Investing

Earnings Previews: IBM, PPG, Steel Dynamics

With the first week of the June-quarter earnings season behind us, we are looking ahead to what the coming week has in store. On Thursday, we previewed three companies scheduled to report quarterly results before Monday’s opening bell: AutoNation, Prologis and Tractor Supply.

Regional banks are in the spotlight next week, along with other companies of wide interest, including American Express, Cleveland-Cliffs, Coca-Cola, IBM, Kinder Morgan, Netflix, Nucor, Twitter, United Airlines and Verizon.

Here’s a look at three firms set to report results after markets close on Monday.

IBM

International Business Machines Corp. (NYSE: IBM) has added about 23% to its share price over the past 12 months, and the shares posted a new 52-week high just five weeks ago. When former Red Hat CEO Jim Whitehurst suddenly left the company on July 2, the stock dropped 5%, and it is having a tough time making up the loss.

Analysts are cool to the stock. Of 16 firms covering IBM that were surveyed, 10 rate the shares at Hold and four have a Buy or Strong Buy rating. There are two Strong Sell ratings as well. Shares trade at around $140.25, implying an upside potential of 3.9% at a median price target of $145.75. At the high target of $175, upside potential is nearly 25%.

Second-quarter revenue is forecast to reach $18.3 billion, up about 5.8% sequentially and about 1% year over year. Adjusted earnings per share (EPS) are forecast at $2.29, up 5% year over year and 29% sequentially. The current estimate for full-year revenue is $74.41 billion, up 1.1% year over year. EPS is forecast to rise by 26% compared to 2020 EPS.

IBM stock trades at around 12.8 times expected 2021 EPS, 11.6 times estimated 2022 EPS and 10.6 times estimated 2023 earnings. The stock’s 52-week trading range is $105.92 to $152.84. IBM pays an annual dividend of $6.56 (yield of 4.69%).

PPG

Shares of paint and coatings manufacturer PPG Industries Inc. (NYSE: PPG) are up almost 50% over the past 12 months. For the year to date, the stock is up about 19%. The company has raised prices twice already this year, and CEO Michael McGarry has said a third increase may be on its way. He told Bloomberg last week, “Inflation is across-the-board … [and customers] don’t have a lot of good ways to counter the argument that we need to have price relief.” PPG has operations in more than 70 countries and is often seen to offer a wide-angle view of the global economy.

Of 23 analysts covering PPG, 15 rate the stock a Buy or Strong Buy, and another seven recommend holding the shares. The recent price of around $169.75 implies a potential upside of almost 12% based on a median price target of $189. At the high price target of $207, upside potential reaches 21.8%.

For the June quarter, analysts are expecting PPG to report $4.32 billion in revenue and $2.19 in EPS. Those estimates represent a sequential increase of 16.5% in EPS and 11.3% in revenue. Year over year, sales are expected to be 43% higher and EPS is forecast to rise by nearly 41%.

PPG’s stock trades at around 21.2 times expected 2021 EPS, 19.0 times estimated 2022 EPS and 17.6 times estimated 2023 earnings. The 52-week range is $105.94 to $182.97. PPG pays an annual dividend of $1.27 (yield of 1.27%).

Steel Dynamics

Steel Dynamics Inc. (NASDAQ: STLD) stock has posted a gain of 132% over the past 12 months, with the lion’s share coming since late January. For the year to date, the steelmaker’s stock is up more than 67%. In April, Credit Suisse reiterated its Outperform rating on the company and raised the price target from $61 to $72. It is also worth noting that steel prices are up more than 300% over the past 12 months.

Of 11 brokerages covering the company, nine rate the stock a Buy or Strong Buy and the rest have a Hold rating. At a price of around $61.20, the implied gain based on a median price target of $76 is 24%. At the high price target of $107, upside potential reaches nearly 75%.

Analysts are forecasting second-quarter revenue of $4.24 billion, which would be up nearly 20% sequentially and more than double sales in the second quarter of last year. The consensus EPS forecast is $3.46, up almost 65% sequentially, and up more than six times second-quarter 2020 EPS. For the full year, analysts expect EPS to improve by about 365% year over year to $13.16 and revenue to increase by nearly 76% to $16.86 billion.

The stock trades at around 4.7 times expected 2021 EPS, 8.9 times estimated 2022 EPS and 11.2 times estimated 2023 earnings. The 52-week range is $26.12 to $66.88. Steel Dynamics pays an annual dividend of $1.04 (yield of 1.70%).