Aerospace & Defense

Earnings Previews: BP, Caterpillar, JetBlue, Marathon Petroleum

The three major U.S. equity indexes closed higher on Thursday. The Dow Jones Industrial Average added 1.03%, the S&P 500 rose 1.21%, and the Nasdaq Composite closed up 1.08%. Ten of 11 sectors, led by real estate (up 3.7%) and utilities (up 3.6%) closed higher while communications services (down 1.1%) was the only sector to close lower. U.S. gross domestic product slipped 0.9% in the second quarter, marking the second consecutive quarterly decline. While that may be a technical signal that the country is in recession, traders and investors behaved as though the bad news on equities has all but ended. In the first hour of Friday’s regular trading session, all three major indexes are trading higher.

Before markets opened Thursday morning, pharmaceutical and cannabis company Tilray reported a loss per share of $0.90, much worse than the projected loss of $0.08 and revenue came in slightly higher than expected. A non-cash impairment charge of $359 million was discounted by investors and added about 12% in Thursday’s regular trading session.

Southwest Airlines reported results that beat top- and bottom-line estimates but issued disappointing third-quarter guidance. Shares dropped 6.4% in Thursday trading.

Comcast also topped consensus estimates on the top and bottom lines but reported no subscriber growth. Lacking a path to growth, investors took the stock down more than 9% Thursday.

After markets closed Thursday, Apple beat earnings per share (EPS) estimates and reported record revenue that was just short of the consensus estimate. The company expects less friction in its supply chain during the current quarter and also expects revenues to be lower sequentially. Shares traded up 3.8% in Friday trading.

Amazon missed the consensus EPS estimate but exceeded the revenue estimate. The better news is the company expects revenue to rise by as much as 17% in the current quarter. Its cloud business, AWS, posted revenue of nearly $20 billion in the quarter and now holds more than a third of the cloud-infrastructure services market. Shares traded up by about 12.3%.

Intel missed consensus estimates for both EPS and revenue. The company expects the market for personal computers to shrink by 10% this year and continues to face product design issues. The stock traded down about 10.2%.

U.S. Steel met the consensus EPS estimate and beat revenue expectations by about 8%. The company also announced a new $500 million stock buyback program. Shares traded up more than 5.8%.

Before markets opened Friday morning, Chevron and Exxon both reported EPS and revenue results that beat consensus estimates. Chevron traded up about 8.2%, and Exxon traded up 4.6% in Friday’s premarket.

We’ve already previewed five companies set to report quarterly results on Monday: Activision Blizzard, Devon Energy, Diamondback Energy, ON Semiconductor, and Williams.

Here’s a look at four companies set to report results before markets open Tuesday morning.

BP

Shares of integrated oil giant BP plc (NYSE: BP) have performed well over the past year but trail far behind Chevron and Exxon, which are up 48% and 57%, respectively. BP’s 12-month increase was about 16.7%. The massive $24 billion charge against first-quarter results for shedding the company’s 19.75% stake in Russian oil giant Rosneft won’t be a factor in second-quarter results. First-quarter operating profit totaled nearly $7.2 billion, cash flow from operations reached $8.2 billion, and free cash flow came in at $5.6 billion. That strength should carry over into the second quarter.

Of 15 brokerages covering the company, nine have a Buy or Strong Buy rating on the shares, and five rate the shares a Hold. At a current price of around $28.5.50, the implied upside to a median price target of $36.00 is 26.3%. At the high price target of $51.00, the upside potential is about 59%.

The consensus estimate for first-quarter revenue is $60.85 billion, up 23.5% sequentially and an increase of 66.8% year over year. Adjusted EPS is forecast at $2.13, up 10.9% sequentially and 1,400% year over year. For the 2022 fiscal year, analysts expect BP to report EPS of $7.72, up 102.2%, on sales of $207.84 million, a rise of  31.8%.

BP stock trades at a multiple of 0.6 times expected 2022 EPS, 0.8 times estimated 2023 of $6.04, and 0.9 times estimated 2024 EPS of $5.14. The stock’s 52-week range is $23.39 to $34.30. BP pays an annual dividend of $1.31 (yield of 4.6%). The total shareholder return for the past year was 23.55%.

Caterpillar

After setting a 52-week high in mid-April, shares of heavy equipment maker Caterpillar Inc. (NYSE: CAT) have tumbled by about 17%. For the past 12 months, the shares are down about 10.6%. The better news for the Dow 30 stock is that the stock price is up nearly 13% over the past two weeks. The uptick is nearly all the result of a less-foreboding macroeconomic outlook and the company’s strong 12-month free cash flow of $5.50 per share ($2.94 billion).

