Thursday, June 6, 2019
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 Johnson & Johnson (JNJ), Chevron (CVX) and Adobe (ADBE). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Johnson & Johnson’s shares have outperformed the Zacks Large Cap Pharmaceuticals industry so far this year (+4.1% vs. -0.1%). The Zacks analyst thinks J&J is likely to witness significant generic/biosimilar headwinds in the Pharma unit in 2019. However, J&J’s sales and earnings growth is expected to accelerate in 2020, supported by contribution from new drugs like Tremfya and successful label expansion of cancer drugs like Imbruvica and Darzalex and immunology drug, Stelara.
J&J is also making rapid progress with its pipeline and line extensions. It has already gained FDA approval for two new drugs in 2019, Balversa and Spravato. Meanwhile, share buybacks and restructuring initiatives should provide bottom-line support.
Headwinds like biosimilar/generic competition and pricing pressure remain. Allegations that its talc products contain asbestos, which causes users to develop ovarian cancer, continue to be an overhang on the stock.
Shares of Chevron have outperformed the Zacks Integrated Oil industry in the past six months (+1.8% vs. -1.9%). The Zacks analyst thinks Chevron’s financial results have greatly improved over the past few quarters, primarily aided by surging production and free cash flow turnaround. In fact, Chevron's free cash flow and upstream production for 2018 hit a record.
The company’s existing oil and gas development project pipeline is among the best in the industry, targeting a CAGR of 3-4% through 2023 thanks to the planned expansion in the Permian Basin. Moreover, growing free cash flow should enable Chevron to deliver stable and rising dividends in the foreseeable future. However, there are worries of a drop in its downstream earnings.
Meanwhile, Chevron's decision to walk away from the Anadarko transaction meant that the company lost the chance to significantly augment its substantial Permian holdings. Hence, investors are advised to wait for a better entry point.
Adobe’s shares have gained +10.3% over the past year, underperforming the Zacks Software industry which has increased +20.5% over the same period. However, the Zacks analyst thinks Adobe is riding high on benefits gained from the Magento and Marketo acquisitions. Further, increasing demand for its creative products is driving top-line growth.
The company has been making great efforts toward establishing its presence in cloud-related areas such as documents and marketing. Adobe’s market position, compelling product lines, continued innovation, solid adoption of Creative Cloud and Adobe marketing cloud provides cause for optimism. Estimates have been stable ahead of the company’s Q2 earnings release.
The company has a mixed record of earnings surprises in recent quarters. However, lower end-market demand and exposure to Europe remain overhangs. Further, high acquisition expenses do not bode well for margin expansion.
Other noteworthy reports we are featuring today include Boston Scientific (BSX), Las Vegas Sands (LVS) and Southern Copper (SCCO).
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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 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 Zacks analyst looks forward to Boston Scientific's strategic buyouts of NxThera, Claret, VENITI, Augmenix, all of which target high-growth markets. A controlled launch of LOTUS Edge is an upside.
The Zacks analyst likes the increase in passenger revenues on the back of strong demand for air travel. However, escalating debt levels and high operating expenses represent major concerns.
Per the Zacks analyst, Semtech is riding on the momentum in IoT, data center and mobile markets driven by its product differentiation strategy.
Per the Zacks analyst, Box's innovative cloud products and increasing number of paid customers continues to fuel growth.
Per the Zacks analyst, Radius's lead drug Tymlos continues to gain traction and capture market share amid competition.
Per the Zacks analysts, Red Robin Red Robin's efforts to improve sales and regain market share via efficient menu innovation, focus on increasing service speed and digitization bode well.
Per the Zacks analyst, Manitowoc will gain from product innovation, solid order growth, focus on cost control and pricing actions despite input cost inflation.
Per the Zacks analyst, robust adoption on account of high demand for 5G design and test solutions primarily from telecom vendors and a strong pipeline for new business bookings are key catalysts.
Per the Zacks analyst, the joint venture deal with Saudi Aramco is expected to support National Oilwell's drilling technology franchise and contribute to its near-term earnings.
Per the Zacks analyst, Pilgrim's Pride is set to gain from its Prepared Foods unit. The company is making investments to strengthen this unit, as it is likely to form a big proportion of the top line.
Per the Zacks analyst, Enersys' revenue growth is being dampened by weakness in motive power business due to ERP implementation issues in the Americas region. High operating costs remain concerns.
Per the Zacks analysts,the trade war between Beijing and Washington and flagging China property prices, which have adversely impacted the high-end VIP segment, are major concerns for Las Vegas Sands.
The Zacks analyst remains apprehensive that lower copper prices, caused by escalating trade war tensions as well as high debt levels, will weigh on Southern Copper's results.
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