Earnings Previews: Activision Blizzard, Devon Energy, Diamondback Energy, ON Semiconductor, Williams Companies

The three major U.S. equity indexes closed higher on Thursday. The Dow Jones Industrial Average added 1.03%, the Standard & Poor’s 500 rose 1.21%, and the Nasdaq Composite closed up 1.08%. Ten of 11 sectors, led by real estate (up 3.7%) and utilities (up3.6%) closed higher while communications services (down 1.1%) was the only sector to close lower. U.S. gross domestic product dropped by 0.9% in the second quarter, marking the second consecutive quarterly decline.

While that may be a technical signal that the country is in recession, traders and investors behaved as though the bad news on equities has all but ended. In Friday’s premarket trading, all three major indexes are trading higher.

Before markets opened Thursday morning, Tilray reported a loss per share of $0.90, much worse than the projected loss of $0.08 and revenues came in slightly higher than expected at the pharmaceutical and cannabis company. A non-cash impairment charge of $359 million was discounted by investors and added about 12% in Thursday’s regular trading session.

Southwest Airlines reported results that beat top- and bottom-line estimates but issued disappointing third-quarter guidance. Shares dropped 6.4% in Thursday trading.

Comcast also beat consensus estimates on the top and bottom lines but the telecom reported no subscriber growth. Lacking a path to growth, investors took the stock down more than 9% Thursday.

After markets closed Thursday, Apple beat earnings per share (EPS) estimates and reported record revenue that was just short of the consensus estimate. The company expects less friction in its supply chain during the current quarter and also expects revenue to be lower sequentially. Shares traded up 2.4% in Friday’s premarket session.

Amazon missed the consensus EPS estimate but topped the revenue estimate. The better news is the company expects revenue to rise by as much as 17% in the current quarter. Its cloud business, AWS, posted revenue of nearly $20 billion in the quarter and now holds more than a third of the cloud infrastructure services market. Shares traded up by about 11%.

Intel missed consensus estimates for both EPS and revenue. The company expects the market for personal computers to shrink by 10% this year and continues to face product design issues. The stock traded down about 11.5% in premarket trading.

U.S. Steel met the consensus EPS estimate and beat revenue expectations by about 8%. The company also announced a new $500 million stock buyback program. Shares traded up more than 4%.

Before markets opened Friday morning, Chevron and Exxon both reported EPS and revenue results that beat consensus estimates. Chevron traded up about 3.3%, and Exxon rose 2.7% in Friday’s premarket.

Here’s a look at five companies set to report results on Monday.

Activision Blizzard

Since Microsoft made an all-cash offer of $95.00 per share (about $70 billion) for interactive game maker Activision Blizzard Inc. (NASDAQ: ATVI), the company’s stock has declined by about 2.8% and trades about $15.00 per share below Microsoft’s offering price. Microsoft still expects the deal to close by the end of June 2023, and there has been little indication that U.S. regulators will try to stop the deal. Microsoft has already said it plans to release Activision’s Call of Duty game for Sony PlayStation consoles. The combined company would not have a dominant market share in the video game market.

Of 25 brokerages covering the company, just 11 have Buy or Strong Buy ratings on the stock. The other 14 have put a Hold rating on the stock. At a current price of around $79.5, the upside potential based on Microsoft’s offer of $95 is 19.5%.

Analysts have forecast second-quarter revenue of $1.57 billion, up about 6% sequentially and down 18.2% year over year. Adjusted EPS is forecast at $0.48, up 26.7% sequentially and down 47.3% year over year. For the full 2022 fiscal year, consensus estimates call for EPS of $2.93, down 21.2%, on sales of $7.92 billion, off 5.2%.

Activision stock trades at a multiple of 27.1 times expected 2022 EPS, 20.5 times estimated 2023 earnings of $3.88, and 18.8 times estimated 2024 earnings of $4.22. The stock’s 52-week range is $56.40 to $86.90, and the company pays an annual dividend of $0.47 (yield of 0.59%). Total shareholder return for the past year was negative 5.7%.

Devon Energy

Devon Energy Inc. (NYSE: DVN) is among the country’s10 largest independent producers of oil and natural gas. The company’s stock has added more than 128% to its share price over the past 12 months, because of a jump in crude oil prices that began in late September. Devon recently completed a bolt-on acquisition in the Williston Basin that it expects to add 20,000 barrels of oil equivalent per day to production. About half of Devon’s first-quarter total production of 575,000 barrels a day was oil, and the other half was natural gas.

Analysts remain bullish on the stock with 20 of 31 giving the shares a Buy or Strong Buy rating. Another 10 have Hold ratings on the stock. At a current price of around $60.40, the upside potential based on a median price target of $75.00 is 24.2%. At the high target of $115.00, the upside potential is 90.4%.

