corp. (NYSE: MCD) have added less than 1% to their price over the past 12 months, including a drop of nearly 12% for the past three months. That decline matches the three-month decline for the hotel, restaurant and leisure sector as a whole. However, the sector is up nearly 15% for the past year, thanks in large part to consumers satisfying their pent-up demand for travel. A Big Mac is just not the same. (These are the 25 biggest restaurant chains in America.)
Of 37 brokerages covering the Dow giant, 29 have a Buy or Strong Buy rating, while the rest rate it at Hold. At a share price of around $258.00, the upside potential based on a median price target of $312.00 is 20.9%. At the high price target of $383.00, the upside potential is about 48.4%.
Third-quarter revenue is forecast at $6.55 billion, which would be up 0.8% sequentially and 11.6% higher year over year. Adjusted EPS are pegged at $2.99, down 5.7% sequentially but up 11.6% year over year. For the 2023 fiscal year, consensus estimates call for EPS of $11.57, up 14.6%, on revenue of $25.38 billion, up 9.5%.
McDonald’s stock trades at 22.3 times expected 2023 EPS, 20.9 times estimated 2023 earnings of $12.36 and 19.2 times estimated 2025 earnings of $13.41 per share. The 52-week trading range is $245.73 to $299.35. McDonald’s pays an annual dividend of $6.68 (yield of 2.59%). Total shareholder return over the past 12 months was 3.51%.
JinkoSolar
China-based solar panel maker JinkoSolar Holding Co. Ltd. (NYSE: JKS) has suffered a share price decline of more than 38% over the past 12 months. For the past six months, shares were down more than 42%. Gross profit is up 80% over the past four quarters and rose by nearly 85% year over year in the second quarter. But free cash flow is negative and surpasses operating cash flow, a sign that all is not well with a company’s finances. In this case, a change to Chinese government subsidy policies has made matters worse.
Of eight analysts covering the stock, six have a Buy or Strong Buy rating, and one more rates it at Hold. At a share price of around $26.00, the upside potential based on a median price target of $52.50 is nearly 100%. The upside potential based on the high price target of $77.00 is 196.2%.
Third-quarter revenue is forecast at $4.19 billion, down 1.1% sequentially but up 52.9% year over year. Adjusted EPS are forecast at $0.92, down 73.9% sequentially and 31.4% higher year over year. For the 2023 fiscal year, analysts are looking for EPS of $9.54, up 129.4%, on sales of $15.9 billion, up nearly 31.3%.
The stock trades at 2.8 times expected 2023 EPS, 2.8 times estimated 2024 earnings of $9.32 and 2.2 times estimated 2025 earnings of $11.63 per share. The 52-week trading range is $25.87 to $61.27. JinkoSolar does not pay a dividend. Total shareholder return for the past year was negative 38.42%.
ON Semiconductor
Chipmaker ON Semiconductor Corp. (NASDAQ: ON) (onsemi, as it wants to be called) posted an all-time high share price after reporting second-quarter results in late July. Since then, stock prices have dropped by 27%. The company’s sensor and power chips are sold into the electric vehicle (EV) sector, itself struggling right now, and the overall market for semiconductors has been weak since July. Price targets and EPS and revenue estimates have dropped slightly, so a miss on profits or revenues could seriously hurt the stock.
Of the 30 analysts covering the stock, 19 have a Buy or Strong Buy rating. The others rate it at Hold. At a price of around $81.00 a share, the implied upside based on a median price target of $120.00 is 48.1%. At the high price target of $135.00, the implied gain is 66.7%.
Third-quarter revenue is forecast at $2.15 billion, up 2.6% sequentially but down 1.8% year over year. Adjusted EPS are forecast at $1.34, up 1% sequentially and 7.6% lower year over year. For the 2023 fiscal year, analysts have estimated EPS of $5.24, down 1.7%, on sales of $8.38 billion, up 0.7%.
The stock trades at 15.5 times expected 2023 EPS, 14.3 times estimated 2024 earnings of $5.68 and 12.4 times estimated 2025 earnings of $6.53 per share. The 52-week trading range is $58.43 to $111.35. The chipmaker does not pay a dividend, and total shareholder return over the past year was 21.86%.
SoFi Technologies
Decentralized financial services firm SoFi Technologies Inc. (NASDAQ: SOFI) has posted a share price increase of 25% over the past 12 months, including a year-to-date jump of almost 54%. The resumption of student loan repayments should give SoFi a boost. More important, though, is how the company adapted to the repayments pause by making shrewd acquisitions that extended SoFi’s reach into a number of new markets.
Of 18 analysts covering the stock, only six have a Buy or Strong Buy rating, and nine more have Hold ratings. At a share price of around $7.00, the upside potential based on a median 12-month price target of $10.00 is 30%. At the high target of $16.00, the upside potential is about 129%.
Analysts expect the company to report first-quarter revenue of $515.56 million. That would be up 5.5% sequentially and by 23.0% year over year. SoFi is expected to post a loss per share of $0.09, worse than the prior quarter’s loss of $0.06 and a penny worse than the year-ago quarter’s loss. For the 2023 fiscal year, analysts expect an adjusted loss of $0.23 per share, compared with a loss per share of $0.33 last year. Revenue for the year is pegged at $2.03 billion, up 31.5%.
SoFi is not expected to post a profit in 2023 or 2024. Based on estimated 2025 EPS of $0.29, the stock trades at a multiple of 24.1 times the 2025 estimate. The 52-week trading range is $4.24 to $11.70, and SoFi does not pay a dividend. Total shareholder return for the past year is 25.09%.
Originally published at 24/7 Wall St.
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