Of 29 brokerages covering the shares, 12 have put a Hold rating on the stock while 15 have a Buy or Strong Buy rating. At the current price of around $190.40, the upside potential based on a median price target of $225.00 is 18.2%. At the high target of $350.00, the upside potential is 83.8%.

Caterpillar is expected to report second-quarter revenue of $14.39 billion, up 5.9% sequentially and an increase of 11.6% year over year. Adjusted EPS is forecast at $3.02, up 4.7% sequentially and 16.2% year over year. For the full 2022 fiscal year, analysts are expecting EPS of $12.47, up 15.3%, on revenue of $57.44 billion, and a gain of 12.7%.

Caterpillar stock trades at a multiple of 15.3 times expected 2022 EPS, 13.5 times estimated 2023 earnings of $14.08, and 12.3 times estimated 2024 earnings of $15.49. The stock’s 52-week range is $167.08 to $237.90. Caterpillar pays an annual dividend of $4.80 (yield of 2.59%). Total shareholder return for the past 12 months was negative 8.5%.

JetBlue

Shares of JetBlue Airways Corp. (NASDAQ: JBLU) have dropped by about 45% over the past 12 months, with the stock putting up a 52-week low in early March. The stock posted a new 52-week low less than two weeks ago. On Thursday, the company announced that it won the competition with Frontier to acquire low-cost carrier Spirit Airlines for $3.9 billion ($33.50 per share in cash). Now the deal has to make it through federal regulators. JetBlue shares closed down a few cents after the deal was announced; Frontier’s stock soared 20%.

Analysts are cautious on the stock, with six6 of 10 giving the shares a Hold rating and two assigning a Buy rating. At a current price of around $8.35, the upside potential based on a median price target of $11.00 is 31.7%. At the high price target of $16.00, the upside potential is 91.6%.

Second-quarter revenue is forecast at $2.46 billion, up 41.7% sequentially and a gain of 64% year over year. Analysts expect JetBlue to post a loss per share of $0.11, better than the loss of $0.80 reported in the prior quarter but better than the $0.65 loss per share in the year-ago period. For the full 2022 fiscal year, analysts are expecting the company to report a loss per share of $0.72 compared with last year’s per-share loss of $2.51. Revenue is forecast to climb 50.7% to $9.1 billion.

JetBlue stock trades at a multiple of 11 times estimated 2023 EPS of $0.76 and 4.9 times estimated 2024 earnings of $1.71 per share. The stock’s 52-week range is $7.87 to $16.64, and the airline does not pay a dividend. Total shareholder return over the past 12 months is negative 44.88%.

Marathon Petroleum

Oil refiner and marketer Marathon Petroleum Corp. (NYSE: MPC) posted an all-time high share in early June and has posted a stock price gain of around 62% over the past year. That’s a far larger increase than rival Phillips 66’s 16.5% gain. Refining margins have begun falling back to earth as high prices have cut demand and there’s barely a month left in the summer driving season. Competing refiner Valero reported refining margins of $30 a barrel, double the first-quarter total, and Phillips 66 reported a per-barrel margin of $29.30, nearly triple its first-quarter total. Marathon should be in the same ballpark.

Of 17 brokerages covering Marathon, 14 have given the stock a Buy or Strong Buy rating, and the rest rate the stock a Hold. At a current trading price of around $91.20, the stock’s upside potential based on a median price target of $118.00 is about 29.4%. At the high target of $130.00, the upside potential is 42.5%.

Second-quarter revenue is forecast at $44.26 billion, up 15.3% sequentially and up by about 48.4% year over year. Analysts are estimating EPS of $8.47, up 484% sequentially and an increase of 1,154% year over year. For the full 2022 fiscal year, the consensus estimates call for EPS of $18.07, up nearly 640%, on revenue of $160.96 billion, up 33.1%.

Marathon Petroleum’s stock trades at a multiple of five times expected 2022 EPS, 10.4 times estimated 2023 earnings of $8.75, and 10.6 times estimated 2024 earnings of $8.63 per share. The stock’s 52-week range is $53.47 to $114.35. Marathon pays an annual dividend of $2.32 (yield of 2.58%). The total shareholder return for the past 12 months was 68.5%.

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