The September-quarter earnings season gets rolling this week, with earnings reports from several of the largest U.S. banks due Friday morning.
Equity markets had a tough quarter. The S&P 500 dipped by 3.3%, while the Nasdaq Composite index dropped 4.1% and the Dow Jones industrials lost 2.7%. Earlier worries over inflation gave way to concerns about interest rates. Bond yields are up, and the Federal Reserve’s higher-for-longer interest rate regime signals an uphill struggle for stocks in the fourth quarter.
Before U.S. markets opened on Tuesday, PepsiCo reported better-than-expected earnings per share (EPS) and revenue. CFO Hugh Johnson said the company is seeing little effect from the popularity of weight-loss drugs like Ozempic. The stock traded up by about 1.2% shortly after Tuesday’s opening bell.
We will get a better look at what the September quarter was like before markets open on Thursday when these three firms report their results.
Commercial Metals
Recycler and metals fabricator Commercial Metals Co. (NYSE: CMC) stock has added nearly 25% to its share price over the past 12 months. Since posting a 52-week high in early February, however, the stock is down by more than 17%. Steel prices have dropped by about the same amount in that time. The U.S. autoworkers strike has begun to weigh on steel prices. Automobile production has dropped by around 6,000 vehicles a day, cutting steel demand by nearly 6,000 tons. The price of coiled sheet steel is down 40% since April.
Just seven analysts cover the stock, and four have Hold ratings. The other three rate it at Buy or Strong Buy. At a recent price of around $48.00 a share, the implied gain based on a median price target of $60.00 is 20%. At the high price target of $74.00, the upside potential is 54.2%.
For the company’s fourth quarter of fiscal 2023, which ended in August, analysts expect revenue of $2.2 billion, which would be down 6.3% sequentially and by 8.7% year over year. Adjusted EPS are forecast at $1.82, down 9.9% sequentially and 25.7% lower year over year. For the full 2023 fiscal year, CMC is forecast to report EPS of $7.59, down 7.4%, on sales of $8.77 billion, down 1.6%.
Shares trade at 6.3 times expected 2023 EPS, 7.8 times estimated 2024 earnings of $6.17 and 8.3 times estimated 2025 earnings of $5.76 per share. The stock’s 52-week trading range is $38.09 to $58.09. CMC pays an annual dividend of $0.64 (yield of 1.34%). Total shareholder return for the past year was 26.48%.
Delta Air Lines
Since posting a 52-week high in mid-July, Delta Air Lines Inc. (NYSE: DAL) stock has dropped 14.5%. Over the past 12 months, however, shares have added 20%. The Hamas-Israeli war cast a chill over the travel industry on Monday. Flight schedules were disrupted, and rising fuel prices are never good news for airline stocks. On Sunday, Delta, United and American suspended flights to Israel. All three airlines saw share prices fall by at least 4% on Monday.
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