Investing

Earnings Previews: Rite Aid, Taiwan Semiconductor, UnitedHealth

Paul Ausick

Published: April 12, 2022 12:09 pm

While there were a few interesting earnings reports out Tuesday morning, all eyes were focused on the U.S. Labor Department’s monthly consumer price index (CPI) report. For the month of March, the CPI rose by 1.2% month over month and by 8.5% year over year. Core CPI, excluding food and energy, rose 0.3% sequentially and by 6.5% year over year. Stocks reacted by rising in the premarket session and were indicated to open the regular session on a slight upswing.

Among companies reporting earnings Tuesday morning, Canada-based marijuana grower OrganiGram jumped by more than 9% in premarket trading after beating estimates on both the top and bottom lines. CarMax reported a miss on profits and shares fell by around 8% at one point in premarket trading. Albertsons beat estimates on both the top and bottom lines, but guidance was no better than lukewarm.

Wednesday more or less marks the beginning of the March-quarter earnings season. We already have previewed four companies set to report results before markets open Wednesday (Bed Bath & Beyond, BlackRock, Delta Air Lines, JPMorgan) and four big bank reports due out first thing Thursday (Citigroup, Goldman Sachs, Morgan Stanley, Wells Fargo).

Here is a look at three more companies set to report results Thursday morning.

Rite Aid

Retail drugstore operator Rite Aid Corp. (NYSE: RAD) reports fiscal 2021 fourth-quarter results before Thursday’s opening bell. Over the past 12 months, the share price has plunged by about 62%. Shares have trended down since late last June, and for the year to date, shares currently trade down nearly 48%. A recent analyst report on the company suggests that it could fail and slapped a Sell rating on the stock, along with a price target of $1.

Just three analysts pay attention to the shares, and none rates them above a Sell. At a recent price of around $7.75 a share, the stock traded above its median price target of $7.00. Upside potential based on a high price target of $12.00 is 54.8%.

Fourth-quarter revenue is expected to come in at $5.95 billion, which would be up by less than 1% sequentially and 2.2% higher year over year. The adjusted loss per share is forecast at $0.57, compared to earnings per share (EPS) of $0.15 in the prior quarter and a loss per share of $0.78 in the fourth quarter of last year. For the full fiscal year that ended in February, Rite Aid is expected to post a loss per share of $0.67, compared to last year’s loss of $0.15. Revenue is expected to increase by 1.8% to $24.46 billion.

Rite Aid is also not expected to post a profit in either 2023 or 2024. The company’s enterprise value to sales multiple for the three fiscal years is 0.3. The stock’s 52-week trading range is $6.11 to $23.02. Rite Aid does not pay a dividend. Total shareholder return for the past year was negative 61.5%.

Taiwan Semiconductor

Last week, Taiwan Semiconductor Manufacturing Co. Ltd. (NYSE: TSM) posted its monthly revenue report. For the first quarter of 2022, revenue totaled $17 billion, an increase of 36% year over year. Revenue for March totaled $5.95 billion, up 33.2% compared to March 2021. Despite supply chain issues and the impact of the coronavirus pandemic, demand for gadgets like smartphones and smart TVs remains strong. The company also said it has no current plans for a downward revision of either its sales or capital spending guidance.
Of 17 analysts covering the stock, 15 have put a Buy or Strong Buy rating on the shares. The other 2 have a Hold rating on the stock. At a share price of around $99.70, the implied upside based on a median price target of $160.00 is 60.5%. At the high price target of $179, the upside potential is nearly 80%.

For TSMC’s first quarter of fiscal 2022, analysts are looking for revenue of $16.11 billion, up 2% sequentially and 26.6% higher year over year. Adjusted EPS are expected to come in at $1.31, up 13.9% sequentially and 36.5% year over year. For the full fiscal year, EPS are forecast at $5.52, up 33.9%, on revenue of $68.99 billion, up 20.6%.

The stock trades at 3.6 times expected 2022 EPS, 3.1 times estimated 2023 earnings of $6.30, and 2.6 times estimated 2024 earnings of $7.59. The stock’s 52-week range is $96.91 to $145.00, and the company pays an annual dividend of $1.98 (yield of 2.03%). Total shareholder return for the past 12 months is negative 16.5%.

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Earnings Previews: Citigroup, Goldman Sachs, Morgan Stanley, Wells Fargo

UnitedHealth

The country’s largest health insurer, UnitedHealth Group Inc. (NYSE: UNH) has posted a share price increase of about 44.2% over the past 12 months. Shares rose by 43.8% in the 2021 fiscal year (fourth-best among the Dow Jones industrials) and by about 48.5% in the first quarter of this year. Late last month, UnitedHealth’s Optum health-services division agreed to acquire home health provider LHC Group for $5.4 billion in cash.

Analysts remain bullish on the stock, with 20 of 24 assigning a rating of Buy or Strong Buy and three more rating the shares at Hold. At a share price of around $535.85, the upside potential based on a median price target of $550.00 is about 2.6%. At the high target of $610.00, the upside potential is 13.8%.

The consensus estimate for first-quarter revenue is $78.70 billion, up by 6.7% sequentially and by 12.1% year over year. Adjusted EPS are tabbed at $5.36, up by 19.6% sequentially and about 1% higher year over year. For the full fiscal year, analysts are forecasting EPS of $21.64, up 13.8%, on revenue of $319.43 billion, up 11.1%.

UnitedHealth stock trades at 24.8 times expected 2022 EPS, 21.8 times estimated 2023 earnings of $24.68 and 19.0 times estimated 2024 earnings of $28.21 per share. The stock’s 52-week range is $374.03 to $548.97. The Dow component pays an annual dividend of $5.80 (yield of 1.06%). Total shareholder return for the past 12 months was 44.5%.