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Research Daily

Monday, May 22, 2017

The Zacks Research Daily presents the best research output of our analyst team. Today’s publication features new research reports on 16 major stocks, including Chevron (CVX), Altria (MO), Kraft-Heinz (KHC) and Time Warner (TWX). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today. Y

ou can see all of today’s research reports here >>>

Chevron started 2017 on a bullish note. It not only swung to a Q1 profit from a year-ago loss, but results handily beat estimates on the back of rebounding commodity prices, lower expenses and an improved U.S. refining environment. Following outperformance in 3 of the last 4 quarters, the stock has performed about in-line with the Zacks Integrated Oil Industry over the past year (up about +7%), but handily outperformed ExxonMobil which saw its stock go down -8.6% over the same time period. However, with oil testing the psychologically-critical $50 threshold again, the near-to-medium term revenue outlook for Chevron – one of the most oil-weighted majors – remains cloudy. Moreover, Chevron is still outspending its cash flow, making it dependent on asset sales. Hence, the Zacks analyst thinks investors should wait for a better entry point before buying shares in America's second largest oil company. (You can read the full research report on Chevron here >>>)

Altria shares have lagged the Zacks Tobacco industry in the year-to-date period, with the stock up +6.5% vs. the peer group’s +15.8% gain. The company’s weaker than expected Q1 quarterly results have added to its under-performance. Altria, the U.S.-based entity whose international sibling is Phillips Morris International (PM), is operating in a mature and heavily regulated market that has been undergoing consistent volume declines over the last many years. But the strength of Marlboro brand and a solid portfolio or low-risk smokeless tobacco products positions it to profitably navigate this market. Further, the recent takeover of SABMiller by Anheuser-Busch InBev's helped Altria maximize the value of its SABMiller investment. An attractive dividend, currently yielding 3.4%, is a notable part of this story as well. (You can read the full research report on Altria here >>>)

Kraft Heinz shares remained relatively subdued this year, gaining only +3.4% year to date. Kraft Heinz's first-quarter earnings and revenues fell short of expectations. Notably, the company’s sales have now declined in four of the past five quarters. The Zacks analyst stresses that Kraft Heinz has been struggling due to the shift in consumer preference toward natural and organic ingredients over packaged and processed food. That said, strong brand portfolio, cost savings initiatives, innovation and marketing efforts raise growth prospects for the company. (You can read the full research report on Kraft Heinz here >>>)

Time Warner share have handily outperformed the broader market as well as the media space (the stock is up more than +35.4% over the last one year) on greater appreciation for the company's proactive strategic initiatives in response to the evolving media landscape. This trend is also borne out by its positive earnings surprise streak for more than 20 straight quarters. Investments in video content and technology continued to show results. Further, Time Warner’s significant international presence has helped broaden client base and product portfolio. Additionally, investments in programming, production and marketing, along with focus on operating and capital efficiencies augur well. However, decline in overall advertising spending and currency headwinds may adversely impact performance. On the other hand, AT&T has agreed to acquire Time Warner in an $85.4 billion deal, which is expected to be concluded by the end of the year. (You can read the full research report on Time Warner here >>>)

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Sheraz Mian

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>>>

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