Earnings Previews: BlackBerry, Paychex

Markets

The three major U.S. equity indexes closed lower Friday. The Dow Jones industrials ended the day down 1.62%, the S&P 500 retreated 1.6% and the Nasdaq closed 1.8% lower. All 11 sectors closed lower, in a range of 6.9% (energy) to 0.5% (health care). Crude oil continued to trade below $80 a barrel Monday morning. Traders fear that an increasingly strong dollar will make the global economic slowdown even worse and that demand for oil will outweigh supply issues. The British pound fell to $1.07 early Monday, and the euro traded at $0.96. Traders want dollars even more than they want oil. The S&P 500 and Nasdaq were higher early Monday.

Before U.S. markets open on Tuesday, Jabil and United Natural Foods are set to report quarterly results.

Here is a look at two companies reporting quarterly results late Tuesday or early Wednesday.

BlackBerry

Shares of BlackBerry Ltd. (NYSE: BB) have tumbled by about 47% over the past 12 months. Since posting a 52-week high in November, the stock is down about 57%. The former cellphone maker has transitioned to a provider of security software and automotive (QNX) software. A proposed sale of the company’s noncore patents for $600 million apparently has fallen through, and the stock is within sight of its 52-week low set in May. The company reports quarterly results after markets close on Tuesday.

Of eight brokerages covering the stock, three have a Sell rating, four rate the shares at Hold, and the other one has a Strong Buy rating. At a recent price of around $5.00 a share, the upside potential to a median price target of $5.70 is 14%. At the high price target of $6.65, the upside potential is 33%.

Fiscal second-quarter revenue is forecast at $165.8 million, which would be down 1.3% sequentially and down about 5.3% year over year. BlackBerry is expected to post an adjusted loss per share of $0.07, compared to the prior quarter’s per-share loss of $0.05 and worse than a loss per share of $0.06 in the year-ago quarter. For the 2023 fiscal year ending in February, the company is forecast to post a loss per share of $0.23, compared with a loss of $0.10 per share a year ago. Revenue is forecast to drop by nearly 4% to $689.27 million.

BlackBerry is not expected to post a profit in 2023 or 2024. Shares trade at 26.8 times expected earnings per share (EPS) of $0.19 in 2025. The stock’s 52-week range is $4.70 to $12.39. BlackBerry does not pay a dividend. Total shareholder return for the past year is negative 52.2%.

Paychex

Paychex Inc. (NASDAQ: PAYX) is the country’s second-largest integrated human resources outsourcer of staffing and employment services such as payroll and insurance. The stock has added about 4.3% to its share price over the past 12 months but has tumbled by 17.5% since posting a 52-week high in early April. Fiscal year 2022, which ended in May, was the company’s best ever and shares reached an all-time high.

Investors are looking for the large-cap ($41.4 billion) company to continue boosting its earnings and improving its already solid free cash flow. Paychex reports quarterly results first thing Wednesday morning.

Of the 19 analysts covering the stock, 14 have a Hold rating and just three rate the shares at Buy or Strong Buy. At a share price of around $115.00, the upside potential based on a median price target of $140.00 is 13%. The high price target of $150.00 implies upside of about 30.4% to the current price.

Analysts expect revenue for the first quarter of fiscal 2023 to come in at $1.17 billion, up 1.8% sequentially and by 8.3% year over year. Adjusted EPS are expected to come in at $0.97, 19.8% higher sequentially and up 9.0% higher year over year. For the full fiscal year ending in May, analysts expect EPS of $4.13, up 9.5%, and revenue of $4.97 billion, up 7.7%.

Paychex stock trades at 27.9 times expected 2023 EPS, 26.0 times estimated 2024 earnings of $4.42 and 23.8 times estimated 2025 earnings of $4.83 per share. The stock’s 52-week range is $106.55 to $141.92. Paychex pays an annual dividend of $3.16 (yield of 2.75%). Total shareholder return for the past 12 months was 6.8%.

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