In late morning trading Friday, the Dow Jones industrial average traded up 0.27%, the S&P 500 up 0.71% and the Nasdaq up 1.16%.
After U.S. markets closed Thursday, Netflix reported results that missed the profit estimate while narrowly beating on revenue. The big news was subscriber growth, the metric by which Netflix’s results are always judged. New paid subscribers totaled 7.7 million, well above the consensus estimate for 4.6 million additions and the company’s own guidance for new subscriptions of 4.6 million. Netflix also shuffled its top managers. Reed Hastings, co-founder and co-CEO, will become executive board chair, and Chief Operating Officer Greg Peters will join Ted Sarandos as co-CEO. The stock traded up about 9.5% about an hour before noon Friday.
Before markets opened on Friday morning, Regions Financial reported beating both earnings per share (EPS) and revenue estimates, and it said the bank expects adjusted revenue growth of 8% to 10% in the new fiscal year. Shares traded up about 3.9%.
Schlumberger also reported better-than-expected EPS and revenue. The oilfield services giant also raised its quarterly dividend by 43% to $0.25, beginning with the April payment to shareholders of record on February 8. Shares traded up about 0.5% just before noon Friday.
Ericsson missed the consensus EPS estimate but beat on revenue. The company is going to propose a dividend increase of 13% from an annualized $0.23 to $0.26. Shares traded down about 4.1% Friday morning.
First thing Monday morning, Baker Hughes and Synchrony Financial are on deck to report quarterly results. Early Tuesday, look for reports from D.R. Horton, General Electric, Halliburton, Lockheed Martin and Raytheon.
Here is a look at three Dow Jones industrials also set to report quarterly results before Tuesday’s open.
Johnson & Johnson
Over the past 12 months, pharmaceuticals giant and Dow component Johnson & Johnson (NYSE: JNJ) has added about 2.2% to its share price. The company announced in October that it will spin off its consumer health products division into a new company named Kenvue. Its pharmaceutical and medical device businesses are growing much faster than the market for Band-Aids and Tylenol. Like 3M, Johnson & Johnson is among the Dividend Aristocrats, with a 60-year record of consecutive dividend increases. A share price gain is a bonus for investors.
Of 21 brokerages covering the company, eight have Buy or Strong Buy ratings and the rest rate the shares at Hold. At a recent trading price of around $168.60, the upside potential based on a median price target of $180.50 is about 7.1%. At the high target of $215.00, the upside potential is 27.5%.
Fourth-quarter revenue is forecast at $23.93 billion, 0.6% sequentially and down 3.5% year over year. Adjusted EPS are expected to come in at $2.24, which would be down 12.2% sequentially but up by 5.2% year over year. For the full 2022 fiscal year, analysts expect EPS of $10.05, up 2.5%, on sales of $95.04 billion, up 1.4%.
The shares trade at 16.8 times expected 2022 EPS, 16.3 times estimated 2023 earnings of $10.37 and 15.7 times estimated 2024 earnings of $10.77 per share. The stock’s 52-week trading range is $155.72 to $186.69. The company pays an annual dividend of $4.52 (yield of 2.66%). Total shareholder return for the past year was 4.8%.
3M
Over the past 12 months, shares of Dow component 3M Co. (NYSE: MMM) have tumbled by about 33%. 3M was among our Dogs of the Dow for 2023, one of 10 Dow stocks paying the highest dividend, largely due to a falling share price. The dividend yield is even a bit higher since January 3 because shares have fallen more than 1% in the first few weeks of the year. 3M has produced dividend growth for 64 consecutive years, and its payout ratio is nearly 52%.
Analyst sentiment is decidedly cool on the stock. Of 20 brokerages surveyed, 14 have a Hold rating. There is just one Buy rating and five Sell or Strong Sell ratings. At a per-share price of around $117.20, the implied gain based on a median price target of $124.50 is 6.2%. At the high target of $210.00, the upside potential is 79.2%.
The consensus revenue estimate for the fourth quarter is $8.08 billion, down 6.2% sequentially and 6.2% lower year over year. Adjusted EPS are forecast at $2.39, a sequential decline of 11% and an increase of 3.5% year over year. For the full 2022 fiscal year, analysts are looking for EPS to rise by 0.6% to $10.18 on a revenue decline of 3.3% to $34.19 billion.
3M stock trades at 11.5 times expected 2022 EPS, 11.5 times estimated 2023 earnings of $10.26 and 11.1 times estimated 2024 earnings of $10.60 per share. The stock’s 52-week range is $107.07 to $179.22, and 3M pays an annual dividend of $5.96 (yield of 5.03%). Total shareholder return for the past 12 months was negative 29.5%.
Verizon
The third Dow stock reporting results Tuesday morning is telecom giant Verizon Communications Inc. (NYSE: VZ). Both Verizon and AT&T are getting slammed by T-Mobile’s growing leadership in the build-out of 5G networks. T-Mobile’s median download speed on its 5G network is 216.56 megabits per second, compared to 127.95 for Verizon and 85.39 for AT&T. T-Mobile also has been growing its subscriber base more quickly than either of its major competitors. Verizon did roll out some prepaid offers during the fourth quarter, and investors are going to take a close look at how that turned out.
Analysts remain cautious. Of 29 analysts, only eight have Buy or Strong Buy ratings on the stock, and 20 have Hold ratings. At a share price of around $39.90, the implied gain based on a median price target of $45.00 is 12.8%. At the high price target of $64.00, the potential upside is 60.4%.
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