American Express: What Will Credit Card Metrics Do in 2019?
American Express Co. (NYSE: AXP) closed out 2018 at $95.32 a share, down 4% from a year earlier. One issue that may have kept pressure on in 2018, outside of the overall plunge in financial stocks, was that Amex shares had gained a surprising 34% in 2017. Gains of that size tend to rob future gains. Amex has a consensus target price of $114.94, with an implied gain of about 20% ahead, or 22% if you include its 1.6% dividend yield.
Warren Buffett and Berkshire Hathaway continue to remain the anchor shareholder for American Express. The company needs to make certain its clients do not see eroding credit metrics with delinquencies and charge-offs in 2019. Oddly enough, the consensus target price is less than 0.4% above Amex’s 52-week high.
Apple: Succeeded in the $1 Trillion Race, but Then Tanked
Apple Inc. (NASDAQ: AAPL) managed to become the first $1 trillion company by market cap in 2018. Unfortunately, CEO Tim Cook decided to stop breaking out individual sales metrics going forward, and that spooked and confused analysts. More than a handful of research analysts lowered their price targets and iPhone sales estimates late in 2018. Apple shares fell by almost 7% in 2018, versus a 46% return to the upside in 2017. Apple closed out 2018 at $157.74, and the consensus target price of $218.78 would imply a simple gain of 40%, without even considering its 1.9% dividend yield. That seems like a crazy-high target, but the share drops have been faster than analysts can ratchet down their targets. It seems logical to expect that analysts will continue to dial down some of their price targets as 2019 continues to develop.
That said, Apple’s all-time and 52-week high is $233.47, and Apple remains an aggressive buyer of stock with that unbelievable mountain of cash. For Apple to resume its impressive gains of yesteryear, it seems that Cook and his research and development teams in those fancy new headquarters are going to have to drum up a new line of business that enthralls the masses (and it’s probably not just another watch or wireless ear-pieces).
Boeing: Way Beyond the Former Boom-Bust Cycle
Boeing Co. (NYSE: BA) pulled back sharply in late 2018 but still managed to squeeze out a gain of over 9% in 2018. That was after the 2017 gain of 89% blew out the mere 4% expected by analysts a year earlier. At $322.50 per share at the end of 2018, it has a consensus analyst target of $417.60 that would imply a gain of almost 30%, without even considering its 2.5% dividend yield. Boeing is also the highest weighted of Dow stocks, with over 9% of the whole index weighting, so its implied gains matter heavily here for the overall direction of the Dow in 2019.
Boeing’s market cap was $183 billion at the end of 2018, and its trailing price-to-earnings (P/E) ratio is 21.0, versus a forward P/E of 17.5. One issue that Boeing has communicated is that it is increasing production where it can to eat away at the near-6,000 plane orders counted in its massive backlog. Boeing has to overcome its recent airline crash exposure in 2019, and it needs to continue to do well in aerospace and defense orders from the United States and its allies. Its trade exposure to China might not be helped if the so-called revenge tariffs come back against the company selling into China.
Can the Mighty Caterpillar Overcome International Challenges in 2019?
Caterpillar Inc. (NYSE: CAT) lost over 19% in 2018, but that was after having seen a whopping gain of 70% in 2017. This was another instance in which overexcitement went too far, and now Caterpillar is in the middle of the storm when it comes to trade wars and international strife in emerging markets. It is also valued at 12.4 times trailing earnings and just 9.8 times expected earnings for 2019, but some investors have the right to fear that Caterpillar will have a hard time hitting its targets during such choppy times.
With shares at $127.07 at the end of 2018, the consensus target price of $156.10 would imply a return of almost 23%, before considering its 2.7% dividend yield. That target price is also still handily short of the 52-week high of $173.24.
Chevron: Beyond Better Metrics and Capex With Lower Oil
Chevron Corp. (NYSE: CVX) stock fell by 13% in 2018 with plummeting oil, but its shares hadn’t exactly been doing all that well when oil was screaming higher in 2018 ahead of the October mudslide. With shares at $108.79, its 52-week high of $133.88 makes the consensus target price of $141.19 seem a bit suspect. Could Chevron really see its shares surge almost 34% in 2019, after considering its 4.1% dividend yield? It seems fair to expect further price target cuts here in 2019, as oil is facing less optimistic prospects entering 2019 than in 2018. And will more state pensions, endowments and institutional investors continue to turn their back on fossil fuels in favor of sustainable investing? Chevron may need continually higher oil prices to get shareholders interested again.
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