Before U.S. markets open on Thursday, the U.S. Bureau of Economic Analysis will release its first estimate of third-quarter gross domestic product (GDP). Economists have forecast quarterly growth of 4.0% to 4.5%, around double second-quarter growth. Deflation is forecast at 2.7%, indicating that prices also dropped sharply in the quarter.
Nearly 90% of the 16 S&P 500 companies reporting results so far have beaten earnings estimates. Three-quarters have also beaten revenue estimates. The big question now is how the Federal Reserve’s Federal Open Market Committee will react at next week’s meeting. The economy continues to run hot, and that could lead to an unexpected increase in the federal funds rate.
Tuesday Afternoon Earnings Reports
After U.S. markets closed Tuesday, Alphabet beat consensus estimates for earnings per share (EPS) and revenue. At $76.9 billion, revenue was up 11% year over year in the quarter. The search giant’s weakness came in cloud computing growth, and investors are punishing the stock. Shares were down 9.0% in the first half-hour of trading on Wednesday.
Microsoft also beat consensus estimates on the top and bottom lines. Revenue was up 12.8% year over year on strong results from the company’s cloud business. Shares traded up 3.6%.
Snap posted EPS of $0.02, crushing the consensus estimate for a loss of $0.02. Revenue was up 5.3% year over year. The stock jumped more than 10% in after-hours trading but pulled back early Wednesday. Then shares added about 1% in early trading.
Texas Instruments missed consensus estimates on both EPS and revenue. Year over year, revenue was down 13.5% and EPS tumbled by 26.5%. Shares traded down 3.5%.
Visa beat consensus estimates on both the top and bottom lines. Revenue rose by nearly 11% year over year. Shares traded up less than 1%.
Wednesday Morning Earnings Reports
Before markets opened, Boeing reported revenue slightly above the consensus estimate while posting a larger-than-expected loss per share. The company lowered guidance on 737 deliveries to around 400 and affirmed delivery guidance of 70 to 80 787s. Boeing expects 737 production of 38 planes per month by the end of this year. Shares traded down 1.5%
General Dynamics beat consensus estimates on both the top and bottom lines. Revenue rose 6% year over year, and the company said that demand remains strong and backlog is growing. The stock traded up 4.3%.
T-Mobile reported EPS above the consensus estimate, but missed on revenue. Sales fell 1.2% year over year. The mobile service provider raised fourth-quarter estimates slightly for both net post-paid subscribers and core adjusted EBITDA. The stock traded up about 1.1%.
On Deck
After markets close on Wednesday, Baker Hughes, IBM and Meta Platforms are among the companies reporting results. Comcast, Merck, UPS and Valero Energy will report quarterly results first thing Thursday morning.
Here is a look at what to expect from four earnings reports on the calendar for Thursday afternoon.
Amazon
Since falling to a new 52-week low in the first week of 2023, shares of Amazon.com Inc. (NASDAQ: AMZN) are up by about 53%. Over the past 12 months, however, shares have only recovered the value lost in 2022 and gained about 7.3%.
At the end of the second quarter, Amazon’s AWS cloud computing platform led all rivals with a 34% market share. Microsoft, with a 22% share, ranked second, and Google ranked third with an 11% share. Growth in AWS is critical, but analysts will also pay attention to the company’s e-commerce business, particularly in everyday consumer items.
Analysts remain strongly bullish on Amazon stock. Of 52 analysts covering it, 50 have a Buy or Strong Buy rating, and two others have Hold ratings. At a share price of around $129.00, the upside potential based on a median price target of $174.00 is 34.9%. At the high price target of $230.00, the upside potential is 78.3%.
Analysts are looking for third-quarter revenue of $141.56 billion, which would be up 5.3% sequentially and by 11.4% year over year. Adjusted EPS are expected to be $0.60, down 8.2% sequentially but up 114.3% compared to the year-ago quarter. For the 2023 fiscal year, Amazon is expected to post EPS of $2.16, compared to last year’s loss of $0.27 per share, on sales of $570.34 billion, up almost 11%.
Amazon stock trades at 59.4 times expected 2023 EPS, 41.2 times estimated 2024 earnings of $3.12 and 29.2 times estimated 2025 earnings of $4.41 per share. The 52-week trading range is $81.43 to $145.86. Amazon does not pay a dividend. Total shareholder return over the past 12 months was 7.29%.
