Earnings Previews: Leonardo DRS, Walgreens

In early trading on Friday, the Dow Jones industrials were down 0.55%, the S&P 500 down 0.50% and the Nasdaq down 0.41%.

There were no notable earnings reports released late Thursday or before markets opened Friday morning.

Before U.S. markets open on Monday, BioNTech and Carnival are scheduled to report quarterly results.

Here is a preview of what to expect when these two companies report results first thing Tuesday morning.

Leonardo DRS

Defense contractor Leonardo DRS Inc. (NASDAQ: DRS) supplies a variety of defense electronics products, systems and military support systems. The Virginia-based company is owned by Milan-based defense firm Leonardo SpA and has a market cap of more than $3.3 billion, about half of Leonardo’s $6.56 billion total market cap.

While not as well known or nearly as large as defense giants Lockheed Martin, Raytheon, or Northrop Grumman, over the past year, Leonardo DRS has outperformed all three. In 2022, Leonardo DRS ranked 40th of the top 100 defense contractors with $1.14 billion. Lockheed, number 1 in the ranking, received $45.7 billion.

Only two brokerages follow Leonardo DRS stock, and both have a Buy rating on it. Shares trade at around $12.75, implying an upside of 41.2%, based on an average price target of $18.00. The target range is $17.00 to $19.00.

For the company’s fourth quarter of fiscal 2022, analysts expect revenue of $634 million and earnings per share (EPS) of $0.28. In the third quarter, DRS reported revenue of $1.87 billion and adjusted EPS of $0.17. Adjusted EPS are forecast to come in at $0.28. The company is expected to report full-year revenue totaling $2.73 billion, down from $2.88 billion in the prior fiscal year. Adjusted EPS for the year are expected to be $0.99, compared to $1.14 in fiscal 2021.

Leonardo DRS stock trades at 12.9 times expected 2022 EPS, 16.8 times estimated 2023 earnings of $0.76 and 14.4 times estimated 2024 earnings per share of $0.59. The stock’s 52-week trading range is $30.39 to $55.00. The company does not pay a dividend.

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Walgreens Boots Alliance Inc. (NYSE: WBA) was one of 2023’s Dogs of the Dow, the 10 Dow stocks that paid the best dividend yield at the end of December 2022. The stock has dropped by 31.1% over the past 12 months, and shares posted their 52-high low 51 weeks ago. The company’s dividend yield remains outstanding, but that likely is due to the declining share price. Walgreens has cut $2 billion from its operating costs a year ahead of its planned schedule, and its online sales efforts have begun to pay off, as has its move into full-service health clinics.

Of 19 analysts covering the stock, 13 have a Hold rating and four a Buy or Strong Buy rating. At a share price of around $32.20, the upside potential based on a median price target of $41.00 is 27.3%. At the high target of $54.00, the upside potential is 67.7%.

For the company’s second quarter of fiscal 2023, analysts expect revenue of $33.56 billion, up 0.5% sequentially but down 0.5% year over year. Adjusted EPS are pegged at $1.11, down 4.2% sequentially and 18.8% higher year over year. For the full fiscal year ending in August, consensus estimates call for EPS of $4.51, down 10.6%, on revenue of $135.40 billion, 2.03%.

Walgreens stock trades at 7.2 times expected 2023 EPS, 6.7 times estimated 2024 earnings of $4.84 and 6.1 times estimated 2025 earnings per share of $5.33. The stock’s 52-week range is $30.39 to $48.48, and Walgreens pays an annual dividend of $1.92 (yield of 5.78%). Total return over the past 12 months was negative 27.55%.

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