Tuesday, April 18, 2023
The Zacks Research Daily presents the best research output of our analyst team. Today’s Research Daily features a real-time update on the onoging Q1 earnings season, particularly the Finance sector, and new research reports on 16 major stocks, including Pfizer Inc. (PFE), Accenture plc (ACN) and Wells Fargo & Company (WFC). 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 >>>
Finance Sector Scorecard
Including this morning’s results, we now have Q1 results from 40 S&P 500 members that combined account for 11.4% of the index’s total market capitalization. Total earnings for these 40 companies are up +4.6% from the same period last year on +9.3% higher revenues, with 82.5% beating EPS estimates and 70% beating revenue estimates.
This is notably better performance than we have seen from this group of 40 index members over the preceding four quarters.
The reporting focus has thus far been mostly on the Finance sector, as is always the case at the start of every earnings season.
For the Finance sector, we now have Q1 results from 32.9% of the sector’s market capitalization in the S&P 500 index. Total Q1 earnings for these Finance companies are up +15.3% from the same peirod last year on +14.5% higher revenues, with 84.6% beating EPS estimates and 76.9% beating revenue estimates.
This is significantly better than what we had seen from this group of Finance sector companies in other recent periods.
Today’s Featured Analyst Reports
Shares of Pfizer have underperformed the Zacks Large Cap Pharmaceuticals industry over the past year (-15.1% vs. -11.9%). The company’s top line is expected to decline in 2023 due to potentially steep declines in revenues from its COVID-19 products, Comirnaty vaccine and Paxlovid oral pill, on lower demand.
Concerns remain about its long-term growth drivers beyond its COVID products. Nonetheless, Pfizer boasts a diversified portfolio of innovative drugs and vaccines, including Ibrance and Prevnar. Pfizer is witnessing solid pipeline progress and expects to launch some key non-COVID products in 2023, which can drive long-term sales and profit growth.
Pfizer’s cash position is strong, which can be used to make acquisitions, increase dividends, buy back shares and reduce debt. Estimates have gone down slightly ahead of Q1 earnings release. Pfizer has a mixed record of earnings surprises in recent quarters.
(You can read the full research report on Pfizer here >>>)
Accenture shares have gained +7.2% over the past six months against the Zacks Consulting Services industry’s gain of +8.3%. The company has been steadily gaining traction in its outsourcing and consulting businesses backed by high demand for services that can improve operating efficiencies and save costs.
Accenture has been strategically enhancing its cloud and digital marketing suite through buyouts and partnerships. The company’s strong operating cash flow has helped it reward its shareholders in the form of dividend payments and share repurchases, and pursue opportunities in areas that show true potential.
However. on the flip side, pricing pressure due to significant competition from strong companies like Genpact, Cognizant and Infosys, remains a concern. Global presence exposes it to foreign currency exchange rate fluctuations. Buyout-related integration risks continues to remain a concern.
(You can read the full research report on Accenture here >>>)
Wells Fargo shares have outperformed the Zacks Banks – Major Regional industry over the year-to-date period (+0.7% vs. -3.2%). The company’s first-quarter results benefited from rising rates and solid average loan growth. Progress on efficiency initiatives propelled expense control and savings, which may support its bottom line in the upcoming period.
A strong deposit balance will aid the bank’s liquidity position. The company’s solid liquidity position will help navigate economic uncertainty and supports capital deployment moves.
However, due to legal hassles, Wells Fargo has been penalized with business restrictions and a monetary fine. Restrictions on asset growth limit loan expansion ability. A decline in originations might limit mortgage banking income.
(You can read the full research report on Wells Fargo here >>>)
Other noteworthy reports we are featuring today include Starbucks Corporation (SBUX), Equinor ASA (EQNR) and Chubb Limited (CB).
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
Pfizer’s (PFE) New Products Can Drive Long Term Sales Growth
Accenture (ACN) Gains From Service Demand Amid Talent Cost
Cost Control Aids Wells Fargo (WFC) Amid Declining Revenues
Store Growth Aids Starbucks (SBUX), Dismal China Comps Hurts
Per the Zacks analyst, Starbucks’ rapid unit growth, best-in-class loyalty program and digital offerings bode well. However, dismal performance in China hurts the company’s performance.
Equinor (EQNR) Banks on Renewable Energy Developments
To combat climate change, Equinor is investing in renewable energy projects, comprising power generation from solar and wind energy. Rising exploration expenses concerns the Zacks analyst.
Better Pricing, New Business Growth Drive Chubb Limited (CB)
Per the Zacks analyst, Chubb is set to grow on better pricing new business growth and high renewal rates. Yet, exposure to cat loss induces underwriting volatility while rising costs pressurize margin
Investments Aid Duke Energy (DUK), Storm Costs Pose Risk
Per the Zacks analyst, solid investments in infrastructure and expansion projects boost Duke Energy’s growth. Yet expenses related to Hurricane Ian might hurt its bottom line.
General Mills (GIS) Gains From Focus on Accelerate Strategy
Per the Zacks analyst, General Mills is gaining from its Accelerate strategy, as part of which it is competing efficiently via brand building, investing in saving initiatives and reshaping portfolio.
Teleflex’s (TFX) Urolift Prospects Strong Amid Stiff Rivalry
The Zacks analyst is impressed with the customer preference for Teleflex’s UroLift over other outpatient BPH treatments driven by strong clinical results. Yet, stiff rivalry remains a concern.
Strong Buildings & Infrastructure Unit Aids Trimble (TRMB)
Per the Zacks analyst, strong civil construction business and contributions from e-Builder, Viewpoint and SketchUp are benefiting Trimble’s Buildings & Infrastructure segment.
Marathon (MPC) Gains from Sale of Speedway Retail Unit
The Zacks analyst likes Marathon’s sale of Speedway business, which provided a much-needed cash infusion and came with a supply agreement ensuring a steady revenue stream.
Strong Streaming Agreements Aid Royal Gold’s (RGLD) Margin
Per the Zacks analyst, solid streaming agreements and recent acquisitions will support Royal Gold’s margin. A strong balance sheet will also drive results.
Solid Top Line, Strong Cash Flows Aid Unum Group (UNM)
Per the Zacks analyst, its strong revenues driven by higher overall persistency, disciplined sales trends have led to significant growth. Moreover, healthy balance sheet should drive long-term growth.
Rising Interest Rates, Seasonality of Business Ail MDU Resources (MDU)
Per the Zacks analyst, MDU Resources’ margins can impacted by rising interest rates. Seasonality of business operations may significantly reduce demand and adversely impact its overall performance.
High Debt Load & Stiff Competition to Hurt FUJIFILM (FUJIY)
Per the Zacks analyst, FUJIFILM’s performance is affected due to weakness in Life sciences and Display Materials segment. Stiff competition and leveraged balance sheet is an added concern.
Dismal Margin & North America Sales Hurt Mattel (MAT)
Per the Zacks analyst, dismal North America sales, higher input cost inflation, unfavorable fixed cost absorption, and higher royalty costs continues to hurt Mattel.
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