Investing

Earnings Previews: Altria, Comcast, McDonald's, Southwest Airlines

McDonald’s

Shares of Dow component McDonald’s Corp. (NYSE: MCD) have added about 19.3% to their share price over the past 12 months, including a drop of about 7.8% since January 6. That’s the best performance among five top restaurant brands, including Starbucks. Over the past two years (pre-pandemic) McDonald’s stock is up 32%, again the best among its top competitors.

Analysts are solidly bullish on the stock with 28 of 37 giving the stock a Buy or Strong Buy rating while the other nine rate the shares at Hold. At a share price of around $249.10, the upside potential based on a median price target of $280 is 12.4%. At the high price target of $314, the upside potential is about 26%.

Fourth-quarter revenue is forecast at $6.03 billion, down 2.7% sequentially and up 13.6% year over year. Adjusted EPS are pegged at $2.34, down 15% sequentially and up 37.6% year over year. For the full 2021 fiscal year, consensus estimates call for EPS of $9.41, up 55.5%, on revenue of $23.24 billion, up 21%.

McDonald’s stock trades at about 26.5 times expected 2021 EPS, 24.5 times estimated 2022 earnings of $10.17 and 22.5 times estimated 2023 earnings of $11.07 per share. The stock’s 52-week range is $202.73 to $271.15. McDonald’s pays an annual dividend of $5.52 (yield of 2.18%). Total shareholder return over the past 12 months is 19.6%.

Southwest Airlines

Shares of Southwest Airlines Co. (NYSE: LUV) have dropped more than 8% over the past 12 months, including a spike to a gain of more than 30% in early April. A resurgence in the coronavirus pandemic and rising fuel costs have weighed on the shares since the middle of last year. Recent flight cancellations and still-rising fuel costs continue to dent Southwest’s comeback. Of the five major U.S.-based airlines, Southwest is the best performer since the pandemic began some two years ago. Since January of 2020, the airline’s stock is down 18.7% while runner-up Jet Blue is down 27.5% during the same period.

Analysts are upbeat on the stock, however, with 14 of 22 giving the shares Buy or Strong Buy ratings and another two assigning a Hold rating to the stock. At a share price of around $43.40, the upside potential based on a median price target of $58.50 is 34.8%. At the high price target of $70, the upside potential is 61.3%.

Fourth-quarter revenue is forecast at $4.99 billion, up 6.7% sequentially and up 148% year over year. Analysts expect Southwest to post EPS of $0.07, better than the $0.23 per share loss in the prior quarter, and much better than the $1.29 loss per share a year ago. For the full 2021 fiscal year, analysts are expecting the company to report a loss per share of $2.20 compared to last year’s per-share loss of $6.22. Revenue is forecast to rise nearly 74% to $15.73 billion.

Southwest stock trades at about 23.9 times estimated 2022 earnings of $1.83 and 12.2 times estimated 2023 earnings of $3.58 per share. The stock’s 52-week range is $38.66 to $64.75, and Southwest does not pay a dividend. Total shareholder return over the past 12 months is negative 4.3%.

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