Investing

Earnings Previews: Kimberly-Clark, Otis Worldwide, Restaurant Brands

Otis Worldwide

Since Otis Worldwide Corp. (NYSE: OTIS) was spun off from the former United Technologies before the latter’s merger with Raytheon in April of last year, the stock has appreciated by 89%, including a recent dip of 9% following its $3.9 billion offer to acquire the 49.9% of its Spanish subsidiary it did not already own. Combined with a downgrade to Underweight by Wells Fargo’s analysts, a sell-off by some institutional investors and chaos in the Chinese housing market, the company’s headwinds have cooled investor enthusiasm for the stock.

Of 15 brokerages covering the stock, eight rate the shares a Buy or Strong Buy, and another five have placed a Hold rating on the stock. At a price of around $83.90, the upside potential based on a  median price target of $97 is 15.6%. At the high price target of $105, the upside potential is just over 25%.

Third-quarter revenue is forecast to total $3.55 billion, down about 4% sequentially but up about 8.6% year over year. Adjusted EPS are forecast at $0.73, down 7.5% sequentially and 5.8% higher year over year. For 2021, EPS are forecast at $2.96, up 17.7%, on sales of $14.22 billion, up 11.5%. The company’s outlook could be the determining factor in how the stock reacts to Monday’s earnings announcement.

Otis stock trades at 28.5 times expected 2021 EPS, 26.0 times estimated 2022 earnings and 23.7 times estimated 2023 earnings. The stock’s 52-week range is $58.77 to $92.84, and Otis pays an annual dividend of $0.95 (yield of 1.15%).

Restaurant Brands

The owner and operator of Burger King, Popeye’s and Tim Hortons, Restaurant Brands International Inc. (NYSE: QSR), owned or operated some 27,000 global locations at the end of 2020. The company’s share price has increased by nearly 13% over the past 12 months but is up less than 2% since the coronavirus pandemic hit early last year.

Restaurant Brands’ post-pandemic bounce has been far smaller than industry biggies McDonald’s (up 26.5%) or Starbucks (up nearly 34%). Foot traffic at the company’s stores remains below pre-pandemic levels, as it does for all fast-food outlets. Toronto-based Restaurant Brands is the fifth-largest (by market cap) U.S.-traded fast-food stock behind McDonald’s, Starbucks, Chipotle and Yum! Brands.

Sentiment on the company is bullish, with 20 of 32 brokerages putting a Buy or Strong Buy rating on the shares. Another 11 rate the stock a Hold. At a price of around $61.90, the upside potential based on a median price target of $75 is 21%. At the high price target of $83, the upside potential is 34%.

Third-quarter revenue is forecast to come in at $1.52 billion, 5.9% higher sequentially and up 13.4% year over year. Adjusted EPS are pegged at $0.74, down 4.5% sequentially but up 8.8% year over year. Current estimates for fiscal 2021 call for EPS of $2.79, up 38%, on sales of $5.76 billion, up 15.9%.

Restaurant Brands stock trades at 21.9 times expected 2021 EPS, 19.2 times estimated 2022 earnings and 17.2 times estimated 2023 earnings. The stock’s 52-week range is $51.12 to $71.12, and the company pays an annual dividend of $2.12 (yield of 3.48%).

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