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Earnings Previews: Delta Air Lines, KB Home, Taiwan Semiconductor

Before markets opened on Monday, two companies we previewed late last week reported quarterly results, and both beat profit estimates. Pot grower Tilray posted a surprise break-even quarter, and Commercial Metals beat earnings estimates by a factor of nearly three, in addition to beating revenue estimates. First thing Tuesday morning, Albertsons posted solid beats to profit and revenue estimates and raised earnings guidance for its 2022 fiscal year.

Earnings season hits the ground with a running start on Friday when several of the country’s largest banks report December quarter results. We will have previews of BlackRock, Citigroup, JPMorgan and Wells Fargo on Wednesday.

Here are previews from three companies that report quarterly results after markets close Wednesday or before they open again on Thursday.

Delta Air Lines

Since posting a 12-month high last February, Delta Air Lines Inc. (NYSE: DAL) has run into stiff headwinds and bumpy air. Over the past 12 months, the stock is up less than 2%; for the past two years, the stock is down about 30%, indicating a recovery of around 50% since falling into a trough last May. First, the Delta variant of COVID-19 put a stop to an early recovery this year, and then the Omicron variant brought a second recovery to a halt. Since December 1, Delta’s share price has increased by around 22%. Delta reports fourth-quarter 2021 results before markets open Thursday morning.

The stock is a sold Buy, based on 16 of 24 analysts’ ratings of Buy or Strong Buy. The other eight rate the stock at Hold. At a recent price of around $40.90 a share, the upside potential based on a median price target of $52 is 2.7%. At the high price target of $67, the upside potential is 64%.

For the fourth quarter, the consensus revenue forecast is $9.29 billion, which would be up 1.5% sequentially and 134% higher year over year. The airline is expected to post adjusted earnings per share (EPS) of $12, down by 58% sequentially but up from a loss of $2.53 in the year-ago fourth quarter. For the full fiscal year, analysts are expecting a loss of $4.28 per share, compared to a year-ago loss of $10.76, on sales of $29.29 billion, up 71%.

Delta’s stock trades at 14.0 times estimated 2022 earnings and 6.8 times estimated 2023 earnings. The stock’s 52-week range is $33.40 to $52.28. The company has suspended its dividend payment, and its total return for the past 12 months is about 3.7%.

KB Home

After markets close Wednesday, homebuilder KB Home (NYSE: KBH) will report fourth-quarter 2021 earnings. The stock traded at its 12-month high in mid-May but has dropped by nearly 19% since then. Shares are still about 27% higher than they were at this time last year. KB Home ranks 19th out of 22 homebuilders for share price performance in 2021. Leader Hovnanian posted a share-price gain of nearly 250% last year.

Of 15 analysts covering the stock, nine rate the shares a Buy or Strong Buy and the other six rate the shares at Hold. At a share price of around $41.70, the implied upside based on a median price target of $51.50 is 23.5%. At the high price target of $63, the upside potential is 51%.

For the company’s fourth quarter, analysts are expecting EPS to rise by 10.7% sequentially to $1.77 and by 58% year over year. Revenue is forecast to rise sequentially by 16.3% to $1.71 billion, up 43.7% year over year. The consensus estimate for the full year calls for EPS of $5.91 (up nearly 89% year over year) on sales of $5.76 billion (up about 37.6%).

KB Home stock trades at 7.1 times expected 2021 EPS, 5.3 times estimated 2022 EPS of $7.90 and 531 times estimated 2023 EPS of $8.15. The stock’s 52-week range is $33.35 to $52.48. KB Home pays an annual dividend of $0.60 (yield of 1.46%). Total shareholder return for the past 12 months is 25.63%.

Taiwan Semiconductor

On Monday morning, Taiwan Semiconductor Manufacturing Co. Ltd. (NYSE: TSM) reported December 2021 revenue of $5.62 billion, an increase of 4.8% month over month and 32.4% compared to December of 2020. For all of 2021, TSMC, as the company is known, reported sales of $57.38 billion, an increase of 18.5% compared to 2020. The fourth-quarter revenue total was the sixth consecutive record-breaker for the company. TSMC invested $18 billion in capital spending in all of 2020. In the first three quarters of 2021, the company has invested $21.5 billion. TSMC expects to invest $100 billion in six new chip foundries in the next three years.

Since the end of the October quarter, the number of analysts covering TSMC has risen from 10 to 33. Of that new total, 30 have put a Buy or Strong Buy rating on the shares. The other three have a Hold rating on the stock. At a share price of around $127.70, the implied upside based on a median price target of $140.50 is 10%. At the high price target of $208, the upside potential is 63%.

For TSMC’s fourth quarter, analysts are looking for revenue of $15.76 billion, up 5.8% sequentially and 22.6% year over year. Adjusted EPS are expected to come in at $1.11, up 11.8% sequentially and 14.4% year over year. For the full year, EPS are forecast at $4.08, down 43%, on revenue of $57.31 billion, up 20%.

TSMC stock trades at 5.8 times expected 2021 EPS, 4.9 times estimated 2022 earnings of $4.88 and 4.0  times estimated 2023 earnings of $5.88. The stock’s 52-week range is $107.58 to $142.20, and the company pays an annual dividend of $1.93 (yield of 1.57%). Total shareholder return for the past 12 months is 5.57%.

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