Investing

Earnings Previews: American Airlines, AT&T, Freeport-McMoRan, Southwest Airlines

Of 30 companies in our watchlist that reported earnings late Monday or before markets opened Tuesday, two posted a negative surprise on earnings and one met expectations exactly. Six missed revenue estimates and seven others hit sales estimates exactly. All in all, a good performance.

We already have previewed five companies scheduled to report September-quarter results after markets close Tuesday and before they open again on Wednesday: Baker Hughes, Netflix, NextEra Energy, United Airlines and Verizon.

Earlier in the day, we previewed earnings reports due out after markets close Wednesday: IBM, Kinder Morgan, Las Vegas Sands and Tesla.

Here’s a look at four companies set to report results before the opening bell on Thursday.

American Airlines

Since Delta Air Lines reported quarterly results last week that beat on both the top and bottom lines, airline stocks have dropped by 3% to nearly 8.5%. The decline was due mainly to a soft outlook for the rest of the year, due largely to rising fuel costs. American Airlines Group Inc. (NASDAQ: AAL) stock has dipped by 3% but is still the best performing over the past 12 months, with a share price gain of more than 59%. It is virtually inevitable that other airlines face the same issue.

A second issue facing airlines is replacing employees who left during the pandemic. On the plus side, this year’s holiday season is expected to improve significantly compared to the pandemic trough of last year.

Analysts are cautious on the stock. Of 22 brokerages covering it, nine have a Hold rating on the shares and eight more have Sell or Strong Sell ratings. At a recent price of around $19.60, the implied upside based on a median price target of $20.75 is about 5.9%. At the high target of $33, the upside potential is more than 63%.

Third-quarter revenue is forecast at $8.91 billion, which would be 19.2% higher sequentially and up 181% year over year. The company is expected to post a loss per share of $1.03, better than the $1.69 loss per share in the prior quarter and much improved over last year’s third-quarter loss of $5.54 per share. For the full year, the company is expected to post a loss of $8.00, compared to the year-ago loss of $19.66, on revenue of $29.73 billion, up 71.5%.

The stock trades at 57.8 times estimated 2022 earnings and 6.9 times estimated 2023 earnings. The stock’s 52-week range is $10.63 to $26.09. American Airlines does not pay a dividend.

AT&T

Following a spike in early May, shares of AT&T Inc. (NYSE: T) have plunged again and currently trade basically flat for the past 12 months. The transaction that will create a new media company, Warner Bros Discovery, won’t be completed until next year, but the deal will reward AT&T shareholders with free shares of the new company to complement the AT&T shares they now own. The not-so-good news for shareholders is the company’s plan to cut its rich dividend.

Sentiment on the stock is decidedly cool. Of 28 brokerages covering the stock, 17 have put a Hold rating on it while three more rate the shares a Sell. The rest have Buy or Strong Buy ratings. At a price of around $25.40, the implied upside based on a median price target of $32 is 26%. At the high price target of $37, the upside potential is about 46%.

Third-quarter revenue is forecast at $40.33 billion, down 8.4% sequentially and down 4.7% year over year. Adjusted earnings per share (EPS) are forecast at $0.79, down 11% sequentially but up 3.9% year over year. For the full year, EPS are expected to come in at $3.25, up 2.3%, on sales of $168.38 billion, down about 2%.

AT&T stock trades at 7.9 times expected 2021 EPS, 8.1 times estimated 2022 earnings and 7.8 times estimated 2023 earnings. The stock’s 52-week range is $25.01 to $33.88. AT&T’s current annual dividend is $2.08 (yield of 8.21%).