Investing

Earnings Previews: KB Home, Taiwan Semiconductor

The three major stock indexes opened essentially flat on Tuesday.

There is little in the way of economic news except for Federal Reserve Chair Jerome Powell’s speech to a meeting of central bankers in Stockholm. Prognosticators found no clue in Powell’s remarks about how the FOMC is leaning on an interest rate hike at its January meeting.

December’s consumer price index report is due out before markets open Thursday, and the consensus forecast calls for no increase in the full index but a jump of 0.3% in core CPI.

Tune in Wednesday for a first look at earnings reports due Friday from several major banks and financial services companies.

Before markets opened Tuesday morning, Albertsons beat estimates on both the top and bottom lines. The announced merger with Kroger dominates Albertsons’ share price.

Bed Bath & Beyond missed estimates on both EPS and revenue, but some investors do not seem to care. The company said last week that it may have to file for bankruptcy but commented Tuesday morning that it is still considering “all strategic alternatives.” Shares traded up nearly 8% shortly after the opening bell, after adding 25% on Monday.

Here is a preview of what to expect when these two companies report quarterly results late Wednesday or early Thursday.

KB Home

After markets close Wednesday, homebuilder KB Home (NYSE: KBH) will report third-quarter 2022 earnings. The stock posted its 52-week low in mid-June, and shares have added about 36% since then. Over the past three months, the stock is up about 24%.

Earlier this week, Redfin reported that pending home sales were down 32% year over year for the four-week period ending January 1. Mortgage rates that have risen above 6%, recession fears, record-low new listings, nasty weather, and the usual holiday season slowdown all contributed to the decline. What KB Home has to say about what is ahead may be more significant than its expected positive results for the past quarter.

Of 14 analysts covering the stock, seven rate the shares a Buy or Strong Buy, and six more have Hold ratings. At a recent price of around $34.40 a share, the implied upside based on a median price target of $37.00 is 7.6%. At the high price target of $48.00, the upside potential is about 39.5%.

For the company’s fourth quarter of fiscal 2022 ended in November, analysts are expecting sales of $1.98 billion, which would be up 7.4% sequentially and by 17.9% year over year. EPS are forecast to slip by 1.8% sequentially to $2.85 and increase by 49.2% year over year. The consensus estimate for the fiscal year just ended calls for EPS of $9.51, up 56.5%, on sales of $6.94 billion, up 21.3%.

KB Home stock trades at 3.6 times expected 2022 EPS, 5.0 times estimated 2023 EPS of $6.93 and 5.2 times estimated 2024 EPS of $6.57. The stock’s 52-week trading range is $24.78 to $50.20. KB Home pays an annual dividend of $0.60 (yield of 1.88%). Total shareholder return for the past 12 months is negative 11.9%.

Taiwan Semiconductor

When Taiwan Semiconductor Manufacturing Co. Ltd. (NYSE: TSM) reported December-quarter sales Tuesday morning, it posted a profit increase of 46% but fell short of even higher expectations. Monthly sales for December rose 24% year over year. Investors did not seem terribly worried, however. The stock traded slightly higher in premarket trading, after adding nearly 3% on Monday.

TSMC, as the company is known, is investing around $100 billion over the next few years as it builds new foundries in Arizona, Japan and Taipei (two each). The shares are down 35% over the past 12 months but up nearly 8% in the first few days of 2023. TSMC reports quarterly results before U.S. markets open on Thursday.

Of 31 analysts covering the stock, 29 have Buy or Strong Buy ratings and the other two rate the shares at Hold. At a price of around $81.30 a share, the upside potential based on a median price target of $96.50 is 18.7%. At the high price target of $130.00, the upside potential is about 60%.

For TSMC’s fourth quarter, analysts are looking for revenue of $20.92 billion, up 8.7% sequentially and 32.4% higher year over year. Adjusted earnings per share are expected to come in at $0.37, up 7.5% sequentially and by nearly 61% year over year. For the full 2022 fiscal year, EPS are forecast at $1.18, down 8%, on revenue of $74.69 billion, up 30.5%.

At the current price level, TSMC stock trades at 12.5 times expected 2022 EPS, 13.6 times estimated 2023 earnings of $1.18 and 11.3 times estimated 2023 earnings of $1.41 per share. The stock’s 52-week range is $59.43 to $145.00, and the company pays an annual dividend of $1.78 (yield of 2.28%).

Sponsored: Tips for Investing

A financial advisor can help you understand the advantages and disadvantages of investment properties. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

Investing in real estate can diversify your portfolio. But expanding your horizons may add additional costs. If you’re an investor looking to minimize expenses, consider checking out online brokerages. They often offer low investment fees, helping you maximize your profit.