Tuesday, July 23, 2024
The Zacks Research Daily presents the best research output of our analyst team. Today's Research Daily features a real-time update on the Q2 earnings season and new research reports on 16 major stocks, including S&P Global Inc. (SPGI), Honeywell International Inc. (HON) and Elevance Health, Inc. (ELV), as well a micro-cap stock Sypris Solutions, Inc. (SYPR). The Zacks microcap research is unique as our research content on these small and under-the-radar companies is the only research of its type in the country.
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 >>>
Q2 Earnings Season Scorecard
Including this morning's releases from Coke, UPS, GM and others, we now have Q2 results from 103 S&P 500 members or 20.6% of the index's total membership. Total earnings for these companies are up +6.8% from the same period last year on +3.5% higher revenues, with 82.5% beating EPS estimates and 59.2% beating revenue estimates.
Comparing the Q2 results from these companies relative to what we had seen from the same group of 103 companies in other recent periods, we find
- The Q2 EPS beats percentage of 82.5% compares to 79.6% in each of the preceding two periods and the average for the preceding 20-quarters (5 years) of 79.8%.
- The Q2 revenue beats percentage of 59.2% compares to 66% and 68% for this group of 103 index members in 2024 Q1 and 2023 Q4, respectively. The 20-quarter average for this group of companies is 70.6%. This means that companies continue to struggle to beat revenue estimates.
- With respect to the growth rates, the earnings growth rate of +6.8% for this group of 103 companies is up from +6.3% in 2024 Q1, -0.7% in 2023 Q4, +2.5% in 2023 Q3, +0.4% in 2023 Q2 and so on. In other words, an accelerating growth trend on the earnings front.
- With respect to revenues, the Q2 revenue growth rate of +3.5% is down from +4% in 2024 Q1, +3.1% in 2023 Q4, +4.5% in 2023 Q3 and so on.
Looking at Q2 as a whole, combining the actuals that have come out with estimates for the still-to-come companies, total earnings are expected to be up +9.2% from the same period last year on +4.9% higher revenues, which will be the highest earnings growth pace since the +10% earnings growth rate in 2022 Q1.
Today's Featured Analyst Reports
S&P Global shares have outperformed the Zacks Business - Information Services industry over the past year (+15.3% vs. +12.8%). The company remains well-poised to gain from the growing demand for business information services. Buyouts help innovate, increase differentiated content and develop new products.
New service launches have been aiding the company's growth. Dividend payments and share buybacks boost investors' confidence and positively impact earnings per share.
However, S&P Global remains vulnerable to proceedings, investigations and inquiries concerning the ratings provided, leading to legal charges, damages or fines. Growth initiatives, higher compensations and incentives raise the company's expenses.t
(You can read the full research report on S&P Global here >>>)
Shares of Honeywell have outperformed the Zacks Diversified Operations industry over the year-to-date period (+3.3% vs. -4.4%). The company’s strength in the commercial aviation, building automation and UOP businesses augurs well. The Aerospace segment is particularly strong, driven by robust demand in the aviation aftermarket.
A strong commercial aftermarket and solid commercial aviation demand, led by strength in the air transport aftermarket, are aiding the Aerospace segment. Handsome rewards to shareholders add to the stock’s appeal. The ability to generate strong free cash flow supports its shareholder-friendly activities.
The company’s commercial and operational excellence initiatives, along with its pricing actions, enable it to maintain a healthy margin performance. While acquisitions have expanded its product range and geographic reach, they have increased Honeywell’s balance sheet debt as well. Foreign currency translation remains an overhang.t
(You can read the full research report on Honeywell here >>>)
Elevance Health shares have outperformed the Zacks Medical Services industry over the past year (+7.0% vs. +2.0%). The company beat earnings estimate by 1.3% in the second quarter. Its revenue growth, fueled by premium rate increases and rising memberships, contributes to its positive trajectory.
Strategic acquisitions and partnerships have fortified its business portfolio. A robust Medicare Advantage segment, combined with successful contract acquisitions, is poised to drive future memberships. It reaffirmed the 2024 earnings guidance to $37.20 per share. The Carelon business is a key contributor to its success. ELV utilizes excess capital to boost shareholder value.
However, its rising expenses continue to put pressure on margins. Its high balance sheet debt is reducing financial flexibility. Also, its declining free cash flow is a concern. As such, the stock warrants a cautious stance.
(You can read the full research report on Elevance Health here >>>)
Shares of Sypris Solutions have outperformed the Zacks Electronics - Miscellaneous Services industry over the past year (+3.8% vs. -8.8%). This microcap company with market capitalization of $42.81 million has secured a long-term, sole-source contract extension with a major commercial vehicle manufacturer for Ultra Axle Shafts, ensuring stable revenues and reinforcing its industry reputation.
