Tuesday, May 5, 2020

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 Alibaba Group (BABA), Verizon Communications (VZ) and Coca-Cola (KO). 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 >>>

Q1 Earnings Season Scorecard 

Including all of this morning's reports, we now have Q1 results from 320 S&P 500 members or 64% of the index's total membership that combined account for 78% of the index's total market capitalization.

Total earnings or aggregate net income is down -12.7% on +0.2% higher revenues, with 66.9% beating EPS estimates and 61.3% beating revenue estimates.

The two largest earnings contributors to the index, Finance & Technology, are having the opposite effect on the aggregate growth picture, with Finance dragging it down and Technology pushing it higher. Excluding the Finance drag, Q1 earnings would be down only -3.6% (vs. -12.7%). But without the Tech support, Q1 earnings growth would be -18.4% (vs. -12.7%). 

Estimates for 2020 Q2 and full-year 2020 are still coming down, with Q2 earnings now expected to be down -38.7% on -9.4% lower revenues. For 2020, earnigns are now expected to be down -21.5% on -6.4% lower revenues. This approximates to index 'EPS' of $127.25 for 2020 vs. $162.16 in 2019 and $160.13 in 2021.  

Alibaba shares have performed strongly lately, but have lagged the Zacks Internet Commerce industry over the past year (+3.7% vs. +7%). The Zacks analyst believes that Alibaba continues to benefit from strong growth in metrics. Further, Alibaba’s strengthening cloud business with its expanding customer base continues to drive its performance.

Its New Retail strategy is also gaining momentum. This is aiding growth in Tmall Import, Hema fresh food grocery business and Intime Department Stores. However, higher costs associated with new initiatives remain a major concern.

Also, uncertain economy and macro headwinds in China are major concerns. In addition, rising competition from e-commerce players poses a risk. However, the steady improvement in core commerce and strong cloud business remain positives.

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

Shares of Verizon have lost -6.1% over the past six months against the Wireless National industry’s fall of -13.4%. The Zacks analyst believes that Verizon’s focus on online content delivery, mobile video and online advertising will likely stoke future growth.

Despite worldwide mayhem induced by the coronavirus pandemic, Verizon started 2020 on a positive note, reporting relatively healthy first-quarter 2020 results primarily led by the wireless business. Verizon is also changing its revenue mix toward newer growth services like cloud, security and professional services.

However, the company continues to struggle in a competitive U.S. wireless market with muted demand and tweaked 2020 guidance amid the coronavirus-led turmoil. The company's wireline division is struggling with losses in access lines due to competitive pressure from VoIP service providers. In addition, Verizon is spending heavily on promotion and lucrative discounts to woo customers, which further erodes profitability.

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

Coca-Cola’s shares have lost -22.7% over the past three months against the Zacks Soft Drinks Beverages industry’s fall of -19.3%. The Zacks analyst believes that the company is gaining from the effective execution of strategies to evolve as a consumer-centric total beverage company.

Coca-Cola continued with its earnings beat streak for the second straight quarter in first-quarter 2020. Despite a beat, its top line declined in the first quarter as gains from a strong start to 2020 were offset by disruptions in the latter half of the quarter due to the coronavirus pandemic. It witnessed a decline in unit case volume, while price.mix and concentrate sales remained flat.

The company expects the pandemic to significantly hurt second-quarter results. Also, adverse currency impacts are likely to persist. However, innovation and investment in core categories and brands have been the key focus areas, which led to the expansion of retail value share. 

(You can read the full research report on Coca-Cola here >>>)

Other noteworthy reports we are featuring today include AT&T (T), Tesla (TSLA) and Charter Communications (CHTR).

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Sheraz Mian

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>>>