Thursday, July 16, 2020
The Zacks Research Daily presents the best research output of our analyst team. Today's Research Daily provides a real-time update on the Q2 earnings season and also features new research reports on 16 major stocks, including Comcast (CMCSA), Philip Morris International (PM) and Lockheed Martin (LMT). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Q2 Earnings Season Scorecard
Including all of this morning's reports, we now have Q2 results from 39 S&P 500 members or 7.8% of the index's total membership. Please note that these 39 index members combined account for 12.3% of the index's total market capitalization. The Finance sector companies that have reported already account for 33.1% of the sector's total market capitalization in the index.
Total Q2 earnings for these 39 index members are down -47.8% from the same period last year on -2.2% lower revenues, with 74.4% beating EPS estimates and 64.1% beating revenue estimates.
For the Finance sector, we now have Q2 results from 33.1% of the sector's total market capitalization in the S&P 500 index. Total earnings or aggregate net income for these Finance companies are down -58.5% from the same period last year on +5.2% higher revenues, with 76.9% beating EPS estimates and 69.2% beating revenue estimates.
Relative to what we had seen from the same group of Finance sector companies in 2020 Q1 and other recent periods, a bigger proportion of companies are beating EPS and revenue estimates. This suggests that Q2 estimates may have fallen more than needed, making it easy for companies to beat consensus estimates. We will see if this trend will continue going forward.
Comcast’s shares have underperformed the Zacks Cable Television industry over the past year (-6% vs. +6.7%). The Zacks analyst believes that Comcast is benefiting from solid high-speed Internet customer wins.
The company’s strategy to provide high-speed Internet at an affordable price plays a pivotal role in improving customer experience. Moreover, increased media consumption and work-from-home wave bode well for Comcast. Growing popularity of Xfinity and Flex products is a major catalyst. Peacock’s launch is a key catalyst.
However, Comcast persistently suffers video-subscriber attrition due to cord-cutting. The company’s theme park revenues are expected to suffer from lower footfall. It expects film results to decline substantially in the second and third quarters due to the rescheduling of Fast and Furious 9, as well as Minions 2 releases in 2021. Moreover, a leveraged balance sheet is a concern.
Shares of Philip Morris have lost -15.4% over the past six months against the Zacks Tobacco industry’s fall of -18.4%. The Zacks analyst believes that the company’s second-quarter show is likely to be hurt by lower duty-free sales and delay in minimum price enforcement in Indonesia stemming from coronavirus-led restrictions, among others
The stock further declined when management said that it expects coronavirus to be detrimental to 2020 performance, during its first-quarter 2020 earnings release. The company withdrew its 2020 earnings view and offered guidance for the second quarter, which is expected to bear the largest quarterly impact of COVID-19 this year.
Nonetheless, the company doesn’t expect facing any out of stock situation in core operating income markets. Also, its first-quarter earnings and sales grew year over year, reflecting continued momentum in the smoke-free portfolio and a solid combustible tobacco pricing.
Lockheed Martin’s shares have lost -8.9% over the past three months against the Zacks Aerospace Defense industry’s fall of -2.5%. The Zacks analyst believes that expansionary budgetary provisions made by the current U.S. administration will immensely boost this defense prime's business.
Lockheed Martin enjoys strong demand for its high-end military equipment in domestic and international markets, being the world's largest defense contractor. However, Lockheed Martin faces intense global competition for its broad portfolio of products and services. Furthermore, forced cost reduction initiatives for the F-35 program might hamper its operating results.
America and Turkey's tiff regarding the latter accepting Russian products may hurt Lockheed’s component supply from Turkey. It is also facing performance issues in relation to some of its products, which in turn may hurt its results.
Other noteworthy reports we are featuring today include SAP SE (SAP), Chevron (CVX) and American Express (AXP).
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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 Trends and 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, robust adoption of S/4HANA and other cloud-based offerings have supported SAP's top line. Also, partnership with IBM is expected to aid SAP in expanding cloud-based clientele.
The Zacks analyst likes Chevron's improving well economics in the Permian Basin. However, the supermajor's low reserve replacement ratio of 44% is a concern.
Per the Zacks analyst, halt in advertising, slow down of launch of new products, will lower marketing expenses and aid margins.
Per the Zacks analyst, Stryker continues to gain from solid prospects of its core MedSurg arm. However, pricing pressure continues to remain a woe.
The Zacks analyst believes that the oil and gas findings in the prolific Sichuan & Ordos Basins will support large-scale production for Sinopec.
Per the Zacks Analyst, America Movil is positioned to benefit from new broadband accesses despite wireless disconnections due to low commercial activities.
The Zacks analyst is worried about the overall compressed volumes at Norfolk Southern. However, reduced costs owing to the precision scheduled railroading model are a relief.
The Zacks analyst stresses that United Rentals' systematic inorganic strategy will expand its core equipment rental business and trench, power and pump footprint and tool offerings.
Per the Zacks analyst, Royal Gold will benefit from the rally in gold prices, ramping up of new mines, focus on acquisitions as well as efforts to cut down debt levels.
Per the Zacks analyst, Legg Mason's strong liquidity position keeps it well poised to grow through acquisitions. Also, strategic acquisitions have aided in asset growth and expansion in market share.
Per the Zacks analyst, heavy spending on sports programming rights weighs on Fox's profits. Moreover, decline in local advertising market as a result of the coronavirus outbreak is an overhang.
The Zacks analyst is worried about STERIS' decline in outsourced reprocessing business due to COVID-19-led fall in procedures. Pricing pressure and customer loss due to consolidation is worrying.
Headwinds surrounding agriculture and construction sectors, especially in the European market, will mar CNH Industrial's results. High leverage of 80% is also a concern, per the Zacks analyst.
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SAP SE (SAP): Free Stock Analysis Report
Philip Morris International Inc. (PM): Free Stock Analysis Report
Lockheed Martin Corporation (LMT): Free Stock Analysis Report
Chevron Corporation (CVX): Free Stock Analysis Report
Comcast Corporation (CMCSA): Free Stock Analysis Report
American Express Company (AXP): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.