Ford
Ford Motor Co. (NYSE: F) stock has declined by 8.7% over the past 12 months, including a drop of more than 2% in 2023. After GM reported better-than-expected EPS and revenue Tuesday morning, the stock dropped by more than 2% after 5,000 UAW members walked out of the Arlington, Texas, assembly plant. Estimates for Ford’s third-quarter EPS and revenue have been lowered, and it is not a stretch to think the company can beat them. If that happens, look for another Ford plant to see its workers walk out. As of Tuesday, roughly one-third of UAW members were out on strike.
Analysts are warming up to the stock, with nine of 23 brokerages having a Hold rating on it and 11 more with a Buy or Strong Buy rating. At a share price of around $11.40, the implied gain based on a median price target of $14.60 is 28.1%. At the high price target of $23.00, the upside potential is 101.8%.
Third-quarter revenue is forecast at $42.51 billion, up 0.2% sequentially and by 14.3% year over year. Adjusted EPS are forecast at $0.46, down 35.9% sequentially but up 53.3% year over year. For the 2023 fiscal year, consensus estimates call for EPS of $2.01, up 6.8%, on sales of $167.05 billion, up 12.1%.
Ford stock trades at 5.7 times expected 2023 EPS, 6.1 times estimated 2024 earnings of $1.88 and 5.7 times estimated 2025 earnings of $2.00 per share. The 52-week trading range is $10.90 to $15.42. Ford pays an annual dividend of $0.60 (yield of 5.27%). Total shareholder return for the past year was 0.34%. Investors may cool to the stock if the strike expands; they will flee in droves if Ford lowers its dividend.
Intel
Shares of Intel Corp. (NASDAQ: INTC) have added more than 30% so far in 2023 and have erased last year’s wipeout by adding more than 27% over the past 12 months. That is not to say that everything is going swimmingly.
On Tuesday, Reuters reported exclusively that rival chipmaker Nvidia is designing an Arm-based chip to compete with Intel for the PC market. Microsoft is reportedly interested in running Windows on an Arm-based platform, and there is no better partner for that than Nvidia. With lagging PC sales, this may not seem like much of a threat, but PC sales accounted for more than half of Intel’s revenue in the second quarter.
Of 45 analysts covering the stock, just nine have a Buy or Strong Buy rating. There are 29 Hold ratings and seven Sell or Strong Sell ratings. At a share price of around $34.60, the implied gain based on a median price target of $36.70 is 6.1%. At the high target of $56.00, the implied upside is about 61.8%.
Third-quarter revenue is forecast at $13.6 billion, up 5% sequentially and down 11.3% year over year. Analysts are also looking for EPS of $0.22, up 68.9% sequentially but 62.7% lower year over year. For the 2023 fiscal year, Intel is expected to report EPS of $0.64, down 65.4%, on sales of $52.55 billion, down 16.7%.
Intel stock trades at 54.3 times expected 2023 EPS, 19.9 times estimated 2024 earnings of $1.74 and 13.7 times estimated 2025 earnings of $2.53 per share. The 52-week trading range is $24.73 to $40.07. Intel pays an annual dividend of $0.50 (yield of 1.45%). Total shareholder return over the past year was 31.56 %.
24/7 Wall St.U.S. Steel
Over the past 12 months, shares of United States Steel Corp. (NYSE: X) have added more than 51%, including a jump of 30% so far in 2023. The company has said it is getting offers from potential buyers, including a reported offer of around $35 a share in cash and stock from Cleveland-Cliffs. Since early August, when talk of an offer from Cliffs was made public, U.S. Steel’s share price is up by nearly 50%. Between August 11 of last year and this year, the company’s share price had actually dropped by about 10%. U.S. Steel has to address the takeover talk in its earnings report. And it had better be what investors want to hear.
Of nine brokerages covering the shares, only two have a Buy or Strong Buy rating. Another six rate the stock a Hold. At around $32.50 a share, the stock trades above its median price target of $32.00. At the high target of $40.00, the upside potential is 23.1%.
Third-quarter revenue is expected to come in at $4.26 billion, down 14.9% sequentially and down 18.1% year over year. Adjusted EPS are forecast at $1.15, down 40.2% sequentially and 41.0 lower % year over year. For the 2023 fiscal year, analysts expect U.S. Steel to post EPS of $4.12, down 58.6%, on sales of $17.95 billion, down 15%.
U.S. Steel stock trades at 7.9 times expected 2023 EPS, 14.7 times estimated 2024 earnings of $2.21 and 9.2 times estimated 2025 earnings of $3.54 per share. The 52-week trading range is $18.92 to $33.65, and the company pays an annual dividend of $0.20 (yield of 0.62%). Total shareholder return for the past 12 months was 52.84%.
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