Thursday, August 3, 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 ongoing Q2 earnings season and new research reports on 16 major stocks, including Johnson & Johnson (JNJ), General Dynamics Corporation (GD) and Pioneer Natural Resources Company (PXD). 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 >>>

Q2 Earnings Season Scorecard

Including all of this morning's results, we now have Q2 results from 394 S&P 500 members or 78.8% of the index's membership.

Total Q2 earnings for these 394 index members are down -11.8% from the same period last year on flat revenues (actually down -0.01%) from the year-earlier level, with 79.7% beating EPS estimates and 66% beating revenue estimates.

Excluding the Energy sector drag where Q2 earnings and revenues are down -50.5% and -28% from the year-earlier levels, respectively, the earnings and revenue growth pace for the rest of the S&P 500 index would be -5% and +4.8%, respectively.

As we have noted all along since the start of this reporting cycle, the Q2 EPS beats percentage is tracking notably above what we had seen from this group in recent quarters as well as historically. This is significant since Q2 estimates had fallen less than was the case ahead of other recent quarters.

We are seeing a similar  revisions trend at play for the current period (2023 Q3), with estimates holding up essentially unchanged since the start of the quarter. This is particulalry so on an ex-Energy basis.

In fact, the aggregate ex-Energy earnings total for the rest of the S&P 500 index is a hair up since June 27th, with Tech, Autos, Construction, Utilities and Transportation enjoying positive estimate revisions.

For complete coverage of the Q2 earnings season, please check out our weekly Earnings Trends report here >>>> Earnings Estimates Reflect Stabilization

Today's Featured Analyst Reports

Shares of Johnson & Johnson have gained +2.0% over the past year against the Zacks Large Cap Pharmaceuticals industry’s gain of +16.0%. The company’s Pharma unit is performing at above-market levels. Growth in 2023 is expected to be driven by existing products like Darzalex, Tremfya, Erleada, Invega Sustenna and Uptravi, and also continued uptake of new launches, including Spravato, Carvykti and Tecvayli.

The MedTech unit is showing improving trends driven by recovery in surgical procedures and contribution from new products. J&J is making rapid progress with its pipeline and line extensions.

However, headwinds like generic competition and pricing pressure continue. Though J&J has taken meaningful steps to resolve its talc and opioid litigation, uncertainty exists regarding the talc litigations.

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

General Dynamics shares have outperformed the Zacks Aerospace - Defense industry over the past year (+0.5% vs. -2.3%). The company’s product innovation strategy should strengthen its footprint in the business jet market significantly. General Dynamics expects to begin G800 customer deliveries in 2023 and G400 deliveries in 2025.

General Dynamics has a solid solvency position. An impressive backlog of $87.63 billion at the second quarter end indicates the solid demand for the company’s products. Yet, supply-chain issues continue to pose risks for its Marine Systems’ submarine programs in 2023.

The geopolitical uncertainty prevalent worldwide may impact the company’s financial performance. Any decrease in U.S. government spending may impact General Dynamics financial results

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

Shares of Pioneer Natural Resources have outperformed the Zacks Oil and Gas - Exploration and Production - United States industry over the past year (+19.5% vs. +12.7%). Divestment of its Delaware Basin assets has established itself as the only large-cap exploration and production pure play in the Midland Basin. This has enhanced its production outlook, as reflected in the upstream player’s higher year-over-year projection for 2023 oil equivalent volumes.

In fact, higher oil-equivalent production volumes led to the firm’s better-than-expected quarterly earnings. Pioneer’s exposure to debt capital has consistently been lower than the composite stocks belonging to the industry over the past few years. It is also engaging in wind and solar projects to increase use of renewable energy and reduce Scope 2 emissions.

However, Pioneer has been bearing the brunt of increasing oil and gas production expenses for the past few quarters. Also, it is highly exposed to oil & gas price volatility.

(You can read the full research report on Pioneer Natural Resources here >>>)

Other noteworthy reports we are featuring today include Alibaba Group Holding Limited (BABA), Aflac Incorporated (AFL) and Autodesk, Inc. (ADSK).

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>>>