Today's Must Read
Intelligrated Unit Drives Honeywell (HON), Soft Demand Hurts
Cost Control to Buoy Caterpillar (CAT) Amid Weak Demand
Wednesday, November 4, 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), Honeywell International (HON) and Caterpillar (CAT). 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 (+34.6% vs. +55.3%), likely reflecting a 'China discount'. That said, the stock has been a strong perfomer, a trend that the Zacks analyst believes will continue on the back of steady improvement in core commerce and strong cloud business.
Further, Alibaba’s strengthening cloud business with its expanding customer base continues to drive 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 Honeywell have lost -0.9% over the past year against the Zacks Diversified Operations industry’s rise of +5.4%. The Zacks analyst believes that strength in defense and space businesses as well as solid demand for warehouse automation products are likely to boost the company’s revenues in the quarters ahead.
Solid demand for personal protective equipment, along with a strong backlog conversion rate, will act as tailwinds. It is committed to rewarding shareholders handsomely. However, the company believes that the coronavirus outbreak-led market downturn and weak commercial aerospace will adversely impact its near-term results.
Given its extensive geographic presence, its business is subject to political, economic and geopolitical issues. Rise in debt levels can increase its financial obligations.
Caterpillar shares have gained +44.3% over the past six months against the Zacks Construction and Mining industry’s rise of +54.2%. The Zacks analyst believes that a recovering manufacturing sector, resumption of spending at miners, improved North American residential construction and strong construction demand in China hold promise for the company.
Caterpillar’s third-quarter 2020 adjusted earnings per share and revenues beat the respective Zacks Consensus Estimate. However, both the metrics declined year over year as overall demand remained weak amid the COVID-19 pandemic. For the fourth quarter the company anticipates demand to remain weak but at improved levels than the third quarter.
A weak backlog, lowering of inventory by dealers and weakness in non-residential construction will impact results in 2020. Its ongoing cost reduction efforts will sustain margins in this scenario. Further, strong liquidity position, investments in expanded offerings and services and digital initiatives will fuel growth.
Other noteworthy reports we are featuring today include Exxon Mobil (XOM), CSX Corporation (CSX) and Norfolk Southern (NSC).
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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>>>