Here is your Investing Action Plan: What you need to know as an investor for Tuesday, Jan. 23.
Earnings are due from United Airlines ( UAL ), chipmaker Texas Instruments ( TXN ), Dow industrial components Verizon ( VZ ), Johnson & Johnson ( JNJ ) and Procter & Gamble ( PG ) and well as for-profit Chinese school operator New Oriental Education (EDU).
[ibd-display-video id=3098125 width=50 float=left autostart=true] United Airlines is near a buy point. Johnson & Johnson, Verizon and New Oriental Education are all in buy range, with some caveats. Texas Instruments is a market and sector leader.
Estimates: The legacy air carrier, which reports fourth-quarter earnings after the close, is expected to grow revenue by 4% to $9.428 billion, as earnings per share slide 25% to $1.34, according to Zacks Investment Research.
United Airlines has been at forefront of a battle between legacy airlines and ultra-low cost carriers such as Spirit Airlines (SAVE) over fares and market share.
United earlier this month said it expects Q4 unit revenue – a key measure of an airline’s sales as they relate to overall flight capacity – would be about flat. That’s better than a forecast last month for the metric coming in anywhere from flat to down 2%.
In tightening up that forecast, United, as with other airlines, cited stronger pricing power and firmer demand for tickets booked closer to their flight departures. As fuel prices – and travel demand – rise, the airlines have had an easier time passing those costs on to customers. Higher costs also mean the airlines are less likely to be tempted into the fare discounting wars that have aggravated investors in the past.
But even as things get better in the skies above the U.S., Atlantic and Pacific, Wall Street’s attention on Tuesday will likely be on an “investor event” United will be holding after the company reports results. Analysts have expressed concern about whether United can keep costs in line and avoid overstepping on its plans to expand this year.
Still, after years of difficulties, United could turn out stronger international results in the fourth quarter.
Delta Air Lines (DAL) this month reported its first quarterly unit-revenue gain over the crowded Pacific market since 2013, according to Stifel, which it indicated could bode well for United.
Cowen analysts said that the trans-Atlantic – where the airspace swarms with low-cost, long-haul rivals – could be the “best performing entity for United,” with Air Berlin’s bankruptcy filing in Germany making business easier for Lufthansa, a United partner.
United rose 0.5% to 76.87 in the stock market today. It’s in a cup-with-handle base with a 79.10 buy point. The relative strength line , which tracks a stock’s RS line vs. the S&P 500 index, has made some progress in recent weeks, but is well off its late May peak. Ideally, United would break out through its entry point with a big price gain, and let its RS line move above the high of the newly formed handle.
American Airlines (AAL), JetBlue (JBLU), Southwest (LUV) and Alaska Air Group (ALK) report Thursday.
Verizon reports before Tuesday’s market open.
Estimates: A Q4 EPS gain of 2% to 88 cents, with revenue up 2.5% to $33.146 billion, according to Zacks.
MoffettNathanson said the GOP’s tax cuts would help Verizon reduce its debt, but that any economic growth that might result from tax reform could push inflation higher, posing a risk to the telecom giant’s stock. Telecoms are the only segment of the S&P 500 that have declined since President Trump took office.
Verizon has also been among the companies reportedly in talks to buy Lionsgate (LGFA).
Shares popped 3% to 53.46. That’s still in buy range from a bottoming base entry of 51.28 cleared in early December. But the RS line, never strong, has been lagging in 2018.
Texas Instruments reports after the close.
Estimates: Fourth-quarter EPS of $1.09, a 24% jump, on revenue of $3.732 billion, up 9%, according to Zacks.
As cars get smarter and more connected, Texas Instruments is among the chipmakers seen benefiting . Texas Instruments also supplies some chips for the Apple (AAPL) iPhone, and it’s definitely diversified.
Nomura-Instinet analyst Romit Shah said in a research note Monday that its estimates for Texas Instruments might have been conservative, citing “positive checks” relating to the company’s industrial and automotive businesses, which make up a big chunk of sales.
Shah said that things to watch for during the company’s earnings call included any commentary from management about the impact of tax reform.
Texas Instruments repatriated most of its foreign earnings before the new tax legislation took effect, and he said “we expect a significant tailwind to earnings now that the U.S. has shifted toward a territorial tax code.”
Other things to watch, Shah said, were the company’s margins and the state of demand and inventory levels in the company’s industrial segment.
Shares climbed 2.2% to 119.44, just below last week’s record highs.
TI has been one of the best-performing chip stocks over the last several months. When chipmakers and chip-equipment stocks sold off sharply at the end of 2017, Texas Instruments barely retreated, finding support at its 50-day moving average and quickly resuming its rapid ascent.
Johnson & Johnson
J&J reports before Tuesday’s market open.
Estimates: Wall Street expects the maker of health care products to report fourth-quarter EPS up 9% to $1.72, with revenue up nearly 12% to $20.219 billion, Zacks data says.
Shares edged up 0.5% to 148.14. J&J is in a buy zone from a 144.45 base-on-base entry , but the RS line has been lagging.
Procter & Gamble
P&G reports before Tuesday’s market open.
Estimates: Fiscal second-quarter EPS of $1.15, up 6.5%, as revenue increases nearly 4% to $17.336 billion, according to Zacks.
Shares of the consumer-care products giant rose 0.9% to 91.89 on Monday. Procter & Gamble shares are in a consolidation, but the RS line has tumbled to a 16-year low.
New Oriental Education & Technology
New Oriental Education, which is on the IBD 50, reports before the opening bell.
Estimates: According to Thomson Reuters, the provider of educational services in China is expected to report fiscal Q2 earnings of 11 cents per share, up 37.5%. Revenue is seen rising 34% to $464.05 million.
Shares retreated 2.8% to 98.85, dropping back into buy range from a 94.73 flat-base entry . But the high-volume sell-off should make investors wary. TAL Education Group (TAL), which reports fiscal Q3 earnings on Thursday, slid 1.1%..
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