Friday, December 16, 2022
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 Amazon.com, Inc. (AMZN), Novartis AG (NVS) and Philip Morris International Inc. (PM). 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 >>>
Amazon.com
shares have been big laggards this year, on account primarily of two distinct factors.
First, Amazon’s growth outlook has gotten cloudier as a result of the uncertain macroeconomic backdrop resulting from the Fed’s extraordinary tightening policy that has raised recessionary risks for the U.S. economy. Second, Amazon’s near-term growth outlook is weighed down by the pulled-forward growth during Covid. The company heavily invested in human and physical capacity during Covid that has produced somewhat of a mismatch between ‘capacity’ and demand growth that they are currently in the process of rationalizing through lay-offs and facility shutdowns.
The stock is down -47.9% this year vs. the -17.2% decline for the S&P 500 index and the Zacks Retail sector’s -26.5% pullback. Amazon’s main Retail sector rival Walmart is up +4.8% this year.
Nevertheless, Amazon’s third quarter results were driven by Prime and AWS momentum. Strengthening AWS services portfolio and its growing adoption rate contributed well.
Ultrafast delivery services and expanding content portfolio were beneficial. Strengthening relationship with third-party sellers was a positive. Robust advertising business contributed well. Improving Alexa skills along with robust smart home products offerings were tailwinds.
Amazon’s strong global presence and solid momentum among the small and medium businesses remain positives. Growing capabilities in grocery, pharmacy, Amazon Care, Kuiper and Zoox are other positives. Considering the abovementioned facts, the Zacks analyst expects 2022 revenue to be up 8.3% from 2021.
(You can
read the full research report on Amazon.com here >>>
)
Novartis’
shares have gained +5.9% over the past year against the Zacks Large Cap Pharmaceuticals industry’s gain of +15.1%. The company’s performance in the third quarter was pretty ho-hum, as earnings beat by a penny but revenues lagged due to generic competition.
With the planned spin off of Sandoz, Novartis is looking to become a pure-play pharmaceutical company. Novartis has a strong and diverse portfolio. Solid momentum in key brands like psoriasis drug Cosentyx, cardiovascular drug Entresto, gene therapy Zolgensma, the oncology portfolio and the launch of Kesimpta continue to boost performance.
The launch of additional drugs like Pluvicto, Piqray, Leqvio and Mayzent and the label expansion of key drugs should also boost performance further. Management’s focus on cost savings should boost the bottom line as well. However, generic competition for key drugs and pipeline setbacks are concerns.
(You can
read the full research report on Novartis here >>>
)
Philip Morris’
shares have outperformed the Zacks Tobacco industry over the past year (+8.4% vs. +3.7%). The company has been benefiting from its strong pricing power. Also, focus on reduced risk products, especially IQOS has been working well for the company, which is witnessing continued product mix shift from cigarettes to smoke-free products. However, Philip Morris has been battling cost-related headwinds. In third-quarter 2022, the proforma adjusted operating income margin fell 1 point on an organic basis.
Management lowered its proforma adjusted operating margin organic growth view for 2022, wherein it expects gross margin contraction due to a considerable rise in IQOS device volumes, the increased initial cost of IQOS ILUMA, elevated logistic costs, growth-oriented investments in the smoke-free space, raw material and energy cost inflation and incremental supply-chain costs.
(You can
read the full research report on Philip Morris here >>>
)
Other noteworthy reports we are featuring today include Automatic Data Processing, Inc. (ADP), Sony Group Corporation (SONY) and Live Nation Entertainment, Inc. (LYV).
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
Amazon (AMZN) Banks on Growing AWS Adoption & Prime Momentum
Cosentyx, Entresto Fuel Novartis (NVS) Amid Competition
Philip Morris (PM) Gains From Solid Pricing Amid Cost Woes
Featured Reports
Solid Business Model Aids ADP Despite Escalating Expenses
The Zacks Analyst is positive about ADP’s business model that ensures high recurring revenue, good margin, robust client retention and low capital expenditure. However rising expenses remain a concern
Higher Music & Pictures Sales Benefit SONY Amid Rising Costs
Per the Zacks analyst, Sony is gaining from strong performance of its Music and Pictures’ segments. Weak global macro-economic conditions and rising costs are concerns.
Live Nation (LYV) to Benefit From Robust Demand For Concerts
Per the Zacks analyst, Live Nation Entertainment is likely to benefit from pent-up demand for live events and Increased demand for digital ticketing.
Expanding Customer Base, Investment Aid Alliant Energy (LNT)
Per the Zacks analyst Alliant Energy will gain from its $8.5 billion investment plan aimed to strengthen infrastructure. Expanding customer base is creating fresh demand and boosting results.
New Buyouts Aid Charles River (CRL), RMS Business Rebounds
Per the Zacks analyst, Charles River broadens scope in drug discovery and early-stage development through recent buyouts. The RMS growth potential has trended up on meaningful price increases.
Expansion Efforts Aid CarMax (KMX) Amid Debt Woes
While store expansion efforts and omnichannel marketing are driving CarMax’s top line, the Zacks analyst is worried about the firm’s elevated leverage of around 77%.
Solid AUM Balance Aids Invesco (IVZ) Amid Top Line Concern
Per the Zacks analyst, consistent improvement in assets under management (AUM) balance and manageable costs aid Invesco, while tough operating backdrop and macroeconomic headwinds will hurt revenues.
New Upgrades
DCP Midstream (DCP) Banks On Massive Gas Pipeline Assets
Per the Zacks analyst, DCP Midstream’s massive network of 57,000 miles of pipeline infrastructure can offer customers intricate connectivity.
Core Labs (CLB) to Gain from Low Capital Expenditure Needs
The Zacks analyst likes Core Labs’ low capital expenditure needs and service-oriented nature, which differentiates it from peers and allows it to generate substantial free cash flows.
Liberty Energy (LBRT) to Benefit from Multi-Basin Presence
The Zacks analyst believes that Liberty Energy’s widespread presence in the top North American shale plays provides it with a competitive advantage over its peers.
New Downgrades
Lower IT Spending to Hurt Hewlett Packard’s (HPE) Prospects
Per the Zacks Analyst, Hewlett Packard’s growth prospects might be hurt by soft IT spending as organizations are pushing back their large IT investment plans amid the macroeconomic headwinds.
Customer Inventory Reduction Actions Hurt’s Marvell (MRVL)
Per the Zacks analyst, customers inventory reduction actions to manage excess chip inventories along with weakening consumer spending are likely to hurt Marvell’s near-term growth prospects.
Forex Volatility, High Debt Concern Manulife Financial (MFC)
Per the Zacks analyst, Manulife Financial has been witnessing increase in financial leverage over the last few years. Foreign exchange volatility raises financial risk.
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