Thursday, February 16 2017
The Zacks Research Daily features the best research output of our analyst team. In today's write-up, we are featuring analyst reports on 16 major stocks, including reports on Merck (MRK), PNC Financial (PNC) and Express Scripts (ESRX). These reports have been hand-picked from amongst the 70 or so stock research reports published by our analyst team today. You can see all of today's research reports here >>
In addition to these stock research reports, we are also giving you a real-time scorecard of the ongoing Q4 earnings season. We have a long history of closely monitoring earnings releases and presenting our analysis of emerging aggregate trends in the weekly Earnings Trends and Earnings Preview reports.
Our latest Earnings Trends report is: A Positive & Reassuring Earnings Picture
Q4 Earnings Scorecard(as of Thursday, February, 16 th)
Including all of this morning's releases, we now have Q4 results from 398 S&P 500 members, or 79.4% of the index's total membership. Total earnings for the 398 index members that have reported results already are up +8% on +5% higher revenues, with 68.8% beating EPS estimates and 55.3% beating revenue estimates.
This is better earnings and revenue growth performance than we have seen from this group of 398 S&P 500 members in other recent periods, even after adjusting for the strong growth from the Finance sector (earnings growth would be +5.4% excluding the Finance sector on +5% higher revenues). The charts below compare the Q4 growth pace with what we had seen from the same group of 398 index members in other recent periods (right-hand chart shows ex-Finance numbers).
The proportion of companies beating EPS and revenue estimates, however, is tracking below other recent periods. Only 41% of the index members are able to beat both EPS and revenue estimates, which compares to 47.2% in the preceding quarter for the same sample of 398 S&P 500 members (the 4-quarter average is 45.1% & the 12-quarter average is 44.6%), as the chart below shows.
Looking at Q4 as a whole, combining the actual results from the 398 index members with estimates from the still-to-come 102 companies, total earnings are expected to be up +7.4% from the same period last year on +3.9% higher revenues. As we have been pointing out all along, this Q4 growth pace continues to be the best growth pace in two years. Importantly, the strong Q4 growth is not a function of easy comparisons, but rather a result of actual gains. The fact is total earnings for the S&P 500 index are on track to reach an all-time quarterly record, surpassing the level achieved in 2014 Q4.
The chart below shows the expected Q4 earnings tally for the index contrasted with what was actually earned in the preceding 8 quarters and what is expected to come in the following 4.
Today's Featured Research Reports
Merck shares have gained 28.7% over the last one year, outperforming the Zacks Large Cap Pharma industry which has gained 5.9% over the same period. Merck's fourth-quarter results were mixed. While earnings beat estimates, sales missed the same due to generic competition for several drugs. However, the Zacks analyst likes Merck's new products, especially Keytruda, which should continue to contribute meaningfully to the top line. Merck will continue to focus on cost-cutting initiatives to drive the bottom line. Merck has also made significant progress with its pipeline and is working on bringing new products to the market. However, generic competition and pricing pressure will continue to pressurize the top line . (You can read the full research report on Merck here >> )
Buy rated PNC Financial shares outperformed the Zacks Regional Banks industry, over the last three months gaining 15.5% vs. 13.8%. The company's fourth-quarter 2016 earnings surpassed the Zacks Consensus Estimate, reflecting a marginal rise in net interest income, partially offset by lower non-interest income and a rise in operating expenses. The Zacks analyst likes the company's efforts to generate positive operating leverage through its cost-saving initiatives. Also, management projects revenues to rise at a mid-single digit rate in 2017, aided by loan growth. Notably, the company's capital deployment activities are encouraging. (You can read the full research report on PNC Financial here >> )
Express Scripts shares have underperformed medical services market over the last three months. EWhile the company's guidance for 2017 was encouraging, tough competition in the Pharmacy Benefit Management space and the persistent drug pricing issue are expected to affect the share price. Express Scripts stands to benefit from increased generic utilization, shift toward mail orders, strong specialty growth and an aging population. The company is focused on the development of both specialty drugs and generics, which are expected to account for 50% of the total drug expenditure by 2018. (You can read the full research report on Express Scripts here>> )
Other noteworthy reports we are featuring today include VeriSign (VRSN), TOTAL S.A. (TOT) and Martin Marietta (MLM).
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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
The covering analyst believes that Martin Marietta is likely to benefit from government's focus on infrastructure. However, wet weather conditions continue to hurt its prospects.
The Zacks analyst thinks although DTE Energy missed revenue as well as earnings estimates, the huge capital investment it promises to make in next five years will boost its growth in 2017.
TOTAL reported strong results in fourth-quarter 2016. The covering analyst believes cost savings initiatives and new startups will further boost its performance in the long run.
In Q4, Aimco's FFO came in-line but rose Y/Y. Per the Zacks analyst, same store property NOI growth, higher contribution from development, redevelopment and acquisition activities helped the results.
The Zacks analyst thinks that Celanese's productivity actions should lend support to its earnings in 2017.
he covering analyst, excellent global business model, innovative product launches and thriving end markets are likely to boost growth.
Though macro headwinds and stringent regulations remain concerns, the Zacks analyst thinks that strong demand for 4G LTE and newly launched IoT products will continue to drive Marvell's revenues.
The Zacks analyst thinks j2 Global's six acquisitions in the fourth quarter of 2016, covering six business units and three countries have driven its revenues and earnings.
The covering analyst believes renewal of the .com contract and price hikes for the .com and .net domain names are major catalysts, Plus, Security Services should boost revenues in the long run.
FLIR Systems' Q4 earnings grew year over year on the back of robust top line growth. Going forward, strong backlog, impressive product pipeline and accretive acquisitions signal bright prospects.
According to the covering analyst, Groupon's new business strategy appears to be working but the company is yet to report significant profits,.
Considering Encana's highly-leveraged balance sheet and the recent equity dilution, the Zacks analyst would prefer to wait for further price recovery before recommending investors purchase shares.
The covering analyst thinks soft economic recovery, slower sales of sporting goods and stiff competition have hurt Cabela's performance. But its deal with Bass Pro Shops may help overcome hurdles.
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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.