Sypris Solutions’ Sypris Electronics unit is also expanding in the electronic warfare market with additional U.S. Navy contracts, enhancing defense capabilities against threats. Sypris' strong position in the growing aerospace and defense electronics markets supports sustained revenue growth. Financial stability is bolstered by an improved cash balance. A significant backlog provides revenue visibility and supports financial planning.
However, the company faces challenges with net losses widening to $2.2 million in Q1 2024 and reduced profit margins. Rising operating expenses, high debt levels and competitive pressures also pose risks.
(You can read the full research report on Sypris Solutions here >>>)
Other noteworthy reports we are featuring today include American Tower Corporation (AMT), Cintas Corporation (CTAS) and TC Energy Corporation (TRP).
Sheraz Mian
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
Market Scan & ChartIQ Buyouts Benefit S&P Global (SPGI)
Honeywell (HON) Benefits from Strength in Aerospace Segment
Strategic Buyouts Aid Elevance Health (ELV), Cost Woes Stay
Featured Reports
Steady Tower Demand Aid American Tower (AMT), High Rates Ail
Per the Zacks analyst, American Tower is expected to gain from the network investments by wireless carriers amid steady growth in wireless data consumption despite a high interest rate environment.
Uniform Rental Unit Aids Cintas (CTAS) Amid Rising Costs
Per the Zacks analyst, Cintas' Uniform Rental and Facility Services unit is driven by the penetration of additional products and services into existing customers. High costs remain a concern.
TC Energy's (TRP) C$34B Growth Projects to Boost Earnings
The Zacks analyst believes that TC Energy's C$34 billion of growth projects should support its earnings and dividend payouts but is worried over the massive debt of C$50 billion.
lululemon (LULU) Tracks Well on Solid e-commerce Growth
Per the Zacks analyst, lululemon expects to capture the growing online demand and enhance shopping experience via accelerated e-commerce investments. Digital sales contributed 41% to net sales in Q1.
Public Sector Demand to Aid Vulcan (VMC) Amid Weather Woes
Per the Zacks Analyst, Vulcan is likely to benefit from robust public sector demand and strong aggregate-led business performance. However, price fluctuations and weather-related risks are a concern.
Veeva Systems (VEEV) Benefits from Strong Product Portfolio
Per the Zacks analyst, Veeva Systems is likely to benefit from its robust product portfolio and continued focus on research and development. However, data security threats persist.
Badger Meter (BMI) Rides on Favorable Customer Demand Trends
Per the Zacks analyst, Badger Meter's performance is gaining from solid order trends for its innovative smart water solutions. The introduction of BlueEdge is creating a tailwind.
New Upgrades
Beam Therapeutics' (BEAM) Gene-Therapy Pipeline Holds Promise
Per the Zacks analyst, Beam Therapeutics' lead candidate, BEAM-101, a base-editing therapy being developed to treat two rare diseases holds promise. Other pipeline candidates are also progressing well
Clean Harbors (CLH) Gains From Thompson Industrial Buyout
Per the Zacks analyst, the Thompson Industrial Services acquisition expanded Clean Harbors' Environmental Services segment's industrial service operations in the Southeastern United States.
Gap's (GPS) Cost-Cutting Plans & Low Airfreight Aid Margins
Per the Zacks analyst, Gap is making efforts to simplify and optimize its operating model and structure. Also, lower airfreight and improved promotional activity have been boosting margins.
New Downgrades
Supply Chain Vulnerability to Effect Emeren (SOL) Growth
Per the Zacks analyst, the vulnerable supply chain condition in the global solar market may hurt Emeren. Trade tensions between the United States and China also pose a risk for the stock.
Paylocity Holding (PCTY) Hurt By Rising Stiff Competition
Per the Zacks Analyst, Paylocity Holding is suffering from rising stiff competition in the HCM software market from players like Oracle, Paychex, etc. Higher interest rates also remain a concern.
High Expenses, Cat Loss Concern Selective Insurance (SIGI)
Per the Zacks analyst, Selective Insurance is exposed to catastrophes loss, which results in volatility in its earnings. Also, rising expenses due to higher losses weigh on margin expansion.
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TC Energy Corporation (TRP) : Free Stock Analysis Report
S&P Global Inc. (SPGI) : Free Stock Analysis Report
Sypris Solutions, Inc. (SYPR) : Free Stock Analysis Report
Elevance Health, Inc. (ELV) : 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.
