It’s that time of year again – Earnings season! The third quarter is well behind us, and companies are preparing to release their quarterly earnings reports. Earnings season is always a critical time for investors, as companies are publishing actual results. So far, investors have used estimates and indirect data to make allocation decisions; now they get to see the real numbers.
We’ve opened up TipRanks’ Earnings Calendar, a great tool for tracking companies’ earnings reports and results. Using the calendar, we’re looking at three ‘Strong Buy’ stocks set to report earnings this week, to see what about them makes the Street optimistic.
Mondelez International (MDLZ)
This is a holding company, created in 2012 when Kraft Foods spun off its North American grocery segments. Today, Mondelez is the parent company of numerous well-known snack brands, including Nabisco, Oreo, and Ritz, along with chocolates like Toblerone and Cadbury, and chewing gum names Trident, Dentyne, and Chiclets. Mondelez sees over $25.9 billion in annual revenue, and realizes over $2.9 billion in annual net income.
Mondelez’ second-quarter report is historically the company’s ‘slow time;’ that is, Q2 shows the company’s lowest earnings during the year. In Q2 2019, MDLZ matched the EPS estimates, at 57 cents per share, and slipped slightly on revenues. The $6.06 billion reported was 0.8% down year-over-year, mostly attributed to poor currency exchange rates.
Looking ahead, the company guided toward a net revenue growth of 3%, higher than the previous 2.5% estimate. Management expects currency exchange rates to put an 11-cent headwind on earnings, but the EPS forecast shows possible 3% to 5% growth. Free cash flow is expected to reach $2.8 billion for Q3.
5-star RBC Capital analyst Nik Modi is bullish on MDLZ, setting a $66 price target and indicating a possible 25% upside to the stock as he initiates coverage of this company with an Outperform rating. (To watch Modi's track record, click here)
Supporting his thesis, Modi writes, “Over the past year, MDLZ has made material operational changes and capability upgrades that we believe will set it up to deliver revenue growth towards the upper end of the large-cap staples sector average. We see MDLZ LT targets as achievable with upside potential. For FY'20 we are modeling organic growth of 3.5% (LT algo +3%) and EPS growth of 7%.”
Wall Street loves this stock, earning a stellar analyst consensus rating, as TipRanks analytics demonstrate MDLZ as a Strong Buy. Out of 12 analysts polled in the last 3 months, 9 are bullish on Mondelez stock, while 3 remain sidelined. With a return potential of nearly 16%, the stock's consensus target price stands at $60.58. (See Mondelez stock analysis on TipRanks)
FMC Corp. (FMC)
This chemical company is one of the most diversified manufacturers in the US. It originated as an insecticide producer, and its core product remains agricultural chemicals. At various times, however, FMC has produced vehicles for the Defense Department, and was the prime manufacturer of the M113 armored fighting vehicle. Today, FMC is best known for pesticides and fungicides, and realizes upwards of $4.7 billion in annual revenue, with over $500 million in net income.
FMC beat the estimates in Q2, showing an 11% year-over-year gain in EPS, with $1.66 per share. Revenues gained 4% and came in at $1.206 billion against a forecast of $1.2 billion. As with MDLZ, FMC saw a headwind from the currency exchange rates, but not as severe. Higher pricing helped to negate the currency factor.
Management guided toward Q3 revenue of $960 million to $990 million, with FY2019 numbers remaining at $4.5 to $4.6 billion. The Q3 earnings are expected at 75 to 85 cents per share, while the full-year earnings forecast was increased to the $5.68 to $5.88 range.
Michael Sison, 5-star analyst with Wells Fargo, is encouraged by FMC’s strong performance and positive guidance. He initiated coverage on the company with a robust $100 price target and a bullish stance. Sison’s price target implies an upside of 19%. (To watch Sison's track record, click here)
The analyst noted, “The combination of expanding its current portfolio of products to niche specialty crops as well as to more geographies and a good pipeline of new actives should support … organic sales growth annually which is seen distinctly thus far in 2019.”
TipRanks shows a large amount of bulls liking the odds on this chemical king. Out of 13 analysts polled in the last 3 months, 10 are bullish on FMC stock, while 3 are playing it safe on the sidelines. However, is the stock overvalued or undervalued based on these analysts' expectations? Consider that the 12-month average price target of $98.67 suggests a nearly 17% upside potential from where the stock is currently trading. (See FMC stock analysis on TipRanks)
We think of Mastercard as a credit card company, but it’s really a payment processor, for cards issued with the company’s familiar brand. Mastercard draws its income mainly from processing fees charged to the merchants, but also to transaction fees charged to the customers and from royalties paid by card issuers for use of the famous logo.
The variety of income streams helped MA to weather the market downturn in 2H18, and after slipping from Q3 2018 to Q4 2018, the company has shown steadily improving earnings through 2019. In the company’s last report, for Q3 2019 released in July, strong consumer spending helped to boost the bottom line.
That bottom line beat the forecast estimates. Mastercard saw an 8.6% gain in gross dollar volume – a measure of the dollar value of all processed transactions – to $1.6 trillion for Q2, on a 21% yearly gain in total transactions processed. Net income was $2.05 billion, while the revenue of $4.11 billion beat the forecast of $4.08 billion. Adjusted EPS, at $1.89 per share, was 3% higher than the $1.83 expectation. All in all, it was a strong quarter and the consensus for Q3 is more of the same. EPS is expected to come in at $2.01 per share on Tuesday.
Peller noted, “Following MA’s 2Q release, we believe the high-end of low-double-digit revenue guidance for the year could look more like low-teens growth by year end as FX headwinds abate and the company continues to surpass expectations with strong organic constant currency growth… That said, we also believe these trends should continue to underscore the long-term opportunity and maintain our OP rating.”
MA, like the other stocks in this list, has a Strong Buy consensus rating – but in this case, the consensus is unanimous. In the last three months, this stock has seen 17 buy ratings. The average price target of $317.31 indicates about 15% upside from the current share price of $274.95. (See Mastercard stock analysis on TipRanks)