Earnings Previews: GE, GM, UPS, Valero Energy

Last November, GE said it planned to spin off its health care and energy businesses into separate companies and become primarily an aviation company. GE is downsizing its corporate headquarters in Boston, leaving Manhattan, and looking for a buyer for its campus in Crotonville, New York. The Financial Times reported last week that France’s EDF is offering a low-ball price ($160 million to $180 million) for GE’s nuclear turbine business due to the segment’s dealings with Russia’s Rosatom.

Analysts remain bullish on the stock. There are 16 Buy or Strong Buy ratings and six Hold ratings among the 22 brokerages covering GE. At a recent price of around $70.50 a share, the potential upside to a median price target of $84.00 is about 19.1%. At the high target of $122.00, the upside potential is 73%.

Third-quarter revenue is forecast at $18.81 billion, which would be up about 0.9% sequentially and 2.1% higher year over year. Adjusted EPS are forecast at $0.49, down 37.6% sequentially and by 14.0% year over year. For the full 2022 fiscal year, analysts expect GE to report EPS of $2.68, up 26.5%, on sales of $74.78 billion, up 0.8%.

GE stock trades at about 15.6 times expected 2022 EPS, 11.7 times estimated 2023 earnings of $6.04 and 8.4 times estimated 2024 earnings of $8.37 per share. The stock’s 52-week trading range is $59.93 to $116.17, and GE pays an annual dividend of $0.32 (yield of 0.46%). Total shareholder return for the past 12 months was negative 31.2%.

General Motors

General Motors Co. (NYSE: GM) has had a tough 2022. The stock price is down about 42% over the past year, including a bounce of about 5.5% since the beginning of the month.

Last week the company announced plans to offer energy storage and management services to residential and commercial customers through a new segment called GM Energy. That puts the venerable firm in direct competition with Tesla on ground that Tesla knows well. GM thinks its competencies in electric vehicles will transfer cleanly to a wider market. Risky business.

Analysts like the company’s prospects. Of 23 brokers covering the stock, 15 have a Buy or Strong Buy rating on the shares and another seven rate the shares at Hold. At a share price of around $33.90, the upside potential based on a median price target of $45.00 is 32.7%. At the high price target of $90.00, the upside potential is about 165%.

Third-quarter revenue is forecast at $42.17 billion, up nearly 18% sequentially and 57.5% higher year over year. Adjusted EPS are forecast at $1.88, up nearly 65% sequentially and by 23.7% year over year. For the full 2022 fiscal year, consensus estimates call for EPS of $6.78, down 4.1%, on revenue of $154.77 billion, up 21.9%.

GM stock trades at about 5.0 times expected 2022 EPS, 5.5 times estimated 2023 earnings of $6.21 and 5.4 times estimated 2024 earnings of $6.26 per share. The stock’s 52-week range is $30.33 to $67.21. GM does not pay a dividend, and total shareholder return for the past year was negative 41.8%.

UPS

United Parcel Service Inc. (NYSE: UPS) stock has dropped about 16.4% over the past 12 months, including a plunge of nearly 24% between mid-August and last week, when it set a new 52-week low. When rival FedEx warned on its quarterly earnings last month, UPS stock took a beating as well. FedEx also said earlier this month that its segment that handles e-commerce deliveries has been experiencing lower volume. UPS has not said anything yet about the holiday season, but it is a sure bet it will come up Tuesday.