Consensus estimates call for second-quarter revenue of $4.45 billion, up 16.8% sequentially and an increase of 83.9% year over year. Adjusted EPS is forecast at $2.38, up 26.4% sequentially and an increase of 297% year over year. For the full 2022 fiscal year, Devon is forecast to post EPS of $9.07, up 157%, on revenue of $16.62 billion, a jump of 36.2%.

Devon’s stock trades at 6.7 times expected 2022 EPS, 6.5 times estimated 2023 earnings of $9.22, and 8.1 times estimated 2024 earnings of $7.46 per share. The stock’s 52-week range is $24.46 to $79.40. Devon pays an annual dividend of $5.08 (yield of 8.53%). Total shareholder return for the past year was 144.5%.

Diamondback Energy

Independent oil and gas producer Diamondback Energy Inc. (NASDAQ: FANG) has seen its share price rise by more than 55% in the past 12 months, again because of rising crude oil prices. Since posting a recent low just two weeks ago, the stock has added nearly 16%. The recent gains are down to increased geopolitical tension, specifically the Russian invasion of Ukraine and the recent bombing of Odessa. Like other energy companies, Diamondback is focusing on investor returns rather than growth.

Analysts are strongly bullish on Diamondback with 28 of 32 brokerages covering the stock giving the shares a Buy or Strong Buy rating. The other four rate the stock a Hold. At the current price of around $123.60, the upside potential based on a median price target of $171.00 is 38.3%. At the high price target of $224.00, the upside potential is 81.2%.

Second-quarter revenue is forecast at $2.43 billion, up 1% sequentially and an increase of 44.6% year over year. Adjusted EPS is expected to come in at $6.68, up 28.4% sequentially and a jump of 178.3% year over year. For the full 2022 fiscal year, analysts expect Diamondback to post EPS of $25.59, up 127%, on revenue of $9.51 billion, a rise of nearly 40%.

Diamondback stock trades at a multiple of 4.8 times expected 2022 EPS, 5.2 times estimated 2023 earnings of $23.72, and 6.1 times estimated 2024 earnings of $20.27 per share. The stock’s 52-week range is $65.93 to $162.24. Diamondback pays an annual dividend of $2.80 (yield of 2.27%).

ON Semiconductor

Since posting an all-time high share price in early January, ON Semiconductor Corp. (NASDAQ: ON) has seen its share price leap by 74%. The company’s products are sold into industrial end-user markets such as automakers, markets that are expected to outperform the consumer markets for personal computers, smartphones, and other gadgets in the near term.

Of the 28 analysts covering the stock, 22 have given the stock a Buy or Strong Buy rating. The other six rate the stock a Hold. At the current price of around $64.60, the implied share price gain based on a median price target of $69.00 is 6.4%. At the high price target of $80.00, the implied gain is 23.8%.

Second-quarter revenue is forecast at $2.01 billion, up 3.6% sequentially and up 20.4% year over year. Adjusted EPS is forecast at $1.26, up 3.3% sequentially and a n increase of 100% year over year. For the full 2022 fiscal year, analysts have estimated EPS of $4.88, up 65.4%, on a sales jump of 18.2% to $7.97 billion.

ON Semi’s stock trades at a multiple of 13.2 times expected 2022 EPS, 13.6 times estimated 2023 earnings of $4.76, and 13.1 times estimated 2024 earnings of $4.92 per share. The stock’s 52-week range is $37.41 to $71.25. The chipmaker does not pay a dividend and total shareholder return over the past year was 74.2%.

Williams

Oil & gas pipeline operator The Williams Companies Inc. (NYSE: WMB) has seen its share price add more than 33% over the past 12 months. The company’s Transco system that delivers natural gas from the Gulf Coast region to customers on the Eastern Seaboard is the nation’s largest-volume natural gas system. Williams transports about 30% of U.S. natural gas and is expanding its capacity to supply gas to LNG producers and power plants in the eastern United States and along the Gulf Coast.

Analysts are bullish on the stock with 15 of 21 giving the stock a Buy or Strong Buy rating. Another five rate the shares a Hold. At a current price of around $33.80, the upside potential based on a median price target of $39.00 is about 15.4%. At the high price target of $41.00, the upside potential is 21.3%.

Analysts expect the company to report second-quarter revenue of $2.42 billion, down 4.2% sequentially and up 6.1% year over year. Adjusted EPS is forecast at $0.37, down 9.1% sequentially and up 37% year over year. Current estimates for the 2022 fiscal year call for EPS of $1.55, up 14.1%, on sales of $10.74 billion, up 1.1%.

Williams stock trades at a multiple of 21.8 times expected 2022 EPS, 21 times estimated 2023 earnings of $1.61, and 20.6 times estimated 2024 earnings of $1.64 per share. The stock’s 52-week range is $23.53 to $37.97. The company pays an annual dividend of $1.70 (yield of 5.03%). Total shareholder return for the past year was 41.2%.

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