Earnings Previews: American Airlines, AT&T, Freeport-McMoRan

The three major U.S. equity indexes closed significantly higher on Monday, salving the wounds of Friday’s big sell-off. The Dow Jones industrials ended the day up 1.86%, the S&P 500 closed 2.65% higher and the Nasdaq jumped 3.43%. All 11 sectors closed higher, with consumer cyclicals (4.23%) and real estate (3.9%%) posting the biggest gains. Consumer staples (1.11%) and energy (1.22%) had the smallest gains.

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 in Tuesday’s regular session.

Before markets opened Tuesday morning, Goldman Sachs beat top-line and bottom-line estimates, but earnings per share (EPS) fell by more than 40% year over year and revenue dropped by 12%. CEO David Solomon also noted the bank’s restructuring, confirming that the investment banking and trading segments would be merged, as will the asset management and wealth management segments. Shares traded up more than 43%.

Johnson & Johnson beat estimates on both the top and bottom lines. The health care giant also guided fiscal-year EPS and revenues in line with consensus estimates. Shares traded down around 1%.

Lockheed Martin beat the consensus EPS estimate but fell short on revenue. The company still expects free cash flow of $6.1 billion, and it recently boosted its share buyback program to $14 billion. Shares traded higher by almost 3%.

After markets close on Tuesday, results from J.B. Hunt, Netflix and United Air Lines are due.

First thing Wednesday morning, Abbott Labs, ASML, Baker Hughes and Procter & Gamble will report quarterly results.

We also have previewed three companies (IBM, Kinder Morgan and Tesla) set to report earnings after U.S. markets close Wednesday.

Here is a look at three companies on deck to report results before U.S. markets open on Thursday.

American Airlines

Over the past 12 months, American Airlines Group Inc. (NASDAQ: AAL) has seen its share price decline by about 34%. Rival Delta reported quarterly results last week that were a bit soft but issued strong fourth-quarter guidance, especially for international and business travel. United Airlines, which reports results after markets close Tuesday, is expected to get a boost from its results, and last week, American raised its third-quarter revenue guidance. Travel is back (last Sunday’s 2.5 million passengers was the highest total since February 2020), and ticket prices are high. What more could an airline ask for going into the holiday travel season?

Analysts remain extremely cautious on American. Of 20 brokerages covering the stock, 14 have a Hold rating and just three have Buy or Strong Buy ratings. At a recent share price of around $13.20, the upside potential based on a median price target of $14.75 is 11.7%. At the high target of $28.00, the upside potential is 112%.

Third-quarter revenue is forecast at $13.46 billion, which would be up 0.3% sequentially and 50% higher year over year. American is expected to post adjusted EPS of $0.56, down 26.9% sequentially but much better than last year’s third-quarter loss of $0.95 per share. For the full 2022 fiscal year, the company is expected to post a loss of $0.74 compared to the year-ago loss of $8.38 on revenue of $48.16 billion, up 61.2%.

American stock trades at about 9.8 times estimated 2023 earnings of $1.35 and 5.1 times estimated 2024 earnings of $2.60 per share. The stock’s 52-week trading range is $11.65 to $22.35. The company does not pay a dividend. The company’s total return for the past 12 months was negative 33.9%.

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