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Earnings Previews: Capital One, Microsoft, Navient, Texas Instruments

Paul Ausick

Published: January 24, 2022 10:34 am

Last Updated: January 24, 2022 10:44 am

We have well and truly arrived at the December-quarter earnings reporting season. Hundreds of results are due out this week, including those from the two largest U.S. tech firms.

Netflix, which fell by 22% on Friday, was down another 3.1% in early trading Monday morning, and Halliburton, which beat on both the top and bottom lines and raised its dividend from 4.5 cents to 12 cents per share, traded lower by about 2.2%. It was a mean old world again this morning.

We already have previewed four companies that will report earnings before markets open Tuesday (American Express, General Electric, Johnson & Johnson and 3M) and four more also scheduled to report results before Tuesday’s opening bell (Lockheed Martin, NextEra Energy, Raytheon and Verizon).

Here is a look at four firms scheduled to report results after Tuesday’s closing bell.

Capital One

Consumer and commercial banking firm Capital One Financial Corp. (NYSE: COF) has seen its share price rise by nearly 34% over the past 12 months, including a drop of more than 17% since mid-August. In a periodic review of the bank’s financial and operating profile, Moody’s noted that its baseline credit assessment “reflects the strength of the company’s credit card franchise, its stronger than peer average profitability as well as its solid liquidity and funding profile.”

Analysts are mostly bullish on the stock. Of 24 brokerages covering the firm, 18 have put a Buy or Strong Buy rating. The other six have given the bank a Hold rating. At a recent price of around $146.50 a share, the implied gain based on a median price target of $187 is about 27.6%. At the high price target of $221, the upside potential rises to nearly 51%.

Fourth-quarter revenue is forecast to rise by about 1.3% sequentially to $7.93 billion, which would be an increase of about 6.8% year over year. Adjusted earnings per share (EPS) are forecast at $5.19, down about 24.4% sequentially and 1.9% lower year over year. For the full 2021 fiscal year, analysts are looking for EPS of $26.88, up about 364%, on revenue of $30.17 billion, up 5.6%.

The stock trades at about 5.58 times expected 2021 EPS, 7.4 times estimated 2022 earnings of $19.75 and 7.6 times estimated 2023 earnings of $19.33 per share. The stock’s 52-week trading range is $99.82 to $177.95, and Capital One pays an annual dividend of $2.40 (yield of 1.64%). Total shareholder return for the past 12 months was 41.5%.

Microsoft

The runner-up in the ranking of the most valuable U.S. companies is Microsoft Corp. (NASDAQ: MSFT), with a market cap of around $2.22 trillion. The company’s stock added about 33% over the past 12 months, but the recent downturn in the market has snipped more than $100 billion from its market cap since October 1 of last year.

Sentiment for the stock is strongly positive. Of 45 analysts covering the stock, 44 rate the shares a Buy or Strong Buy, and the other one has a Hold rating. At a share price of around $296.00, the potential upside based on a median target of $370 is about 25%. At the high target of $425, the implied gain is 43.6%.

For its second fiscal quarter of 2022, revenue is forecast at $50.78 billion, up about 12% sequentially and 17.9% higher year over year. Adjusted EPS are forecast at $2.32, up 2.3% sequentially and 14.3% year over year. For the full fiscal year, current consensus estimates call for EPS of $9.25, up 16%, on revenue of $196.61 billion, up 17%.

Microsoft stock trades at about 32 times expected 2022 EPS, 28 times estimated 2023 earnings of $10.57 and 23.8 times estimated 2024 earnings of $12.42 per share. The stock’s 52-week range is $224.22 to $349.67. Microsoft pays an annual dividend of $2.48 (yield of 0.84%). Total shareholder return over the past year was 32.1%.

Educational loan maker and servicer Navient Corp. (NASDAQ: NAVI) has posted a share price gain of nearly 71% over the past 12 months. Since mid-September, however, the stock has dropped about 18.7%, largely due to a settlement with the attorneys general of 39 states that includes the cancellation of $1.7 billion in private student loans made to some 66,000 borrowers. The company itself in legal filings referred to the private loans as a “baited hook” to capture more federally guaranteed student loans. The company denied any wrongdoing.

Just 11 analysts cover the stock. Of those, seven have a Hold rating on the shares and the others have rated the stock a Buy or Strong Buy. At a share price of around $19.00, the potential upside based on a median target of $22.50 is about 18.4%. At the high target of $25, the implied gain is 31.6%.

For the fourth fiscal quarter of 2021, revenue is forecast at $281.89 million, down about 5.7% sequentially and 11.4% year over year. Adjusted EPS are forecast at $0.87, down 5.5% sequentially and 10.3% year over year. For the full year, consensus estimates call for EPS of $4.49, up 32%, on revenue of $1.17 billion, down 7%.

Navient stock trades at about 4.2 times expected 2021 EPS, 6.1 times estimated 2022 earnings of $3.12 and 6.0 times estimated 2023 earnings of $3.16 per share. The stock’s 52-week range is $10.83 to $23.80. Navient pays an annual dividend of $0.64 (yield of 3.38%). Total shareholder return over the past year was 74.2%.

Texas Instruments

Chipmaker Texas Instruments Inc. (NASDAQ: TXN) has added just 3.7% to its share price over the past 12 months. In 2021, the stock rose by nearly 15%. This is the country’s sixth-largest semiconductor manufacturer by market cap ($160.2 billion) and probably the world’s largest supplier of analog and embedded microprocessors. While these chips are not the most advanced, they are ubiquitous and cheap to make. TI’s operating margin is nearly 50%, about double the industry average.

Analysts are mixed on the company’s prospects. Fifteen of 31 brokerages rate the stock a Hold, another four rate the stock a Buy, and eight have Strong Buy ratings. There are also four Sell or Strong Sell ratings mixed in. At a price of around $175.60 per share, the upside potential at a median price target of $203.50 is 15.9%. At the high price target of $240, the upside potential is 36.7%.

For the company’s fourth fiscal quarter, analysts expect to see revenue of $4.43 billion, down about 4.6% sequentially but up 8.6% year over year. Adjusted EPS are forecast to total $1.96, down 7.5% sequentially and up about 5.4% year over year. For the full fiscal 2021, EPS are forecast to rise almost 30% to $8.06 and revenue is expected to increase by 24% to $17.93 billion.

The stock trades at around 31.9 times expected 2021 EPS, 21.3 times estimated 2022 earnings of $8.29 and 20.1 times estimated 2023 earnings of $8.76 per share. The stock’s 52-week range is $161.67 to $202.26. The company pays an annual dividend of $4.60 (yield of 2.62%). Total shareholder return for the past year was 4.4%.

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