Today's Must Read
NIKE's (NKE) Digital Business Aid Top Line Amid the Pandemic
UPS Strong on E-commerce Surge and Robust Free Cash Flow
Friday, October 30, 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 Procter & Gamble (PG), NIKE (NKE) and United Parcel Service (UPS). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Procter & Gamble shares have outperformed the Zacks Soap and Cleaning Materials industry in the year to date period (+9% vs. +8.8%). The Zacks analyst believes that the company’s efforts to make its cleaning and personal care products available during the ongoing coronavirus crisis have helped bolster sales.
Its solid first-quarter fiscal 2021 earnings mark the continuation of its earnings surprise trend. Further, earnings and sales improved year over year in the reported quarter on gains from significant sales increase, related fixed cost leverage and ongoing productivity efforts. Sales were aided by strength across all segments as well as robust shipments, pricing and mix.
Cost savings aided core currency-neutral gross and operating margin, which expanded 170 bps and 350 bps, respectively. Also, it delivered adjusted free cash flow productivity of 95% in the fiscal first quarter. Driven by the robust results, the company raised its outlook for fiscal 2021. However, currency headwinds are likely to affect results in fiscal 2021. Also, stiff competition remains a woe.
Shares of NIKE have gained +33.5% over the past year against the Zacks Shoes and Retail Apparel industry’s rise of +31.9%. The Zacks analyst believes that even as stores reopen, NIKE witnesses strong digital trends, which demonstrates the strength of its brands and investments made over the past several years to improve digital consumer experiences.
Digital sales for the NIKE brand in first-quarter fiscal 2021 exhibited double-digit growth across North America, Greater China, and APLA, along with triple-digit growth in EMEA. Moreover, decline in SG&A expenses on lower overhead costs and demand creation expenses aided earnings.
Further, the company expects robust top line growth in fiscal 2021 owing to anticipated gains in the second half. However, soft traffic at retail stores and lower revenues at Wholesale business remain headwinds. Moreover, higher promotions and supply-chain costs hurt gross margin in the quarter.
UPS shares have gained +71.2% over the past six months against the Zacks Transportation - Air Freight and Cargo industry’s rise of +102.1%. The Zacks analyst believes that UPS is benefiting from a significant increase in home deliveries amid the prevalent coronavirus pandemic.
Notably, the need for door-to-door delivery of essentials during this crisis is rising. Owing to the surge in residential delivery volumes and strong outbound demand from Asia, UPS performed very well in third-quarter 2020.
Moreover, the optimism surrounding the stock is evident from the Zacks Consensus Estimate for current-year earnings being revised upward in the past 60 days. However, the third-quarter decline in adjusted operating profit at the U.S. Domestic Package segment is a concern.
Other noteworthy reports we are featuring today include Cisco (CSCO), Zoom Video Communications (ZM) and Lockheed Martin (LMT).
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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>>>