5 Rapid-Fire Earnings Updates as We Lift Our Price Target on a Key Name
We’re reviewing other price targets, and will have more comments after this morning’s earnings calls.
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Ahead of this morning’s earnings calls from United Rentals URI and Waste Management WM, we are sharing some initial thoughts based on their earnings press releases.
We are also providing some quick thoughts on quarterly results from Microsoft MSFT and ServiceNow NOW as we lift our price target on Meta META and maintain our Two rating as the shares move into overbought territory.
Meta
Meta Platforms not only delivered a wonderful top and bottom line beat for the December quarter, with revenue up just over 20% year over year, but we continued to see dramatic margin growth compared to the year-ago quarter. While that will slow in the coming quarters as Meta continues to invest big on AI, we continue to see the company well positioned as the shift to digital advertising accelerates and as it focuses on monetizing more of its platforms.
We do expect a slower rate of margin improvement in the coming year given the expected double-digit growth telegraphed in total expenses, which is a faster pace than we saw in 2024. However, the ability to deliver continued EPS growth while investing $60 billion-$65 billion in the coming year leads us to boost our below-consensus price target to $725 from $675. We’ll revisit that target based on Meta’s monetization efforts and as its spending outlook is updated in the coming quarters.
As we noted above, based on their relative strength index level, META shares have crossed into overbought territory and the post-earnings move should only increase that RSI level further. Members should not chase the shares at current levels, hence we are our keeping our Two rating.
Microsoft
With Microsoft shares, the market is focusing on the shortfall in cloud growth for the quarter, but back in October the company telegraphed its being capacity-constrained, hence its large capital spending program. Strong bookings point to further growth ahead as that capacity comes online in the next few months.
We’re inclined to be patient with MSFT shares, but we will say that if the shares found their way below $420 it would be a good pick-up point for members.
ServiceNow
Turning quickly to ServiceNow, relative to extremely high expectations the company delivered a modest earnings beat and revenue up 21.3% year over year to $2.96 billion despite tough comparisons. Currency headwinds are contributing to forward guidance that is a tad softer than expected even though it still points to 20% revenue growth across its two key reporting segments. Rising AI adoption across the enterprise and the extremely high-margin subscription business generating almost 98% of ServiceNow’s revenue stream means we will continue to be shareholders.
We are reviewing our price target, with an eye toward nudging it modestly higher. Members that may have missed NOW shares, we’d remind you we last added to the position earlier this month when NOW was trading near $1,028.
United Rentals
United Rentals delivered a mixed earnings report with revenue for the December quarter up 9.8%, year over year, to $4.09 billion, topping the $3.93 billion consensus. However, EPS for the quarter fell short of the market consensus by $0.09 per share, a miss of less than 1%.
The company’s outlook for 2025 bookends market consensus forecasts, but the reality is that forecast will likely be revised when United closes its pending acquisition of H&E Equipment HEES, which should bring another $1.5 billion in revenue and the opportunity to bring H&E’s margins up to United levels. We’ll have more comments after this morning’s earnings call, but odds are we will not revisit our $900 price target until we have more clarity on H&E acquisition timing and synergy roadmap.
We are pleased with United’s dividend increase to $1.79 per share per quarter up from $1.63. That increase comes even though United targets reducing its pro forma net leverage following the H&E acquisition to $2.0x within 12 months of closing the deal from ~2.3x at closing.
Waste Management
Ahead of the company’s earnings call this morning, shares of Waste Management are trending higher, lifted by stronger 2025 revenue and EBITDA guidance compared to market expectations. WM sees 2025 revenue between $25.55 billion-$28.80 billion with adjusted EBITDA between $7.45 billion-$7.65 billion compared to the market consensus of $25.55 billion and $7.2 billion, respectively. That outlook is overshadowing mixed December-quarter results that included a top-line beat and an EPS miss, even though adjusted EBITDA of $1.7 billion was modestly ahead of expectations.
On the earnings call, we’ll be interested in WM’s plans to integrate Stericycle and also comments on potential longer-term margin targets. For 2025, WM’s initial guidance calls for adjusted EBITDA margins for the rebranded WM Healthcare Solutions to hit 17.6%, easily less than half the 30.7% targeted for the core WM business.
We’ll also be interested in comments on further productivity initiatives for the core WM business and how they complement targeted price increases of 5.8%-6.2% this year. What we’ll be looking for is how conservative management’s core WM margin targets could be.
At the time of publication, TheStreet Pro Portfolio was long URI, WM, MSFT, NOW and META.
