Investing

Earnings Previews: CSX, Netflix, PPG Industries

Tuesday was not a good day for equity investors. Wednesday got off to a slightly better start with the three major stock indexes all trading higher in the premarket session. The two big banks that reported results in the morning (Bank of America and Morgan Stanley) both beat profit estimates and missed on revenues. Dow Jones industrial average components Procter & Gamble and UnitedHealth Group beat on both.

After markets close Wednesday, results from Alcoa, Discover Financial, Kinder Morgan and United Airlines are due. We also previewed three firms set to report quarterly results before markets open on Thursday: American Airlines, Baker Hughes and Union Pacific.

Here is a look at three companies that are scheduled to report results after markets close Thursday.

CSX

Railroad operator CSX Corp. (NYSE: CSX) has added about 14.5% to its share price over the past 12 months, including a dip of more than 6% since the beginning of this year. U.S. rail traffic rose 5.7% last year, but the new year was off to a rocky start with total traffic down 16%. CSX recently struck a deal that is expected to lead to the completion of its acquisition of Pan Am Railroads, a Vermont-based operator that serves the New England states on an 1,800-mile network.

Analysts remain bullish on the stock, with 18 of 27 rating the shares a Buy or Strong Buy and seven rating the stock at Hold. At a recent trading price of around $35.30 per share, the upside potential to a median price target of $41 is 16.1%. At a high price target of $45, the upside potential rises to 27.5%.

For the fourth quarter, analysts have forecast revenue at $3.32 billion, which would be less than 1% higher sequentially and up 17.3% year over year. Adjusted earnings per share (EPS) are forecast at $0.41, down 3.6% sequentially but up by 24.2% year over year. For the full year, analysts forecast EPS of $1.55, up 29.3% year over year, and revenue of $12.42 billion, up 17.3%.

CSX stock currently trades at around 22.8 times expected 2021 EPS, 19.7 times estimated 2022 EPS of $1.80 and 18.1 times estimated 2023 earnings of $1.96 per share. The stock’s 52-week range is $27.70 to $38.01. The company pays an annual dividend of $0.37 (yield of 1.06%). Total shareholder return over the past year is nearly 16%.

Netflix

Netflix Inc. (NASDAQ: NFLX) stock got a boost late Friday when the company announced it was raising its subscription rates. It gave back all of that and more on Tuesday. The initial positive reaction likely stemmed from investors’ belief in Netflix’s pricing power. Tuesday’s reaction (likely counter-reaction) was based on increased competition from the likes of Disney and WarnerMedia that could limit Netflix’s pricing power. We shall have to wait at least a few months to see how that works out for the streaming video giant.

Of 44 analysts covering the stock, 32 have given the shares a Buy or Strong Buy rating, while another seven rate the stock at Hold. At a share price of around $512.90, the upside potential based on a median price target of $700 is 36.5%. At the high price target of $800, the upside potential is 75.5%.

Fourth-quarter revenue is forecast at $7.71 billion, up 3% sequentially and 16% year over year. Adjusted EPS are forecast at $0.82, down nearly 75% sequentially and 31% year over year. For the full 2021, analysts expect to see EPS of $10.71, up 76%, on sales of $29.7 billion, up nearly 19%.

Netflix shares trade at 47.9 times expected 2021 EPS, 39.1 times estimated 2022 earnings of $13.13 and 30.5 times estimated 2023 earnings of $16.83 per share. The stock’s 52-week range is $478.54 to $700.99. Netflix does not pay a dividend. Total shareholder return for the past 12 months was about 2.4%. Since mid-November, Netflix stock has dropped more than 25%.

PPG Industries

Paint and coatings manufacturer PPG Industries Inc. (NYSE: PPG) has had a share price bump of about 13% over the past 12 months. So far in 2022, the stock is down about 5%. Over the past 12 quarters, PPG has beaten EPS estimates in 10 and revenue estimates in eight, including the last six in a row.

Of 24 analysts covering the stock, 15 have either a Buy or Strong Buy rating, while another eight rate the stock at Hold. The recent price of around $163.10 implies a potential upside of 12.8% based on a median price target of $184. At the high price target of $200, the upside potential reaches 22.6%.

For the fourth quarter, analysts are expecting PPG to report $4.05 billion in revenue, down 7.3% sequentially and up by 10.4% year over year. EPS are pegged at $1.21, down 28.6% sequentially and nearly 24% lower year over year. For the full year, analysts are looking for EPS of $6.74, up 18.3%, on revenue of $16.68 billion, up 20.6%.

PPG’s stock trades at around 24.2 times expected 2021 EPS, 19.9 times estimated 2022 EPS of $8.18 and 17.5 times estimated 2023 earnings of $9.33. The 52-week range is $132.10 to $182.97. PPG pays an annual dividend of $2.36 (yield of 1.43%). Total shareholder return for the past 12 months was 14%.

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