Tuesday, December 20, 2022
The Zacks Research Daily presents the best research output of our analyst team. Today’s Research Daily features a real-time update on the Q4 earnings season and new research reports on 16 major stocks, including Broadcom Inc. (AVGO), United Parcel Service, Inc. (UPS) and Amgen Inc. (AMGN). 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 >>>
Q4 Earnings Season Scorecard
General Mills became the 9th S&P 500 member to report results for its fiscal quarter ending in November. All of these November-quarter results get classified as part of the 2022 Q4 earnings season tally. Total Q4 earnings for these 9 index members are down -11.2% from the same period last year on +9.8% higher revenues, with 66.7% beating EPS estimates and an equivalent proportion beating revenue estimates.
This is a weaker showing relative to what we saw from this same group of 9 index members in the preceding reporting cycle. The -11.2% decline in aggregate earnings for these 9 index members compares to growth of +6.5% in 2022 Q3 while the +9.8% revenue growth in Q4 is down from +15.1% growth in 2022 Q3. The 66.7% EPS beats % for these 9 index members is unchanged from the preceding period, but up from 55.6% revenue beats % in 2022 Q3.
Looking at 2022 Q4 as a whole, total earnings for the index are expected to be down -6.5% from the same period last year on +4.1% higher revenues. Excluding the strong Energy sector contribution, Q4 earnings for the rest of the index would be down
Estimates are steadily coming down
Shares of
Broadcom
have declined -14.7% over the past year against the Zacks Electronics – Semiconductors industry’s decline of -28.7%. The company is facing increasing competition, along with high debt levels, are persistent overhangs. Nevertheless, Broadcom’s Top-line growth was driven by strength in cloud and service provider segments.
Networking is riding on strong adoption of Broadcom’s next-gen merchant switching and routing solutions by hyperscalers, enterprises and service providers. Aggressive adoption of its next-generation server storage solutions by hyperscalers is expected to drive top-line growth.
Broadcom expects fiscal fourth-quarter networking and server storage revenues to grow 30% and 45% on a year-over-year basis, respectively. An upbeat fourth-quarter fiscal 2022 guidance is encouraging. The VMware acquisition will aid prospects over the long term.
(You can
read the full research report on Broadcom here >>>
)
Shares of
United Parcel
have declined -11.9% over the past year against the Zacks Transportation – Air Freight and Cargo industry’s decline of -18.1%. The company’s elevated operating expenses are hurting its bottom line. Due to the 66.4% rise in fuel expenses, operating costs increased 4.6% in the first nine months of 2022. A decline in shipping volumes due to weakening demand is also very concerning.
However, though the economies are reopening, the urge for online shopping refuses to relent among consumers. High shipping rates also bode well for UPS. Moreover, its strong free cash flow generating ability pleases us and supports UPS’ shareholder-friendly activities.
In the first nine months of 2022, UPS generated a free cash flow of $8,472 million. In the first nine months of 2022, UPS paid out dividends worth $3.8 billion and repurchased shares of $2.2 billion. UPS aims to reward its shareholders with $8.2 billion in 2022 through dividends ($5.2 billion) and share buybacks ($3 billion).
(You can
read the full research report on United Parcel here >>>
)
Amgen
shares have outperformed the Zacks Medical – Biomedical and Genetics industry over the past year (+20.8% vs. -24.1%). The company beats Q3 estimates for earnings and sales. While key drugs like Prolia, Repatha and Otezla are driving sales, increasing competition for its legacy products is hurting the same.
Amgen is rapidly advancing its robust pipeline. New drugs Lumakras and Tezspire are off to an encouraging start. The acquisition of ChemoCentryx has added a strategic new growth asset in Tavneos to Amgen’s portfolio. Amgen boasts a strong biosimilars portfolio with potential new products expected to drive long-term growth.
However, increased pricing headwinds and competitive pressure are hurting sales of many of Amgen’s products including some biosimilars. The Humira U.S. sales erosion in 2023 and increasing biosimilar competition for some other legacy products create potential revenue headwinds.
(You can
read the full research report on Amgen here >>>
)
Other noteworthy reports we are featuring today include América Móvil, S.A.B. de C.V. (AMX), Occidental Petroleum Corporation (OXY) and Manulife Financial Corporation (MFC).
Director of Research
Sheraz Mian
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
Strong Demand for Networking Products Aids Broadcom (AVGO)
Dividends & Buyback Aid United Parcel (UPS), Expenses Ail
Amgen (AMGN) New Drugs Off to Good Start; Pipeline Strong
Featured Reports
America Movil (AMX) Benefits from Increasing Subscriber Base
Per the Zacks analyst, America Movil’s performance is gaining from increasing broadband client base. Focused 5G efforts and the deployment of advanced technologies are other tailwinds
Cost Management, Focus on Permian Basin Aid Occidental (OXY)
Per the Zacks analyst Occidental’s efficient cost management and expansion of its operation Permian Basin through acquisition of Anadarko will drive its performance over the long run.
Manulife Financial (MFC) Banks on Buyout, Expenses A Concern
Per the Zacks analyst, acquisitions have helped Manulife to increase scale to its core business lines and strengthen its presence in markets. However, higher expenses weigh on margins.
Organic Growth Efforts Aid T. Rowe Price (TROW), Costs Ail
Per the Zacks analyst, T. Rowe Price’s organic growth efforts and strong AUM balance will support financials. However, rising costs and the over dependence on investment advisory fees are headwinds.
Martin Marietta (MLM) Gains From Higher Pricing, High Costs Ail
Per the Zacks analyst, Martin Marietta is poised to benefit from an uptick in non-residential construction and strong pricing. Higher raw material costs are risks.
Low Breakeven Costs to Aid Marathon Oil’s (MRO) Cash Flows
The Zacks analyst believes that Marathon’s extremely low oil price breakeven costs of just $35 a barrel should generate meaningful free cash flows and improve future profitability.
Henry Schein (HSIC) Dental Business Grows amid Stiff Rivalry
The Zacks analyst is impressed with Henry Schein’s strategy to expand digital dentistry globally. Yet, stiff rivalry remains a concern.
New Upgrades
Fortinet (FTNT) Rides on Product Strength, Marketing Efforts
Per the Zacks analyst, Fortinet is gaining from solid contributions of its growth-oriented products Security Fabric, cloud and SD-WAN. Increasing marketing efforts are also a positive.
Zscaler (ZS) Benefits From Acquisitions & Product Refreshes
Per the Zacks analyst, Zscaler is benefiting from its strategic acquisitions like Smokescreen and Trustdome. Moreover, frequent product refreshes are helping it in gaining new customers.
Steady Growth in Global Generics Markets Aid Dr. Reddy’s (RDY)
Per the Zacks analyst, Dr. Reddy’s is witnessing healthy growth across its branded and global generics markets. Efforts on strengthening its presence in the biosimilars market also bode well.
New Downgrades
Supply-Chain Constraints & High Costs Hurt Kennametal (KMT)
The Zacks analyst is concerned about persistent supply chain constraints and high raw material costs, which are affecting Kennametal’s margins and profits. Forex woes are an added concern.
Viasat (VSAT) Plagued by High R&D Costs, Price Competition
Per the Zacks analyst, Viasat’s profitability is likely to be marred by a significant rise in R&D costs related to the launch of ViaSat-3 satellites, stiff competition and high integration risks.
Hanesbrands (HBI) Hurt by Commodity & Freight Cost Inflation
Per the Zacks analyst, Hanesbrands is battling cost inflation. Management expects the gross margin to fall nearly 400 bps in fourth quarter due to freight and commodity cost inflation among others.
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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