Today's Must Read
Visa (V) Rides on Acquisitions, Technological Enhancement
E-commerce Aids UPS, Industrial Sector Weakness Affects
Monday, August 3, 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 Amazon.com (AMZN), Visa (V) and United Parcel Service (UPS). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Amazon was enjoying plenty of sunshine even before the pandemic hit, but the Covid-19 pandmec has truly established the company's status as a bellwether of our times. The pandemic accelerated pre-existing trends that were shifting consumer spending from the mall to the digital space and Amazon has been a big beneficiary of that shift. The company has also been a big beneficiary of the secular transition to cloud computing through its industry-leading Amazon Web Service or AWS business.
All of these positives were on display in the company's blowout Q2 earnings report. No doubt, the stock has handily outperformed the S&P 500 index over the past year (+79.3% vs. +15.4%).
Moreover, surge in online grocery shopping was a major positive. Additionally, solid Prime momentum owing to ultrafast delivery services and expanding content portfolio remained tailwind. Further, strengthening AWS services and its growing adoption rate contributed well.
Additionally, improving Alexa skills and features remained a major positive. Expanding smart home products offerings were tailwinds. The stock has outperformed its industry on a year-to-date basis. However, accelerating coronavirus related expenses remain major concerns. Also, foreign exchange headwinds and rising cloud competition are risks.
Shares of Visa have lost -6.4% over the past six months against the Zacks Internet Software industry’s fall of -7.9%. The Zacks analyst believes that the company is likely to see a slowdown in cross-border business due to the coronavirus outbreak.
However, numerous acquisitions and alliances plus technology upgrades paved the way for long-term growth and consistently drove revenues. Shift in payments to new methods such as mobile, cards, online and via wearables bodes well for the long haul. The acquisition of Visa Europe is a growth strategy as well.
The company’s strong cash position enables effective capital deployment measures for its shareholders. However, high operating expenses suppress operating margins. Ramped-up client initiatives will dent the top line.
United Parcel Service’s shares have gained +57.8% over the past three months against the Zacks Transportation - Air Freight and Cargo industry’s rise of +64.4%. The Zacks analyst believes that the increase in e-commerce sales during the coronavirus pandemic is a huge positive for UPS.
UPS delivered better-than-expected revenues as well as earnings per share for second-quarter 2020. Moreover, both the top and the bottom line improved year over year owing to a significant increase in home deliveries amid the prevalent coronavirus pandemic. Demand for residential delivery soared, leading to a 65.2% jump in business-to-consumer shipments.
Notably, the need for door-to-door delivery of essentials during this crisis is rising. Higher cargo revenues are an added positive. Strong adjusted free cash flow generation of $3.9 billion in first-half 2020 was up 77.2% year over year. However, UPS expects U.S. Domestic average daily volume growth to be lower in the second half of 2020 than 22.8% witnessed in the June quarter.
Other noteworthy reports we are featuring today include American Tower (AMT), Lockheed Martin (LMT) and Colgate-Palmolive (CL).
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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>>>