Investing

Earnings Previews: Altria, Caterpillar, McDonald's, Merck

A quick glance at the calendar for this week shows some 900 publicly traded companies are scheduled to report March quarter earnings this week. We’ve selected a couple of dozen to preview over the next few days from the nearly endless list.

Looking ahead to companies reporting earnings after Tuesday’s closing bell, we have previewed Alphabet, AMD, Microsoft and Texas Instruments in a Monday story. Four more, Boeing, Enphase, Shopify and Starbucks, were previewed in a second story posted Monday.

The first of two preview stories for Tuesday was our look at the four companies scheduled to report results after the closing bell Wednesday: Apple, Facebook, Ford and Qualcomm. The four companies previewed in this story are scheduled to report earnings before markets open Thursday. Three of the four are Dow Jones industrial average components.

Altria

Marlboro cigarette maker Altria Group Inc. (NYSE: MO) trades more than 10 million shares on an average day. On April 19, the stock traded within a nickel of its 52-week high set in late March before, plunging by more than $5 following a report that the Federal Trade Commission has filed suit to unwind the company’s $12.8 billion deal for e-cigarette maker Juul.

Since the 2018 deal, Altria has written off about $8.6 billion of the value of its 35% stake in Juul. The FTC has been considering the action for the past year. Then a week ago, the Biden administration reportedly was considering lowering allowed levels of nicotine in cigarettes to the point where cigarettes are no longer addictive.

All that negativity has had little impact on eight sell-side analysts, who rate the stock a Buy or Strong Buy compared to just six who rate the stock at Hold. No analysts rate Altria a Sell. The consensus price target on the stock is $52.63 and shares trade at around $47, implying a potential upside of nearly 12%. At the high target of $66, the upside potential rises to more than 40%.

Analysts are looking for Altria to report Earnings per share (EPS) of $1.04, a decline of about 4.6% year over year, on sales of $4.98 billion, down about 1.4% year over year. For the full year, analysts forecast EPS of $4.57, up 4.89% year over year, on sales of $21.27 billion, up 2%.

At the current price, the stock trades at a multiple of 10.3 times expected 2021 EPS, 9.7 times estimated 2022 earnings and 9.1 times estimated 2023 earnings. Altria’s secret, of course, is its annual dividend of $3.44 per share. That works out to a yield of 7.29%, the third-highest among all S&P 500 components, outpacing both AT&T and Exxon Mobil, the other two behemoths in the top 10 dividend payers.

Caterpillar

After sinking to a yearly low in late March, Caterpillar Inc. (NYSE: CAT) ended 2020 with a gain of 27%. The stock has added another 27% since the beginning of the year, and for the past 12 months, the share price has more than doubled. The White House’s infrastructure plan is seen as a huge driver of demand for Caterpillar and other suppliers to the construction business. The 2020 fourth quarter was something of a disappointment, as demand was lower than expected but earnings and revenues were solid.

Brokerages are evenly split, with 11 touting Caterpillar as a Buy or Strong Buy and an equal number giving the stock Hold ratings. At a recent price of $229.50, the stock has already outrun its 12-month consensus price target of $224.36. The upside potential for the high target of $270 pencils out to 17.5%.

EPS for the company’s first quarter is forecast at $1.94, up by more than 21% year over year, with revenue forecast to increase by 4.3% to $11.09 billion. For the 2021 fiscal year, Caterpillar is expected to post EPS of $8.34, up 27% year over year, on sales of $46.55 billion, up 11.5% year over year.