Friday, December 9, 2022
The Zacks Research Daily presents the best research output of our analyst team. Today’s Research Daily features an update on the Q4 earnings season which got underway this week. We are also featuring the updated December Economic Outlook report, in addition to new research reports on 16 major stocks, including Merck & Co., Inc. (MRK), Bristol-Myers Squibb Company (BMY) and Deere & Company (DE).
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 >>>
Zacks Economic Outlook for December 2022 —->
Christmastime U.S. Retail Sales Update
Q4 Earnings Season Gets Underway
This week’s quarterly reports from AutoZon
AZO
and Costco
COST
for their fiscal quarters ending in November that we count as part of the 2022 Q4 earnings tally. Next week’s reports from the likes of Adobe, Orable, Accenture, Lennar and others will similarly count as part of the 2022 Q4 tally.
Aggregate Q4 earnings for Costco and AutoZone are up +2.2% from the same period last year on +8.1% higher revenues, with only one of the two (AutoZone) beating EPS and revenue estimates.
Looking at Q4 as a whole, total S&P 500 earnings are expected to be down -5.9% from the same period last year on +4.3% higher revenues.
Excluding contribution from the Energy sector whose earnings are expected to be up +56.9%, Q4 earnings for the rest of the index are expected to be down -10.3% from the same period last year. Estimates have been steadily coming down, with the current -5.9% decline down from +1.7% on October 5th.
Today’s Featured Analyst Reports
Shares of
Merck & Co
have outperformed the Zacks Large Cap Pharmaceuticals industry over the past year (+52.7% vs. +19.3%) on the back of strong sales momentum from drugs like Keytruda and the Gardasil vaccine. With continued label expansion into new indications & early-stage settings, Keytruda is expected to remain a key top-line driver.
Animal health and vaccine products are core growth drivers. Its new COVID oral antiviral pill, Lagevrio has become a key top-line driver in 2022. Merck boasts a strong cancer pipeline, including Keytruda, which should help drive long-term growth.
However, generic competition for several drugs and rising competitive pressure, mainly on the diabetes franchise, will continue to be overhangs on the top line. There are concerns about Merck’s ability to grow its non-oncology business ahead of Keytruda’s loss of exclusivity later in the decade.
(You can
read the full research report on Merck & Co here >>>
)
Shares of
Bristol-Myers Squibb
have outperformed the Zacks Medical – Biomedical and Genetics industry over the past year (+41.7% vs. -17.8%). Solid demand for the company’s blood thinner drug Eliquis and the label expansion of Opdivo are maintaining momentum for Bristol-Myers. Eliquis is the leading oral anticoagulant drug and continues to experience growth in its market share.
The label expansion of Opdivo into indications for lung cancer, renal cancer and gastric cancer boosted sales. The recent approval of drugs like Opdualag, Breyanzi and Sotyktu will add a new stream of revenues. Our estimates for BMY’s top line suggest a CAGR of around 1% over the next three years, driven by solid demand for legacy drugs and the approval of new drugs.
However, Revlimid, one of the top revenue generators, is facing generic competition and sales are being adversely impacted.
(You can
read the full research report on Bristol-Myers Squibb here >>>
)
Deere & Company
shares have outperformed the Zacks Manufacturing – Farm Equipment industry over the past year (+23.6% vs. +21.7%). The company is poised well to gain on improving commodity prices, which will encourage farmers to spend more on farm equipment. Strong replacement demand will also continue to boost its top line.
Demand for Construction equipment will likely benefit from anticipated growth in infrastructure investments. Higher material and labor costs will likely dent margins. However, we expect Deere’s adjusted earnings per share to grow 16% in fiscal 2023, led by strong demand and pricing. Product launches equipped with the latest technology to make farming automated will continue to provide it with an edge over its competitors.
It will benefit in the long run from rapid growth in global population as well as the rising worldwide infrastructure needs. Our estimates for Deere’s bottom line suggest a CAGR of around 2% over the 2022-2025 forecast period.
(You can
read the full research report on Deere & Company here >>>
)
Other noteworthy reports we are featuring today include Anheuser-Busch InBev SA/NV (BUD), Marsh & McLennan Companies, Inc. (MMC), and América Móvil, S.A.B. de C.V. (AMX).
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
Keytruda to Remain Merck’s (MRK) Key op Line Driver
Eliquis, Opdivo Fuel Bristol (BMY) Amid Generic Competition
Strong End Market Demand to Drive Deere (DE), Costs Ail
Featured Reports
Digital Investments Brighten AB InBev’s (BUD) Growth Prospects
Per the Zacks analyst, AB InBev’s investments in B2B platforms, e-commerce and digital marketing have been aiding growth. It is likely to rapidly grow its digital platform, like BEES and Ze Delivery.
Marsh & McLennan (MMC) Strategic Buyouts Aid, Expenses High
Per the Zacks analyst, a number of acquisitions help Marsh & McLennan expand geographically, and diversify its portfolio. Yet, escalating expenses continue to weigh down margins.
America Movil (AMX) Benefits from Increasing Subscriber Base
Per the Zacks analyst, America Movil’s performance is gaining from increased broadband client base. However, stiff competition and the firm’s high leverage remain concerns.
KLA (KLAC) Benefits From Growing Foundry/Logic Investments
Per the Zacks analyst, KLA is gaining from increasing investments across multiple nodes. This is driving its growth in the Foundry/Logic market.
Regular Investment and Debt Management Aid FirstEnergy (FE)
Per the Zacks analyst FirstEnergy’s (FE) investment to fortify its infrastructure increase profit as the company will efficiently serve more customers. Efficient debt management will boost margins.
ZTO Express (ZTO) Benefits From Parcel Volumes, Expenses Ail
The Zacks Analyst believes that increase in parcel volume aids ZTO Express express delivery services unit. However rise in selling general and administrative expense continue to bother the bottom line
Increased Demand & Expansion Efforts to Aid Hyatt (H)
Per the Zacks analyst, Hyatt is likely to benefit from strong leisure demand and easing of travel restrictions. This and emphasis on new hotel openings and acquisition efforts bode well.
New Upgrades
Helmerich & Payne (HP) to Gain from Proprietary FlexRigs
The Zacks analyst believes that Helmerich & Payne’s technologically-advanced FlexRigs help it to consolidate activity levels and maintain strong rig margins.
Strength Across End Markets to Aid Applied Industrial (AIT)
The Zacks analyst is encouraged by Applied Industrial’s growth owing to strength across the food & beverage,mining, metals, pulp & paper, energy, lumber & wood, and transportation end-markets.
Increasing Demand for Financing Aids Hercules Capital (HTGC)
Per the Zacks analyst, driven by the rise in demand for customized financing and a robust deal pipeline, total new commitments are expected to keep rising. This will aid Hercules Capital’s top line.
New Downgrades
Soft Global Housing Segment, High Costs Ail Assistant (AIZ)
Per the Zacks analyst Assurants lower revenues from Global Housing segment due to declines in lender-placed policies in-force given lower real estate owned volume and increase in expense remain a drag
Inflation Led Drab Demand to Ail V.F. Corp’s (VFC) Performance
Per the Zacks analyst, V.F. Corp has been witnessing lower-than-expected consumer demand due to reduced discretionary spending and heightened promotions. As a result, it trimmed its fiscal 2023 view.
Regulatory Obligations, Stiff Competition Ail Catalent (CTLT)
The Zacks analyst is worried about Catalent’s operation in markets where the company and its customers are party to various laws and regulations. Stiff competition in the niche space is an added issue
Zacks Names “Single Best Pick to Double”
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
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