Investing

Earnings Previews: ConocoPhillips, Honeywell, Merck

Honeywell

Dow Jones industrial average component Honeywell International Inc. (NASDAQ: HON) has added about 6% to its share price over the past 12 months. Honeywell has beaten EPS estimates in each of the four preceding quarters and topped revenue estimates in three of the four quarters. From its mid-August peak, the stock is down 12.7%. Honeywell has long been a value play, however, and its dividends and buybacks cover a lot of sins.

Of 27 analysts covering the company, 13 rate the stock a Hold and 13 have a Buy or Strong Buy rating. At a share price of around $203, the upside potential based on a median price target of $236 is about 16.3%. At the high target of $285, upside potential is 40.4%.

Analysts are looking for fourth-quarter revenue of $8.74 billion, up 3.2% sequentially but down 2.1% year over year. Adjusted EPS are forecast at $2.08, up 2.9% sequentially, as well as a penny more than in the year-ago quarter. For fiscal 2021, revenue is projected to grow by 5.6% to $34.45 billion and EPS is forecast to rise by 13.2% to $8.04.

Honeywell stock trades at 25.3 times expected 2021 EPS, 22.6 times estimated 2022 earnings of $8.97 and 20.4 times estimated 2023 earnings of $8.87. The stock’s 52-week trading range is $196.05 to $2336.86. The company pays an annual dividend of $3.92 (yield of 1.94%). Total shareholder return for the past year was 5.54%.

Merck

Drugmaker Merck & Co. Inc. (NYSE: MRK) is the second Dow stock reporting earnings Thursday morning. The stock’s share price has improved by more than 14% over the past 12 months, including two big dips and one wild spike. Shares have added more than 13% since the most recent low posted in early December. Over the next few years, the company’s Keytruda cancer drug may be on its way to becoming the world’s best-selling prescription drug. That gives analysts ulcers because eventually (the end of this decade) the music will stop and no one is sure what Merck will do then.

Of 25 analysts covering the company, 15 rate the stock a Buy or Strong Buy and the other 10 have Hold ratings. At a share price of around $81.20, the implied upside on the stock at a median price target of $93.50 is just over 15%. At the high price target of $115, the upside potential is around 41.6%.

For the company’s fourth quarter, analysts anticipate revenue of $13.18 billion, up just 0.2% sequentially but an increase of 5.3% year over year. Adjusted EPS are tabbed to come in at $1.52, down by about 13% sequentially but about 15.2% higher year over year. For the full fiscal year, the current revenue estimate is $48.49 billion, up 1.0%, and the EPS estimate is $5.78, down by 2.7%.

Merck stock trades at 14.0 times expected 2021 EPS, 11.1 times estimated 2022 earnings of $7.29 and 11.2 times estimated 2023 earnings of $7.25 per share. The stock’s 52-week trading range is $196.05 to $236.86. Merck pays an annual dividend of $3.92 (yield of 1.94%). Total shareholder return for the past year is almost 14%.

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