Monday, July 22, 2019
The Zacks Research Daily presents the best research output of our analyst team. Today's Research Daily features new research reports on 16 major stocks, including UnitedHealth (UNH), Citigroup (C) and Honeywell (HON). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
UnitedHealth’s shares have gained +2% in the past year, outperforming the Zacks Medical Insurance industry, which has increased +1.7% over the same period. UnitedHealth Group’s earnings surpassed expectations by 4%, and were up 15% year over year. The Zacks analyst thinks the company stands apart in the industry by virtue of healthcare services, technology and innovations offered by its unit Optum.
Numerous acquisitions made by the company have broadened its business profile and provide benefits of diversification. Its solid balance sheet and consistent cash flow generation has enabled investment in business which will drive long term growth. Also, capital management through dividend payments and share buybacks is another positive.
However, slowdown of growth in international operations and underperformance of the Medicaid business are some concerns. An increase in leverage and substantial interest burden raises financial risk.
Shares of Citigroup have outperformed the Zacks Major Regional Banks industry in the past six months (+14.3% vs. +3.3%). The Zacks analyst thinks the company has an impressive earnings surprise history, beating expectations in all the trailing four quarters.
The company’s second-quarter 2019 results reflected expense control and higher revenues driven by consumer banking. However, lower fixed income, investment banking and equity market revenues amid challenging trading environment are acting as drags on the stock. Citigroup’s restructuring and streamlining efforts, along with strategic investments in core business, bode well for the long term.
Also, the company’s declining costs base supports its bottom-line improvement. Steady capital-deployment activities of the company are also commendable. However, pending litigation issues might keep legal expenses elevated.
Honeywell’s shares have outperformed the Zacks Diversified Operations industry in the past three months, gaining +0.4% vs. a -3.4% decline. In second-quarter 2019, Honeywell's earnings grew 8.8% year over year and exceeded expectations by about 1%.
The Zacks analyst thinks strength in its commercial aerospace, warehouse and process automation’s businesses as well as solid demand for its commercial fire and security products will boost revenues in the quarters ahead. Stronger sales volumes, increased productivity and ongoing commercial effectiveness actions will improve near-term profitability.
For 2019, Honeywell raised earnings guidance from $7.90-$8.15 to $7.95-$8.15 per share. However, the stock looks overvalued compared to the industry for the past three-month period. Also, the company is experiencing softness in its productivity products business.
Other noteworthy reports we are featuring today include IBM (IBM), Union Pacific (UNP) and Amgen (AMGN).
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Note: Sheraz Mian heads the Zacks Equity Research department and is a well-regarded expert of aggregate earnings. He is frequently quoted in the print and electronic media and publishes the weekly Earnings Trends and Earnings Preview reports. If you want an email notification each time Sheraz publishes a new article, please click here>>>
Per the Zacks analyst, IBM is having a tough time, given the ongoing time-consuming transition to a cloud business model. Stiff competition from peers & high indebtedness is another concern.
The Zacks analyst likes the company's efforts to check costs. Union Pacific's initiatives to reward its shareholders are encouraging too. However, the sluggish freight scenario is worrisome.
While Amgen's newer drugs - Prolia, Xgeva, Blincyto, - will drive sales, biosimilar and brand competition for its legacy products should hurt the top line in 2019, per the Zacks analyst.
Per the Zacks analyst, Nucor should gain from efforts to expand production capacity and grow through acquisitions.
Per the Zacks analyst, Seattle Genetics aims to spur sales of its flagship product, Adcetris. The drug's label expansion studies raise hopes.
Per the Zacks analyst, Invesco's inorganic growth efforts, rise in assets under management and widening global presence will aid growth.
Per the Zacks analyst, Webster Financial's organic strength is reflected by rising loans and deposits balances along with easing margin pressure.
Per the Zacks analyst, Danaher stands to gain from solid demand for products and effective implementation of Danaher Business System. Buyouts, including BioPharma business of GE, are another positive.
Per the Zacks analyst, increase in finance charges, driven by growth in consumer loans will likely aid Credit Acceptance's revenues. Its share repurchase plan reflects a solid balance sheet.
Per the Zacks analyst, Skechers' international business remains a key sales driver, apart from product innovation. International business is expected to rise in mid-teens over the balance of the year.
Per the Zacks analyst, Qualcomm continues to face fierce competition from low-cost rival chipmakers like MediaTek, and leading smartphone makers like Samsung (KS:005930), which is hurting its operating margin.
The Zacks analyst is concerned about J.B. Hunt's escalating operating expenses hampering its bottom-line growth. The company's high debt levels further add to its woes.
Per the Zacks analyst, decline in production volume in key markets and incremental spending on advanced engineering to support growth in electrification and connectivity are headwinds for Lear.
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