Today's Must Read
Coca-Cola (KO) Lags Earnings on Refranchising Cost
T-Mobile US (TMUS) Tops Q1 Earnings & Revenue Estimates
Wednesday April 26, 2017
Today's Research Daily features new research reports on 16 major stocks, including McDonald's (MCD), Coca-Cola (KO) and T-Mobile (TMUS).
McDonald's shares have gained +26.4% over the last six months easily outperforming many of its peers which have been struggling to survive the restaurant space’s tough operating environment lately. McDonald’s Q1 earnings and revenues exceeded expectations, but revenues fell year over year mainly due to the impact of refranchising.
Meanwhile, the company recorded the seventh consecutive quarter of global comps growth. The Zacks analyst likes the company’s attempts to attract customers in international lead markets as the positive global comps over the past 7 quarters show. Increased focus on refranchising will cut the company’s capital requirements and facilitate EPS growth and ROE expansion over the long-term. On the flip side, higher labor costs, currency headwinds and concerns about the efficiencies of an ever expanding menu remain issues. (You can read the full research report on McDonald's here.)
Shares of Coca-Cola have gained +3.9% in the year-to-date period underperforming the Zacks Consumer Staples sector as a whole, which has gained +8.4%. Coca-Cola failed to meet earnings expectations in the first quarter of 2017. Earnings also decreased year over year due to higher costs related to refranchising efforts in Coca-Cola's North America bottling operations.
Further, Coca-Cola's total sales fell 11%, marking the eighth consecutive quarterly decline in revenue. But the Zacks analyst likes the company’s efforts in boosting its current productivity and reinvestment program that is expected to generate an incremental $800 million in annualized savings by 2019.
This brings the total annualized savings target of its six-year program to $3.8 billion. Though refranchising efforts will hurt sales/profits in the near term, the company will see higher operating margins, lower capital spending, and improved return on invested capital in the long run. (You can read the full research report on Coca-Cola here.)
T-Mobile shares have been strong performers lately - the stock is up +69.6% over the last 12 months, handily outperforming the Zacks National Wireless industry (up +5%) and the broader Zacks Telecom Services industry (down -0.4%). T-Mobile US posted strong first quarter 2017 financial results with net customer additions of 1.142 million.
Driving this outperformance is the success of the carrier's cultivation of an 'insurgent' persona through promotional measures like the 'Un-carrier' initiatives. Being the fourth national carrier, the company regularly gets mentioned in industry consolidation rumors, which helps the stock price.
The Zacks analyst also likes the company's network expansion plans such as 5G trials with Ericsson as well as 4G LTE network improvement and expansion. On the flip side, T-Mobile US operates in a highly competitive and saturated wireless market where it has to work hard to maintain its growth momentum. (You can read the full research report on T-Mobile here.)
Other noteworthy reports we are featuring today include PPG Industries (PPG), Crown Castle (CCI) and Corning (GLW).
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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 >>>