Today's Must Read
Strong Service and Benefit Business Aids UnitedHealth (UNH)
Merck Banks on Keytruda, Pipeline & Deals Amid Generic Woes
Thursday, October 1, 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), UnitedHealth Group (UNH) and Merck (MRK). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Alibaba shares have underperformed the Zacks Internet Commerce industry in the year-to-date period (+38.6% vs. +58.4%), likely reflecting a 'China discount' for this 'Chinese Amazon'. The Zacks analyst believes that Alibaba Group is being driven by a steady improvement in core commerce and strong cloud business. The company continues to benefit from strong growth in metrics.
Further, Alibaba’s strengthening cloud business with its expanding customer base continues to boost 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, COVID-19 related economic uncertainties and macro headwinds in China are major concerns. In addition, rising competition from e-commerce players poses a risk.
Shares of UnitedHealth have gained +43.8% over the past year against the Zacks Medical Insurance industry’s rise of +31.4%. The Zacks analyst believes that UnitedHealth's continued strong growth at Optum as well as UnitedHealthcare segments are driving revenues. Its favorable government business and strong capital position are other positives.
It has been benefiting from higher segmental contributions, which helped it counter the coronavirus-led fund crunch. Its numerous acquisitions bolstered its inorganic growth profile. Its expansion of the health services segment and international business provides significant diversification benefits.
The company's solid balance sheet and consistent cash flow generation not only encourage investment in business but also enables it to return shareholders’ value. Retaining 2020 earnings guidance instills investor confidence. However, it is witnessing a slowdown in its international operations. Commercial membership may also see attrition due to increased joblessness.
Merck shares have gained +7.9% over the past six months against the Zacks Large Cap Pharmaceuticals industry’s rise of +11.3%. The Zacks analyst believes that Merck’s products like Keytruda, Lynparza and Bridion are driving sales. Keytruda sales are gaining from continued uptake in lung cancer and increasing usage in other cancer indications.
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.
Merck experienced less-severe-than-anticipated COVID-19 impact on second-quarter results and expects trends to improve in the second half. However, generic competition for several drugs and rising competitive pressure, mainly on the diabetes franchise, will continue to be overhangs on the top line.
Other noteworthy reports we are featuring today include UBS Group (UBS), Chipotle Mexican Grill (CMG) and IDEXX Laboratories (IDXX).
Zacks’ Single Best Pick to Double
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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>>>