Wednesday, June 27, 2018
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 Amazon (AMZN), Intel (INTC) and Eli Lilly (LLY). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
You can see all of today's research reports here >>>
Amazon 's shares have outperformed the broader market year to date by a wide margin. (the stock is up +44.6% vs. the +2.1% gain for the S&P 500 as a whole). The Zacks analyst thinks Amazon is benefiting from an expanding AWS enterprise customer base, benefits from Whole Foods acquisition and increasing number of paid Prime members.
In the first-quarter, AWS was selected by enterprise customers like GoDaddy, Cox Automotive, Shutterfly, NextGen Healthcare, Amway and LG Electronics. Collaboration with VMware is expected to boost AWS product offerings in the long haul. Notably, AWS generates much higher margins than retail, positively impacting Amazon's profitability.
Additionally, Amazon's expanding distribution footprint bodes well for Prime. However, the company's increased operating expenses to support expansion of its business into new markets and territories, localize the availability of products and grow its content will keep margins under pressure.
(You can read the full research report on Amazon here >>> ).
Shares of Buy-ranked Intel have underperformed the Zacks General Semiconductor industry over the past one year, gaining +45.2% vs. +49.5%. However, the Zacks analyst thinks Intel is benefiting from robust performance of the Data Center Group, Internet-of-Things Group, Non-Volatile Memory Solutions and Programmable Solutions Group. These segments form the crux of Intel's data-centric business model.
The company's strategy of expanding TAM beyond CPU to adjacent product lines like silicon photonics, fabric, network ASICs, and 3D XPoint memory is bearing fruit. Its expanding customer base in the PSG segment drove top-line growth. A stable PC market is also positive for the company.
Additionally, lower spending helped in expanding operating margins. Intel raised 2018 guidance based on these solid growth trends. However, delay in transition to 10-nm process is a concern. Moreover, intensifying competition remains a headwind.
(You can read the full research report on Intel here >>> ).
Eli Lilly 's shares have outperformed the Zacks Large-Cap Pharmaceuticals industry in the last year (+2.4% vs. -3%). The Zacks analyst thinks Lilly's presence across a wide range of therapeutic areas provides support in the face of generic competition. Lilly's new products like Trulicity, Taltz, Basaglar, Cyramza, Jardiance and Lartruvo have been driving revenues and the trend is expected to continue in 2018.
Lilly expects to launch 20 new products by 2023, including at least two new indications/line extensions on an average every year. The decision to sell or spin-off the Animal Health segment, which has underperformed lately, is a prudent decision in our view. However, competitive pressure on Lilly's drugs is expected to rise this year.
Challenges remain for the company in the form of upcoming loss of patent exclusivity for products like Cialis and the impact of generic competition for Strattera, Effient and Axiron. U.S. pricing access pressure will also remain a headwind in 2018.
(You can read the full research report on Eli Lilly here >>> ).
Other noteworthy reports we are featuring today include Raytheon (RTN), Illinois Tool Works (ITW) and Southern Company (SO).
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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 Trendsand Earnings Preview reports. If you want an email notification each time Sheraz publishes a new article, please click here>>>
Today's Must Read
Amazon (AMZN) Prime and AWS Impress, Rising Expenses a Worry
Intel (INTC) Rides on AI-based Alliances & Product Rollouts
Lilly's (LLY) New Drugs Drive Sales amid Rising Competition
AGL Acquisition Buoys Southern (SO), Project Overruns Hurt
While the AGL Resources buy has increased Southern Company's customer base and diversified its offerings, the Zacks analyst is worried about timing and cost overruns in Vogtle and Kemper projects.
Rising Demand Aids Raytheon (RTN), Macro Economic Risks hurt
Per the Zacks analyst, rising demand from Gulf and Europe has been a key revenue driver. However, overseas sales are subject to country-specific risk related to political stability and regime changes.
Dunkin' Brands (DNKN) Gains From Menu & Digital Initiatives
The Zacks analyst believes that Dunkin' Brands' focus on beverage portfolio, digital initiatives and aggressive expansion strategies are the major revenue growth drivers.
Halcyon Platform Aids Varian Medical (VAR), Competition Rife
Varian has been gaining consistently from its coveted Halcyon platform. The Zacks analyst is bearish about the intense competition in the MedTech space.
GEAR Up initiatives Aid Comerica (CMA), High Expenses A Woe
Per the Zacks analyst, Comerica's GEAR Up initiatives remain encouraging.
High Demand for On & Off-highway Products Aid Allison (ALSN)
Per the Zacks analyst, augmented demand for on and off-highway products from global customers and price increase of certain products drive Allison's revenues.
Fleet Upgrade Aids American Airlines (AAL), Fuel Costs Ail
The Zacks analyst likes the efforts to modernize its fleet. Passenger revenue growth due to strong demand for air travel is a positive too.
Project Investments, Cost Cuts to Drive Air Products (APD)
Per the Zacks analyst, Air Products will gain from strong project backlog and strategic investments in high-return projects. It will also benefit from actions to cut operational costs.
Hershey (HSY) Likely to Gain from Margin for Growth Program
Per the Zacks analyst, Hershey's Margin for Growth plan is set to improve the company's operating margin via supply chain optimization, a streamlined operating model and reduced administrative costs.
Solid Demand, Margin Improvement to Aid Illinois Tool (ITW)
Per the Zacks analyst, Illinois Tool Works is poised to gain from strengthening demand for its products and margin improvement driven by benefits from enterprise initiatives.
Environmental Rules, Costs Hurt American Electric Power (AEP)
Per the Zacks analyst, dependence on regulatory commissions for rate relief, stringent environmental regulations and additional costs required to meet them could weigh on the company's finances.
Rising Expenses Weigh on Universal Health (UHS) Margins
Per the Zacks analyst, rising operating expenses from past many years have been a drag on the company's margins. Also shortage of nurses have led to an increase in labor costs.
Cat Loss Exposure Continues to Hurt W.R. Berkley (WRB)
Per the Zacks analyst, catastrophe losses will continue to render volatility to W.R. Berkley's earnings, thereby hampering the company's overall growth.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free reportSouthern Company (The) (SO): Free Stock Analysis ReportRaytheon Company (RTN): Free Stock Analysis ReportEli Lilly and Company (LLY): Free Stock Analysis ReportIllinois Tool Works Inc. (ITW): Free Stock Analysis ReportIntel Corporation (INTC): Free Stock Analysis ReportAmazon.com, Inc. (AMZN): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment Research