Today's Must Read
Keytruda is Key to Merck's (MRK) Growth Prospects
Ventilator Sales Aid Medtronic (MDT) amid Procedural Delay
Monday, July 13, 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 Alphabet (GOOGL), Merck (MRK) and Medtronic (MDT). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Alphabet shares have been strong performers relative to the market, the Tech sector, and even the Zacks Internet Services industry over the past year (+33.8% vs. +27.8%) despite cyclical pressures weighing on ad spending levels. The Zacks analyst believes that Alphabet's outperformance, which is expected to continue over the coming quarters, is the company's strengthening cloud unit that is aiding substantial revenue growth.
Moreover, expanding data centers will continue to bolster its presence in the cloud space. Further, major updates in its search segment are enhancing the search results, which is a major positive. Moreover, Google’s robust mobile search is gaining solid momentum.
Additionally, strong focus on innovation of AI techniques and the home automation space should aid business growth in the long term. Further, its deepening focus on wearables category remains a tailwind. However, the company’s growing litigation issues and increasing expenses might hurt profitability.
Shares of Merck have lagged the peer group in the recent past as a result of long-standing genericization, competitive pressures and Covid-related disruptions. But Zacks analyst believes the long-term will likely be favorable given products like Keytruda, Lynparza and Bridion that have been driving sales.
Animal health and vaccine products remain core growth drivers. The potential separation into two companies makes strategic sense as the remaining Merck should be able to achieve higher profits than the combined company. However, Merck expects COVID-related business disruptions to impact sales in its Pharmaceuticals as well as Animal Health units in 2020 with maximum impact in the second quarter.
Meanwhile, generic competition for several drugs and rising competitive pressure, mainly on the diabetes franchise, will continue to be overhangs on the top line. Estimates have declined slightly ahead of Q2 results. Merck has a positive record of earnings surprises in recent quarters.
Medtronic’s shares have lost -10.3% over the past three months against the Zacks Medical Products industry’s rise of +0.4%. The Zacks analyst believes that headwinds like unfavorable currency movement and global economic uncertainties continue to adversely affect Medtronic.
Medtronic saw significant growth in airways and ventilators sales in the fourth quarter of fiscal 2020 amid the pandemic. It is currently focusing on the geographical diversification of its businesses, apart from product innovation. Also, Medtronic demonstrated a strong solvency position. Its fourth quarter performance saw better-than-expected revenues.
Nonetheless, lower-than-expected earnings and weak performances demonstrated by the company at CER, backed by dismal performance in all major business segments and geographies are concerning. The company’s performance was primarily impacted from deferred procedures due to the pandemic.
Other noteworthy reports we are featuring today include Netflix (NFLX), Novo Nordisk (NVO) and Anheuser-Busch InBev (BUD).
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained and impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%.
This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
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>>>