Tuesday, January 10, 2023

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 The Home Depot, Inc. (HD), Merck & Co., Inc. (MRK) and Bank of America Corporation (BAC). 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 Home Depot have performed roughly in-line with the broader marekt over the past year (-18.6% vs. -18.1% for the S&P 500 index) and only modestly better than rival Lowe's (down -19.5%).

The Zacks Construction which earlier matched Home Depot's performance has lately done relatively better as interest rates have pulled back a bit (down -15.1%). But the on whole, the outlook for Home Depot is a function of the outlook for the housing space that has been weighed down by higher interest rates resulting from the Fed's tightening cycle.

Home Depot reported 10th straight quarter of earnings and sales beat in the fiscal third quarter. Results also outpaced our estimate in Q3. It continues to gain from strong demand for home-improvement projects, robust housing market trends and ongoing investments.

It also witnessed continued strength in both Pro and DIY categories, and digital momentum. Its interconnected retail strategy and underlying technology infrastructure have helped consistently boost web traffic for the past few quarters, aiding digital sales.

(You can read the full research report on Home Depot here >>>)

Merck shares have outperformed the Zacks Large Cap Pharmaceuticals industry over the past year (+35.1% vs. +12.4%) on the back of sales momentum in the company’s drugs like Keytruda and 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 here >>>)

Shares of Bank of America have weakend more than the peer group in recent weeks on crypto-related litigation issues, resulting in the stock significantly lagging the industry as well as the market. The stock is down -30.6% over the past year vs. JPMorgan's -17.3% pullback and the S&P 500 index's -18.1% decline. 

Bank of America as well as the other banks benefit from higher interest rates through improved net-interest margins, but the risk of a significant economic downturn is weighing on the outlook.

Nevertheless, the opening of new financial centers, enhancement in digital capabilities and cost-saving efforts are expected to keep aiding the company’s financials. Supported by loan growth, Bank of America's top line is expected to improve. Our estimates for total revenues suggest that the metric will grow 6.2% in 2022.

Given the rise in interest rates, the company is expected to witness growth in margins in the near term. Per our estimates, BAC will record a net interest yield of 1.93% in 2022, higher than the level recorded in 2021.

(You can read the full research report on Bank of America here >>>)

Other noteworthy reports we are featuring today include International Business Machines Corporation (IBM), Elevance Health Inc. (ELV) and ResMed Inc. (RMD).

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>>>