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Earnings Previews: Baker Hughes, Netflix, NextEra Energy, United Airlines, Verizon

United Airlines

When competitor Delta reported third-quarter results last week, it beat consensus estimates on both the top and bottom lines, yet the stock closed lower and has been drifting downward ever since. United Airlines Holdings Inc. (NASDAQ: UAL) managed to hold its stock price relatively flat since Delta’s announcement, but that may be due to low expectations for the carrier. United has recently suspended some flights from San Francisco and announced an expansion to its transatlantic flights beginning next year.

Airlines (and other travel industry businesses) are betting (again) that the coronavirus pandemic will be in the rear-view mirror for good by next summer’s travel season. United’s outlook may be more important than its numbers when it reports results after markets close Tuesday. Over the past 12 months, United’s stock has added roughly 40% to its share price.

Analysts are primarily in a wait-and-see mode with the stock. Of 22 brokerages covering the firm, 10 have assigned the stock a Hold rating, and eight rate the stock a Buy or Strong Bug. There are also three Strong Sell ratings on the company. At a price of around $47.70, the upside potential based on a median price target of $58 is nearly 24%. At the high price target of $78, the upside potential rises to 63.5%.

The consensus third-quarter revenue forecast calls for sales of $7.64 billion, up nearly 40% sequentially and about 207% higher year over year. Analysts are forecasting an adjusted loss of $1.68 per share, better than the $3.91 loss per share posted in the second quarter and much better than the $8.16 per share loss in the year-ago quarter. For the full fiscal year, analysts expect a loss per share of $13.33, less than half the $27.57 per share loss posted a year ago. Revenue is forecast to rise by 61% to $24.7 billion.

The stock trades at 16.4 times estimated 2022 earnings and 6.1 times estimated 2023 earnings. The stock’s 52-week range is $32.16 to $63.70, and United does not pay a dividend.

Verizon

Telecom giant and Dow Jones industrial Verizon Communications Inc. (NYSE: VZ) reports third-quarter results early Wednesday. Over the past 12 months, the share price has dropped by nearly 6%, as well as by 7% for the year to date.

Verizon has spent big on 5G spectrum licenses this year but reportedly pulled out of an October 8 auction, causing the auction to miss its reserve minimum of $14.8 billion. Verizon has spent more than $45 billion on spectrum this year, more than 2.5-times is capital spending in all of last year. In seven of the eight immediately past quarters, Verizon has beaten EPS estimates, and in six it also has beaten revenue estimates.

While analysts are definitely cool toward Verizon’s potential to grow its share price, the company’s massive dividend yield makes it hard to recommend selling the stock. Of 27 analysts, seven rate the stock as a Buy or Strong Buy, and 19 rate the shares a Hold. At a price of around $52, the implied gain based on a median price target of $60 is 15.4%. At the high price target of $68, the potential upside is almost 31%.

Third-quarter revenue is forecast to come in at $33.26 billion, down about 1.5% sequentially and up 5.5% year over year. Adjusted EPS are forecast at $1.36, down a penny sequentially and up 8.8% (11 cents) year over year. For the full 2021 fiscal year, analysts currently expect Verizon to post EPS of $5.72, up 7.7%, on sales of $134 billion, up 4.5%.

Verizon stock trades at 9.9 times expected 2021 EPS, 9.8 times estimated 2022 earnings and 9.6 times estimated 2023 earnings. The stock’s 52-week range is $50.86 to $61.95. Verizon pays an annual dividend of $2.56 (yield of 4.9%).

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