Earnings Previews: Alcoa, Discover, Kinder Morgan, United Airlines

Last Friday, investors got their first look at how the country’s biggest banks fared in the fourth quarter of 2021. Judging by their reactions, Wells Fargo deserved a share price boost and JPMorgan deserved to get punished. Citigroup and BlackRock closed lower on Friday, but they avoided the punishment JPMorgan received.

Following Monday’s Dr. Martin Luther King Jr. holiday, Goldman Sachs and Truist reported results before markets opened Tuesday. Truist beat on both the top and bottom lines, while Goldman missed the consensus earnings estimate.

More financial sector results are coming up this Wednesday and the rest of this week, as well as reports from consumer product, industrial, and transportation firms. Before markets open Wednesday, we will hear results from Bank of America, Morgan Stanley, Procter & Gamble and UnitedHealth. It will be a busy week.

Here are four earnings reports due out after markets close Wednesday.

Alcoa

Aluminum producer and refiner Alcoa Inc. (NYSE: AA) has added more than 150% to its share price over the past 12 months, including a spike of 40% since December 1. Aluminum prices hit a high of around $3,176 per metric ton in mid-October before falling to around $2,520 just three weeks later. Last week, the stock reached a 14-year high. High energy costs are not expected to hurt Alcoa as much as they are aluminum smelters exposed to the spot commodity prices.

Only 12 analysts cover the stock, but nine of those have a Buy or Strong Buy rating on the stock and the other three rate the shares at Hold. At a recent price of around $61.40per share, the stock’s upside potential based on a median price target of $62 is just 1.3%. At the high target of $68, the upside potential is 10.7%.

Fourth-quarter revenue is forecast to reach $3.35 billion, which would be up 7.6% sequentially and 40% higher year over year. Adjusted earnings per share (EPS) are forecast at $2.01, down 2.2% sequentially but up 670% year over year. For the full year, EPS are currently estimated to reach $6.27, compared to a loss of $1.16 a year ago, on revenue of $12.2 billion, up 31.4%.

Alcoa stock trades at 9.8 times expected 2021 EPS, 9.5 times estimated 2022 per-share earnings of $6.49 and 9.0 times estimated 2023 earnings of $6.84. The stock’s 52-week range is $17.30 to $64.37. Alcoa pays an annual dividend of $0.40 (yield of 0.66%). Total shareholder return over the past year was 164.3%.

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Discover

Credit card issuer Discover Financial Services (NYSE: DFS) has seen its share price rise by nearly 34% over the past 12 months. After a plunge in the first two months of the fourth quarter, Discover has shot up by 20% since. In a review of the company’s credit ratings published Monday, Moody’s said that Discover’s “solid market position in the US general-purpose credit card market drives its very strong profitability” along with a “strengthening deposit franchise.”

Analysts are bullish on the stock, with 13 of 22 giving the shares a Buy or Strong Buy rating and the rest putting a Hold rating on the stock. At a share price of around $127.50, the upside potential based on a median price target of $143 is about 12.2%. At the high price target of $160, the upside potential is 25.5%.

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