Investing

Earnings Previews: BlackBerry, Micron, Paychex

Paul Ausick

Published: June 27, 2023 9:53 am

Following a rather downbeat opening to the week on Monday, stocks were moving slightly higher Tuesday morning. Downgrades to Tesla and Alphabet sent large-cap growth stocks 0.8% lower on Monday. Tesla traded higher Tuesday morning, while Alphabet struggled to reach the break-even line.

Before U.S. markets opened on Tuesday, Walgreens released mixed earnings results. The pharmaceutical retailer fell short of earnings per share (EPS) expectations but beat revenue estimates by about 3%. Walgreens also issued downside EPS guidance for the full 2023 fiscal year and preliminary 2024 guidance that is below expectations. The stock traded down by more than 9% shortly after Tuesday’s opening bell.

Before markets open on Wednesday, General Mills will report quarterly results.

Here is a preview of three companies set to report earnings late Wednesday or early Thursday.

BlackBerry

Shares of BlackBerry Ltd. (NYSE: BB) have added about 47% to their price so far this year, cutting the 12-month share price decline from about 50% in late March to around 17% at Monday’s close. The company releases results after markets close Wednesday.

The company said Monday that tech analysis and research firm TechInsights reported that BlackBerry’s QNX software is now embedded in 235 million vehicles around the world. The royalty backlog now totals about $640 million, up 14% over the past three quarters.

BlackBerry’s early days as a cellphone giant named Research in Motion are the subject of a recently released movie, BlackBerry, that a Wired review says “plays like the comedy equivalent of the industrious dorks pulling an all-nighter in the garage, attempting to reengineer the world in their image.”

Of 10 brokerages covering the stock, nine have a Hold rating, and the other rates it at Sell. At a recent share price of around $4.80, the stock trades above its median price target of $4.59. At the high price target of $4.99, the upside potential is 4%.

Fiscal 2024 first-quarter revenue is forecast at $159.29 million, which would be up 5.5% sequentially but down about 5.2% year over year. BlackBerry is expected to post an adjusted loss per share of $0.05, compared to the prior quarter’s per-share loss of $0.02 and equal to its loss in the year-ago quarter. For the fiscal year ending in February, the company is forecast to post a loss per share of $0.09, compared with a loss of $0.18 per share in the 2023 fiscal year. Revenue is forecast to rise by 6.6% to $699.22 million.

BlackBerry trades at 83.9 times estimated 2025 earnings of $0.06 and 23.3 times estimated 2026 earnings of $0.21 per share. The stock’s 52-week trading range is $3.17 to $7.20. BlackBerry does not pay a dividend. Total shareholder return for the past year is negative 16.87%.

Micron

Shares of semiconductor maker Micron Technology Inc. (NASDAQ: MU) have added 12% to their price over the past 12 months, courtesy of a 31% jump so far in 2023. The stock reached a new 52-week high at the end of May but has dropped by about $10 per share since then. The company announces results after markets close Wednesday.

Micron has been banned from selling chips in China, a move that the company now expects to have a larger-than-first-anticipated effect on revenue. A new chipmaking plant in Japan and a new, just-announced testing facility in India have taken some of the sting out, but neither is expected quickly make up for the 11% of revenues that Micron realized from its sales in China.

Of 36 analysts covering the stock, 24 have a Buy or Strong Buy rating, and another nine rate the stock a Hold. At a share price of around $65.50, the upside potential based on a median price target of $72.00 is 14.5%. At the high target of $100.00, upside potential is 52.7%.

Fiscal third-quarter revenue is forecast at $3.68 billion, down 0.5% sequentially and 57.4% lower year over year. Analysts expect an adjusted loss per share of $1.57, better than the $1.91 loss in the prior quarter and well below EPS of $2.59 in the third fiscal quarter of 2022. For the full 2023 fiscal year ending in August, revenue is forecast at $15.37 billion, down 50%, and the full-year loss is forecast at $4.60, compared to last year’s EPS of $8.35.

Micron stock trades at 109.9 times estimated 2024 earnings of $0.60 and 12.5 times estimated 2025 earnings of $5.26 per share. Its 52-week range is $48.43 to $74.77, and MIcron pays an annual dividend of $0.46 (yield of 0.70%). Total return over the past 12 months was 12.93%.

Paychex

Paychex Inc. (NASDAQ: PAYX) is the country’s second-largest integrated human resources outsourcer of staffing and employment services such as payroll and insurance. The stock has dropped about 9.6% from its share price over the past 12 months, including an increase of 5.5% in June. The company reports results before markets open on Thursday.

Paychex has more than doubled its EPS total over the past three years and has raised its dividend by around 43.5% in the same period. Free cash flow for the past four quarters totals $1.5 billion ($4.15 per share), and with more than 70% of its stock owned by institutional investors, it would not be a big surprise if Paychex announced a share buyback in the near term.

Of 20 analysts covering the stock, 12 have a Hold rating and four rateit at a Buy or Strong Buy. At a share price of around $110.70, the upside potential based on a median price target of $120.00 is 8.4%. The high price target of $140.00 implies an upside of about 26.5% to the current price.

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Analysts expect revenue for the fourth quarter of fiscal 2023 to come in at $1.22 billion, down 11.5% sequentially but 7.8% higher year over year. Adjusted EPS are expected to come in at $0.97, down 24.9% sequentially and up 19.8% year over year. For the full fiscal year that ended in May, analysts forecast EPS of $4.28, up 13.7%, and revenue of $4.99 billion, up 8.3%.

Paychex stock trades at 25.8 times expected 2023 EPS, 24.1 times estimated 2024 earnings of $4.60 and 22.3 times estimated 2025 earnings of $4.96 per share. It 52-week range is $104.09 to $139.47. Paychex pays an annual dividend of $3.56 (yield of 3.22%). Total shareholder return for the past 12 months was negative 7.06%.