Today's Must Read
Liquidity, High Iron Prices to Aid BHP Group (BHP)
Robust Adoption of Cloud Solutions Aids IBM Amid High Debt
Wednesday, July 08, 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 Walmart (WMT), BHP Group (BHP) and International Business Machines (IBM). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Walmart shares have only modestly lagged the Zacks Supermarkets industry over the past year (+12.5% vs. +13.8%), with the group benefiting from increased demand for essential items amid coronavirus.
Such trends drove the company in first-quarter fiscal 2021, wherein top and bottom lines rose year over year and beat the consensus mark, and U.S. comps grew for the 23rd straight time. Further, higher stay-at-home trends boosted e-commerce sales. Walmart has long been witnessing solid e-commerce sales, largely backed by grocery delivery.
Notably, it recently unveiled Express Delivery service to expedite deliveries amid coronavirus. The company is also undertaking other measures to support operations amid the pandemic, which however entail high costs and pose threats to the operating income. Also, the gross margin has been strained due to unfavorable mix and pricing.
Shares of BHP Group have gained +67% over the past six months against the Zacks Mining - Miscellaneous industry’s rise of +18%. The Zacks analyst believes that its strong cash flow and focus on lowering debt will help it sail through these turbulent times. BHP Group is making operations more efficient on the back of smarter technology adoption across the entire value chain, which in turn will drive results.
BHP Group’s copper and iron ore production improved year over year in the nine-month period ended Mar 31, 2020, while petroleum, metallurgical coal, energy coal and nickel production declined. The company affirmed production and cost guidance for fiscal 2020 despite the pandemic.
The company will also benefit from the recent surge in iron and copper prices. The consensus estimate for earnings for the current fiscal year has thus undergone positive revisions lately. It has six major projects under development in petroleum, copper, iron ore and potash, which will drive growth in the long run.
IBM shares have lost -3.2% over the past three months against the S&P 500’s rise of +13.4%. This underperformance notwithstanding, the Zacks analyst believes that IBM is well placed in the hosted cloud, security and analytics domains.
Moreover, Red Hat acquisition has helped IBM to enhance containerized software capabilities and strengthen competitive position in the hybrid cloud market. Further, growing clout of Watson Health and growth in Payer, Provider, Imaging and Life Sciences verticals are noteworthy. Also, gains from z15 hold promise.
However, stiff competition in the cloud computing market remains a woe. Notably, adoption of cognitive applications and transaction processing platforms in March was affected by coronavirus outbreak, which is a major concern. For 2020, IBM has withdrawn guidance, citing uncertainty pertaining to coronavirus crisis. Also, a highly leveraged balance sheet, adds to the risks.
Other noteworthy reports we are featuring today include Costco Wholesale (COST), Citigroup (C) and Morgan Stanley (MS).
5 Stocks to Soar Past the Pandemic: In addition to the companies you learned about above, we invite you to learn about 5 cutting-edge stocks that could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of the decade.
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>>>