Investing

Earnings Previews: JB Hunt, Netflix, United Airlines

Paul Ausick

Published: October 17, 2022 9:41 am

Last Updated: October 17, 2022 10:25 am

The three major U.S. equity indexes closed sharply lower on Friday, giving up the gains posted Thursday when the consumer price index report was interpreted as good news. The Dow Jones industrials ended the day down 1.34%, the S&P 500 closed 2.37% lower and the Nasdaq lost 3.08%. All 11 sectors closed lower, with consumer cyclicals and energy (both 3.7%) and materials (3.4%) posting the biggest drops. Health care (0.7%) was the only sector to end the day with a loss of less than 1%.

The first economic data of note due this week is the monthly report on new housing starts and building permits on Wednesday. The monthly report on existing home sales is due Thursday.

All three major indexes were trading higher early Monday.

Before markets opened Monday morning, Bank of America reported better-than-expected adjusted earnings per share (EPS) and revenue. The bank added $898 million to its provision for credit losses, a year-over-year increase of $1.5 billion. The stock traded up about 5% Monday morning.

Bank of New York Mellon also reported beating both the top-line and bottom-line estimates. The bank also reported a benefit of $30 million from releasing that amount from its credit loss provisions. The stock traded up 5.9% early Monday.

We already have previewed four companies (Albertsons, Goldman Sachs, Johnson & Johnson, Lockheed Martin) set to report quarterly results before markets open on Tuesday.

After markets close Tuesday, these three companies will share their quarterly results.

24/7 Wall St.
Goldman Sachs Has 6 Software Superstars for 2023 With 30% to 150% Upside Potential

J.B. Hunt

Trucking and logistics company J.B. Hunt Transport Services Inc. (NASDAQ: JBHT) has seen its share price decline by about 6.9% over the past 12 months. The stock posted a 52-week high in mid-March and plummeted on a weak outlook given the soaring price of fuel. Since posting that high, the shares have dropped nearly 25%. Analysts have begun to throw shade on transportation stocks, based largely on forecasts for a limited 2022 holiday season. Volumes are expected to be down and so is pricing.

Of 26 analysts covering the stock, 15 have a Buy or Strong Buy rating while the others rate the shares at Hold. At a recent price of around $163.200 a share, the upside potential based on a median price target of $190.00 is 16.4%. At the high price target of $230.00, the upside potential is nearly 41%.

Third-quarter revenue is forecast at $3.81 billion, which would be down 0.8% sequentially but up 21.3% year over year. Adjusted EPS are forecast at $2.46, up 1.5% sequentially and by 30.9% year over year. For the full 2022 fiscal year, analysts expect to see EPS of $9.64, up 35.1%, on sales of $14.92 billion, up 22.7%.

J.B. Hunt shares trade at 16.9 times expected 2022 EPS, 16.8 times estimated 2023 earnings of $9.71 and 15.9 times estimated 2024 earnings of $10.24 per share. The stock’s 52-week trading range is $153.92 to $218.18. The company pays an annual dividend of $1.60 (yield of 0.98%). Total shareholder return for the past 12 months was negative 6.1%.

Netflix Inc. (NASDAQ: NFLX) posted its 52-week high 11 months ago. Since then, the stock price has dropped by nearly 64%. The biggest losses came after Netflix reported quarterly results in April.

Last week, the streaming media giant announced it will launch its U.S. advertising-supported tier in November, a move that has some observers cheering and others more reticent. The change could snare more subscribers because of the lower price, or it could cannibalize current subscribers who want to pay less for a service they use less often. From Netflix’s point of view, the ad-supported tier gets some help from its partnership with Microsoft and, if the new offer is a success, could remove the market’s focus on subscriber growth as the sole metric of the company’s business.

Of 42 analysts covering the stock, 15 have a Buy or Strong Buy rating while another 22 rate the shares at Hold (these totals are virtually identical to those at the end of the prior quarter). At a share price of around $230.00, the upside potential based on a median price target of $245.00 is 6.5%. At the high price target of $399.00, the upside potential is about 73.5%.

Third-quarter revenue is forecast at $7.84 billion, down 1.6% sequentially but 7.8% higher year over year. Adjusted EPS are forecast at $2.17, down 32.3% sequentially and up 32% year over year. For the full 2022 fiscal year, analysts expect to see EPS of $10.31, down 8.3%, on sales of $31.66 billion, up 6.6%.

Netflix shares trade at 22.3 times expected 2022 EPS, 21 times estimated 2023 earnings of $10.96 and 17 times estimated 2024 earnings of $13.53 per share. The stock’s 52-week range is $162.71 to $700.99. Netflix does not pay a dividend. Total shareholder return for the past 12 months was negative 63.7%.

United Airlines

Over the past 12 months, shares of United Airlines Holdings Inc. (NASDAQ: UAL) have fallen by about 26%. As bad as that is, it is better than the industrywide index that is down by more than 40%. Higher wage costs and fuel prices have been partially offset by fewer flights and higher prices, but that is only a formula for staying alive in extraordinarily tough times. What United does have is a strong presence in the international air travel market. That may have helped with the third quarter, but winter may not be the best time to bank on international travel.

Analysts continue to be cautious about United stock. Of 20 brokerages covering the firm, eight have Hold ratings and nine rate the shares at Buy or Strong Buy. At a share price of around $35.50, the upside potential based on a median price target of $47.00 is 32.4%. At the high price target of $81.00, the upside potential rises to 128%.

The consensus third-quarter revenue forecast calls for sales of $12.74 billion, up about 5.2% sequentially and by about 64.4% year over year. Analysts are forecasting adjusted EPS of $2.28 per share, up nearly 60% sequentially and better than the $1.02 per share loss in the year-ago quarter. For the full 2022 fiscal year, analysts expect EPS of $0.43, much improved over last year’s $13.94 per share loss. Revenue is forecast to rise by 79.5% to $44.21 billion.

United stock trades at 6.8 times expected 2022 EPS, 4.3 times estimated 2023 earnings of $8.19 and 3.2 times estimated 2024 earnings of $11.22 per share. The stock’s 52-week range is $30.54 to $54.52, and the company does not pay a dividend. Total shareholder return for the past 12 months was negative 26%.