Wednesday, December 28, 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 Meta Platforms, Inc. (META), Altria Group, Inc. (MO) and Applied Materials, Inc. (AMAT). 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 >>>
Shares of
Meta Platforms
have been big-time laggards in 2022, with the stock down -65.4% in the year-to-date period vs. the -40.4% decline in Alphabet shares and the broader market’s -21% pullback. Driving Meta’s underperformance is the company’s aggressive spending plans for metaverse that many in the market see as the wrong strategy. On top of that is the cyclical downturn in the digital advertizing space as a result of macroeconomic factors.
Unfavorable forex, targeting and measurement headwinds due to Apple’s iOS changes, normalization of e-commerce after the pandemic peak and higher inflation are some of the other headwinds.
User base in Europe declined in the last reported quarter, with the fourth-quarter guidance reflecting macroeconomic and forex concerns. Weak advertising demand is a headwind. Meta expects Reels to monetize much slower than feed or stories. Shares have underperformed the industry in the past year.
However, Meta is benefiting from steady user growth across all regions, particularly Asia Pacific. Increased engagement for its products like Instagram, WhatsApp, Messenger and Facebook has been a major growth driver.
(You can
read the full research report on Meta Platforms here >>>
)
Shares of
Altria Group
have underperformed the Zacks Tobacco industry over the past year (-1.9% vs. +4.0%), but have held up really well relative to the broader market. The company’s revenues in the last reported quarter were hurt by the wine unit’s divestiture and soft shipment volumes in the Smokeable Products unit due to retail share losses and the industry’s rate of decline.
However, Altria Group has been gaining from its strong pricing power, which aided the bottom-line growth in the third quarter of 2022. Also, management remains optimistic about its journey toward a smoke-free future.
To this end, the company’s investment in on! is yielding well. The reported shipment volumes of on! surged roughly 70% in the third quarter. For 2022, management expects adjusted earnings in the band of $4.81-$4.89 per share, which indicates growth of 4.5-6%.
(You can
read the full research report on Altria Group here >>>
)
Shares of
Applied Materials
have underperformed the Zacks Semiconductor Equipment – Wafer Fabrication industry over the past year (-41.2% vs. -35.8%). The company is facing sluggishness in its Display and Adjacent Market segment remains a concern. Softness in the segment is expected to continue in the days ahead. Per our estimate, the segment is likely to witness a year-over-year fall of 47.6% in fiscal 2022. Further, mounting expenses and rising competition pose a risk to the company’s market position.
Nevertheless, Applied Materials is benefiting from strong momentum across Semiconductor Systems and Applied Global Services. Further, solid demand for silicon in several applications across various markets remains a tailwind.
Increased customer spending in foundry and logic on the back of rising need for specialty nodes in automotive, power, 5G rollout, IoT, communications and image sensor markets, is a major positive. Strong momentum in conductor etches is benefiting the company’s position in DRAM and NAND.
(You can
read the full research report on Applied Materials here >>>
)
Other noteworthy reports we are featuring today include BCE Inc. (BCE), McCormick & Company, Incorporated (MKC) and Hewlett Packard Enterprise Company (HPE).
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
User Growth, Instagram Strength Aids Meta Platforms (META)
Altria (PM) Gains From Solid Pricing Power Amid Cost Woes
Applied Materials (AMAT) Rides on Foundry & Logic Spending
Featured Reports
BCE to Gain From Increased Demand for 5G & Wireless Network
Per the Zacks analyst, BCE will benefit from the increased demand for 5G and wireless network as people are working remotely. Pandemic-induced supply-chain constraints remain concern.
Focus on CCI Program to Bolster McCormick’s (MKC) Profits
Per the Zacks analyst, McCormick’s Comprehensive Continuous Improvement (CCI) plan will continue enhancing its profits. The plan is likely to deliver savings of $85 million in 2022.
Hewlett Packard (HPE) Benefits From Spurt in Aruba Services
Per the Zacks analyst, a strong uptick in Aruba Services is driving Hewlett Packard’s Intelligent Edge segment, which in turn, helps sustain its supremacy in the market with high growth opportunity.
Southwestern (SWN) to Gain From GEP Haynesville Acquisition
Per the Zacks analyst, Southwestern’s acquisition of GEP Haynesville will help build additional scale in Haynesville, with a production of 700 MMcf per day. Yet, its rising debt level is concerning.
Product Launches Aid QuidelOrtho (QDEL) Amid Stiff Competition
The Zacks analyst is upbeat about QuidelOrtho’s product launches over the past few months despite its operation in a highly competitive market.
Ionis’ (IONS) Dependence on Collaboration Revenues A Woe
Ionis’ RNA antisense technology has allowed it to form partnerships with leading drugmakers for development/marketing of its drugs. However, the recent pipeline setbacks concern the Zacks Analyst.
Robust Spending Per Visit Likely to Aid Red Rock (RRR)
Per the Zacks analyst, Red Rock is likely to benefit from strong spending per visit across its portfolio, cost saving initiatives and development pipeline.
New Upgrades
Air-Travel Demand, Cargo Revenues Lift United Airlines (UAL)
Upbeat air-travel demand is driving United Airlines’ top line. The Zacks analyst is, also, pleased by the company’s focus on boosting cargo revenues.
DocuSign (DOCU) Gains From eSignature Strength, Investments
The Zacks analyst is positive about DocuSign’s top line as it is significantly benefiting from continued customer demand for eSignature. Investments in technical expertise are also reaping benefits.
Jabil (JBL) Rides on Secular Tailwinds in 5G, Cloud Domain
Per the Zacks analyst, Jabil is likely to benefit from secular tailwinds in healthcare, automotive, industrial, 5G and cloud businesses with keen focus on end-market and product diversification.
New Downgrades
Supply Disruptions & Recessionary Fears to Hurt Thor (THO)
Thor is battling severe chassis supply challenges, especially in Europe. The Zacks analyst believes that the declining RV demand amid economic slowdown will limit Thor’s sales, going forward.
Cat Loss, Rising Expenses Hurt Cincinnati Financial (CINF)
Per the Zacks analysts, Cincinnati Financial’s exposure to catastrophe induces volatility in its underwriting profitability while increasing expenses weighing on margin expansion are concern.
Soft Housing Demand, High Inflation Ail Meritage Homes (MTH)
Per the Zacks analyst, rising home prices, high mortgage rates and interest rate hikes make it difficult for entry-level/first-time buyers to buy home, thus hurting Meritage Homes.
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