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Earnings Previews: ASML, IBM, Netflix

Paul Ausick

Published: April 18, 2022 10:56 am

Before markets opened on Monday, Bank of America reported first-quarter results that beat both revenue and profit estimates, and shares traded up about 1%. Bank of New York Mellon reported inline profits but missed slightly on revenue. Shares traded down about 4% Monday morning.

Charles Schwab missed on both the top and bottom lines, and the shares traded down more than 5%. Synchrony Financial beat both profit and revenue estimates and announced a further $2.8 billion in share buybacks. The stock traded up more than 3%.

This week we expect to get earnings reports from a variety of industries, including more airlines, mining companies and energy companies. A couple of Dow Jones industrials stocks are on tap for Friday, and Tesla will report results after markets close Wednesday.

We already have previewed four companies set to report results before Tuesday’s opening bell: Halliburton, Johnson & Johnson, Lockheed Martin and Truist.

Here is a look a three technology firms that will release quarterly results either on Tuesday afternoon or Wednesday morning.

ASML

Semiconductor manufacturing equipment maker ASML N.V. (NASDAQ: ASML) has added dropped about 4.5% from its share price over the past 12 months. Since mid-November, the stock is down 32%, and for the year to date, shares have declined nearly 25%. The Netherlands-based company will report first-quarter results before U.S. markets open on Wednesday.

What’s difficult to understand is how a company that has a virtual monopoly on machines that etch circuits onto silicon wafers could be down so much when demand for semiconductors is so strong. What seems to be in question is ASML’s ability to expand fast enough and just how much that could cost. ASML’s outlook for the rest of this year will be critical for the company and its investors.

Of 35 analysts following the stock, 27 have given the shares a Buy or Strong Buy rating while five have Hold ratings. At a recent price of around $597.90 a share, the implied upside based on a median price target of about $837.13 is about 40%. At the high price target of $994.59, upside potential reaches 66%. Last July, ASML’s average price target was around $700.

Analysts expect the company to report revenue of $3.75 billion for the March quarter, which would be down about 34% sequentially and by more than 32% year over year. Adjusted earnings per share (EPS) are forecast at $1.82, down 59.4% sequentially and 51.5% lower year over year. For the full 2022 fiscal year, analysts currently forecast EPS of $18.11, up about 14.5% year over year, on revenue of $24.01 billion, up 13.3%. Analysts remain more upbeat than investors.

ASML stock trades at around 33.4 times expected 2022 EPS, 28 times estimated 2023 EPS of $21.62 and 24.6 times estimated 2024 earnings of $24.59 per share. The stock’s 52-week range is $558.77 to $895.93. The company pays an annual dividend of $6.26 per share (yield of 0.56%). Total shareholder return for the past 12 months was negative 4.8%.

IBM

Shares of International Business Machines Corp. (NYSE: IBM) have added about 4.2% over the past 12 months. The less good news is that shares are about 4.1% lower year to date. The spinoff of the company’s services business into Kyndryl will lower overall revenue by nearly $4 billion. Adjusted for the spinoff, however, revenue is expected to rise by around 5%. IBM needs to show that its software business is growing, especially the Red Hat unit, and that its hardware business is growing, even by a little. The company reports results after markets close Tuesday.

Analysts continue to wait for evidence that IBM is going to do something other than maintain its rather lackluster performance. Of 19 brokerages covering the firm, 12 have a Hold rating on the shares, and six rate the stock a Buy or Strong Buy. At a share price of around $127.00, the implied upside based on a median price target of $144.00 is about 13.4%. At the high price target of $165.00, the implied upside is nearly 30%.

First-quarter revenue is expected to come in at $13.84 billion, down about 17% sequentially and almost 22% year over year. Adjusted EPS are forecast at $1.39, down 58.5% sequentially and 21.5% year over year. The current full-year estimates call for EPS of $10.00, up 26.2%, on sales of $60.67 billion, up 5.8%.

IBM stock trades at 12.7 times expected 2022 EPS, 11.9 times estimated 2023 earnings of $10.69 and 11.3 times estimated 2024 earnings of $11.18 per share. The stock’s 52-week range is $114.56 to $152.84. IBM pays an annual dividend of $6.56 (yield of 5.2%), and total shareholder return for the past 12 months is 4.2%.

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Netflix

Netflix Inc. (NASDAQ: NFLX) stock has not recovered from its 30% plunge following its 2021 fourth-quarter earnings report in January. The company’s disappointing subscriber growth estimate for the first quarter of 2022 sent investors stampeding for the exits. The worse news is that analysts have seen no reason to boost the estimate. Considering that Netflix halted its Russian operations, the subscriber growth number could be as low as just 1 million newbies. The company reports results late Tuesday.

Of 42 analysts covering the stock, 24 have given the shares a Buy or Strong Buy rating, while another 15 rate the stock at Hold. At a share price of around $339.75, the upside potential based on a median price target of $527.50 is about 55.3%. At the high price target of $700.00, the upside potential is 106%.

First-quarter revenue is forecast at $7.95 billion, up about 3% sequentially and 11% higher year over year. Adjusted EPS are forecast at $2.92, up nearly 120% sequentially and down 22% year over year. For full fiscal 2022, analysts expect to see EPS of $11.15, down 0.8%, on sales of $33.4 billion, up 12.5%.

Netflix shares trade at 30.4 times expected 2022 EPS, 23.4 times estimated 2023 earnings of $14.54 and 18.5 times estimated 2024 earnings of $18.31 per share. The stock’s 52-week range is $329.82 to $700.99. Netflix does not pay a dividend. Total shareholder return for the past 12 months was negative 37.9%.