Monday June 12 2017
The Zacks Research Daily presents the best research output of our analyst team. Today's write-up features new research reports on 16 major stocks, including Facebook (FB), Wal-Mart (WMT) and Merck (MRK).These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Facebook 's shares lagged the S&P 500 index following the election, but have more than made up for that underperformance since the start of 2017 - the stock is up +29.9% in the year-to-date period vs. +8.9% gain for the index in that time period. The stock has lost ground in the last few sessions as the market has soured on the high-flying tech sector, but the Zacks analyst remains about Facebook's outlook given the social media giant's strong growth outlook. Apart from mobile and video, the potential for monetization of its Instagram, Messenger, WhatsApp and Oculus assets, a huge user base and room for higher engagement levels remain at the core of the company's attractive fundamentals. Longer term, Facebook's investments in augmented reality/virtual reality (AR/VR) and artificial intelligence (AI) technologies also remain promising. On the flip side, while the stock isn't nose-bleed expensive on valuation grounds, it nevertheless remains vulnerable to sentiment shift if the technology rally falters.
Wal-Mart shares have been strong performers lately, with the stock up +14.6% in the year-to-date period, handily outperforming the S&P 500's +8.9% gain in the same time period. The market's growing appreciation for the company's efforts to build e-commerce capabilities and strengthen the legacy business through improved and expanded product assortment, store cleanliness and an overall pleasant customer experience to drive traffic. The positive comps for the last 10 quarters and strong results in the last quarterly report are some of the more tangible outcomes of these efforts. The company has been making steady investments in its business, both on the brick-and-mortar side as well as in the e-commerce platform. These are necessary outlays for its long-term competitive positioning, but they nevertheless have bearing on near-term profitability. The stock's recent momentum and outperformance relative to others like Target (TGT) suggest that market participants are willing to be patient with management's plans.
Merck shares have outperformed the Large Cap Pharmaceuticals industry over the last one year, gaining +14.6% versus the industry's +4.5% increase. This momentum reflects the progress it has made with product pipeline and strong recent results; the company beat estimates in Q1 and raised guidance. While generic competition for several drugs and pricing pressures as are material in the Merck story as they are for many of its peers, the Zacks analyst points out that the company's new products like Keytruda and Zepatier hold great potential. The analyst discusses all of these issues in the updated research report issued today.
Other noteworthy reports we are featuring today include Dominion Resources (D), Kellogg (K) and PACCAR (PCAR).
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Director of Research
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
Per the Zacks analyst, with growing international expansion, IDEXX's Companion Animal Diagnostics business is likely to suffer from adverse currency fluxes.
Per the covering analyst, Kellogg's cost-saving initiatives like Project K and ZBB programs are supporting margin expansion, while a weak top line is a major deterrent.
While the company should gain from expansion of its parts distribution centers (PDC), falling truck prices and expected decline in Class 8 retail sales in 2017 pose concerns.
Per the Zacks analyst, Nordstrom's 2020 strategy positions it to deliver sustainable long term growth despite the volatile consumer behavior, sluggish store traffic and a tough retail environment.
The Zacks analyst believes that Amkor will continue to benefit from strategic acquisitions. It's leading market position, and focus on mobile communications and automotive are the other positives.
The Zacks analyst is impressed by the company's efforts to revive its fortunes under CEO Bob Bakish. However, its high debt levels raise concerns.
The covering analyst thinks Digital Realty's accretive acquisitions and development efforts augur well. However, foreign currency exposure and high debt remain woes.
The Zacks analyst believes that the existing tight oil price scenario have made Core Labs' services even more important for energy companies that look to utilize every dollar that they spend.
The covering analyst thinks intensifying focus on niche market will position Torchmark for long term growth. Steady capital deployment and strong operating fundamentals should add to the upside.
Per the Zacks analyst, ABM's strategy entails growth through acquisitions and organic growth while maintaining profit margins. It has embarked on its Vision 2020 Plan which outlines its vision.
Per the Zacks analyst, dearth of new awards, slow burn rate on key projects and transition from higher margin engineering to lower margin construction activities will continue to pressurize margins.
Per the covering analyst, fewer movies releasing in fiscal 2018 may hurt Lions Gate's Motion Pictures revenues. Further, rising cost of motion picture production and marketing may jeopardize margins.
The Zacks analyst believes Dominion Resources earnings will be adversely impacted by reduction in solar investment tax credit of $0.15 to $0.20 per share in 2017.
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