Wednesday, May 30, 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 Chevron (CVX), Wells Fargo (WFC) and Eli Lilly (LLY). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Chevron 's shares have risen +17.3% in the past year, outperforming the Zacks Integrated Oil industry's +14.8% increase, while larger rival Exxon Mobil has seen its scrip go up a meagre 1.3% over the same time period.
The supermajor has been a beneficiary of the recovery in commodity prices, which helped its upstream unit profits to double from a year ago. Further, Chevron's high-quality Permian acreage continues to drive production. Importantly, cash flow from operations, at $5 billion, were more than $1 billion higher than a year ago.
However, the Zacks analyst remains worried over a drop in Chevron's downstream segment earnings on weaker margins, while exposure to production in the vulnerable and violence-prone regions in Nigeria poses additional risk. Hence, investors are advised to wait for a better entry point before buying shares in Chevron.
Wells Fargo 's shares have underperformed the Zacks Major Banks industry over the last six months (-5.7% vs. -2.3%). The company possesses a decent earnings surprise history, having beaten the Zacks Consensus Estimate in two of the trailing four quarters.
Recently, the bank entered into a consent order with OCC and CFPB for paying $1 billion as civil penalty related to auto-loan issues. Also, Wells Fargo was slapped with new sanctions, including a cap on the assets position by the Federal Reserve. Though continued growth in loans and deposits, lower tax rate and expansions will likely support the bank's growth profile, the crisis related to the revelation of illegally opening millions of illegal accounts in 2016 will take some time to alleviate.
Shares of Buy-rated Eli Lilly have outrperformed the Zacks Large-Cap Pharmaceuticals industry in the last year (+3.6% vs. -0.8%). 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 between 2014 and 2023, including at least two new indications/line extensions on an average every year. Also, competitive pressure on Lilly's drugs is expected to rise this year.
Meanwhile, challenges remain for the company in the form of 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.
Other noteworthy reports we are featuring today include 3M (MMM), FedEx (FDX) and Valero Energy (VLO).
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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 Previewreports. If you want an email notification each time Sheraz publishes a new article, please click here>>>
Today's Must Read
Per the Zacks Analyst, CMS Energy (CMS) maintains stable liquidity position, besides having a strong cash generation capacity.
The Zacks analyst thinks that Albemarle is well placed to gain from expansion actions in its lithium unit, strong growth in battery-grade lithium market and synergies of Rockwood Holdings buyout.
Per the Zacks analyst, Lululemon's top-line is gaining from its 2020 strategy.
Per the Zacks analyst, Amphenol's top-line benefits from improved end-market demand, new product rollouts and market share gains.
The Zacks analyst is encouraged by Darden's aggressive cost management plan, under which it trying to significantly cut operating costs.
The Zacks analyst believes that improving throughput volume on higher refinery utilization will help Valero generate more cash flow.
While LyondellBasell faces headwind from production outages, it should gain from construction of the HDPE plant on the U.S. Gulf Coast and synergies of A. Schulman buyout.
The Zacks analyst is bullish on solid Invisalign technology prospects and continued growth in North America and globally, particularly in the Asia-Pacific and EMEA regions.
Per the Zacks Analyst, lower corporate taxes, fruitful integration of the Fontanini and Columbus business buyouts and ongoing innovation investments will strengthen Hormel Foods' competency.
The Zacks analyst likes the company's efforts to reward shareholders through dividends & buybacks. The growth in e-commerce is also aiding its top line. The new tax law is another positive.
The Zacks analyst is worried about increasing competition in the outsourcing space. Paychex's near-term performance is likely to be negatively impacted due to unfavorable client mix.
Per the Zacks analyst, escalating expenses, mainly due to higher compensation and operating costs, will continue to restrict Arthur J. Gallagher's operating margin expansion.
Per the analyst, 3M is struggling with poor performance of Display Materials & Systems business, due to softness in consumer electronics. Constrained margins & high operating costs remain concerns.