Last week marked the third week of earnings season, where firms of all shapes and sizes release their quarterly financial reports in a cascade of eye-wateringly large (or in some cases, small) balance sheets. But earnings season isn’t just a boon for companies – it provides a chance for investors to capitalize on their beliefs about a company’s performance and worth.
This month’s earnings season kicked off with financial institutions such as Wells Fargo
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Netflix, Inc. (NFLX)
Netflix is trending after reporting its Q2 earnings report after the bell last Tuesday. Though the company lost 433,000 subscribers in the United States and Canada, it made up for weaker domestic results by netting 1.5 million new paid memberships worldwide. And while Netflix’s earnings slightly beat estimates, EPS dipped below Wall Street expectations.
Additionally, Netflix revised its Q3 expectations lower for new memberships from 5.46 million to 3.5 million net adds. That said, Netflix is still optimistic moving forward, citing its upcoming slate of new content and its reaffirmed push into the gaming space as drivers for new business.
Over the last three fiscal years, Netflix’s revenue jumped 75% from $15.8 billion to almost $25 billion. Additionally, operating income skyrocketed 278.6% to $4.585 billion compared to just $1.6 billion, with per-share earnings up 260% to $6.08 in the most recent year. And while Netflix’s return on equity growth wasn’t as impressive, it still rose from 27.5% to 29.6%.
All told, Netflix’s forward 12-month revenue is expected to grow around 6.5%. Our AI rates this streaming media giant A in Growth and B in Technicals, Low Volatility Momentum, and Quality Value.
Intel Corporation (INTC)
Intel dropped Friday after nearly a third of analysts cut price targets following the company’s stronger-than-expected Q2 earnings report. Revenue came in at $18.5 billion – $700 million over April guidance – with EPS 23 cents above guidance at $1.28. However, the composition of earnings gave investors pause, as data center chip revenues fell 9% while personal computers were up 6%.
Going forward, Intel raised late 2021 revenue forecasts by $1 billion to $73.5 billion but noted that gross margins will likely be lower thanks to rising costs and global semiconductor supply chain constraints.
Over the last three fiscal years, Intel’s revenue grew 9.6% to $77.9 billion compared to $70.8 billion, while operating income inched up incrementally from $23.2 billion to $23.9 billion. Per-share earnings also rose from $4.48 to $4.94 – though ROE slipped from 29.3% to 26.4%.
All told, our AI rates Intel Corporation B in Technicals, C in Low Volatility Momentum and Quality Value, and D in Growth.
AT&T, Inc. (T)
AT&T is also trending thanks to its Q2 earnings report last week, with revenues coming in at $44 billion for the three-month period and adjusted per-share earnings at 89 cents. Management noted that the company beat estimates for monthly phone bill subscriptions at 789,000 new paid customers, largely fueled by an increase of 5G phone-using customers.
Additionally, AT&T added 51,000 net consumer broadband customers to its 67.5 million subscribers worldwide, while its media segment added 2.8 million U.S. subscribers to its streaming HBO Max platform and premium HBO channel. Thanks to this boon to its bottom line, AT&T raised full-year revenue, adjusted EPS, and new HBO Max subscriber forecasts.
In the last three fiscal years, AT&T’s revenue grew around 3% from $170.7 billion to $171.7 billion – but operating income fell from $31.6 billion to $25.6 billion. Moreover, per-share earnings slipped from $2.85 to $0.75, while return on equity plunged from almost 12% to 2% even.
Currently, our AI rates AT&T A in Growth and Low Volatility Momentum and C in Technicals and Quality Value.
Verizon Communications, Inc. (VZ)
Verizon Communications, Inc.
Verizon is trending thanks to Q2 earnings that highlight the increasing popularity and adoption of 5G phones and services that facilitate work-from-home conditions, with consumer growth up 11.2% YOY to $23.5 billion and business growth up 3.7% YOY to $7.8 billion. Additionally, total wireless service revenue came in at $16.9 billion for a 5.9% increase since last year. All told, this media giant saw adjusted EPS of $1.37 for the quarter.
Over the last three fiscal years, Verizon’s revenue fell slightly from $130.8 billion to $128.3 billion, with operating income down from $31.7 billion to $31.4 billion. Meanwhile, return on equity dropped from 32.3% to 27.8%. That said, per-share earnings are up 28.4% in the period from $3.76 to $4.30.
All told, Verizon’s forward 12-month revenue is expected to grow around 0.3%. Our AI rates this telecommunications and wireless giant A in Low Volatility Momentum, B in Quality Value, and C in Technicals and Growth.
Johnson & Johnson (JNJ)
Johnson & Johnson
Johnson & Johnson became an even bigger household name in 2020 after producing one of three FDA-approved coronavirus vaccines. And its their vaccine, at least in part, that have driven the company’s recent growth, as its Q2 earnings report reflect strong sales growth of 27.1% in the quarter to $23.3 billion. Moreover, operational growth exceeded 23%, with a 48.5% increase in adjusted EPS to $2.48.
That said, Johnson & Johnson has seen some choppiness recently thanks to rare side effects of the company’s coronavirus vaccine, including blood clots and even Guillain-Barré syndrome. The FDA updated the vaccine’s label earlier this month to reflect this possible risk – though only 100 preliminary cases out of 12.8 million administered Janssen vaccines reported Guillan-Barré as a side effect.
That said, the CDC stated last Thursday that the vaccine’s risks were both minute and worth taking, as “many hospitalizations, ICU admissions, and deaths can be prevented through Janssen and mRNA Covid-19 vaccines, far outweighing the risks.”
Over the last three fiscal years, Johnson & Johnson’s revenue grew by 9.3% to $82.58 billion in the most recent year compared to $81.58 billion three years prior. In the same period, operating income dropped from $21 billion to $20 billion, while per-share earnings dropped 10 cents to $5.51 and return on equity slipped to 24%.
All told, Johnson & Johnson is expected to see around 2.75% revenue growth in the next 12 months. Our AI rates this pharmaceutical stock A in Low Volatility Momentum and Quality Value and C in Technicals and Growth.
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