Today's Must Read
Solid Aeronautics sales, Budget Upside Aids Lockheed (LMT)
Rising Costs, Competition Hurts Netflix's (NFLX) Prospects
Wednesday July 19, 2017
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 IBM (IBM), Lockheed Martin (LMT) and Netflix (NFLX). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today. You can see all of today’s research reports here >>>
IBM’s shares have underperformed the broader market on a year to date basis, losing -7.2% vs. the S&P 500’s +10.1% gain. IBM’s recently announced second-quarter 2017 results exhibited the company’s growing focus on “Strategic Imperatives” as long-term growth drivers. However, revenue growth remained elusive as these “Strategic Imperatives” failed to offset the weakness in traditional businesses.
Moreover, third-quarter revenue guidance reflects negative impact from seasonality, which is anticipated to be partially neutralized by higher contributions from the new Mainframe z14 product and services contracts. However, the Zacks analyst likes the fact that despite sluggish revenue growth projections in the near term, IBM maintained 2017 earnings guidance suggesting improving strength in cloud, mobile, security and social products as well as cost savings.
Intensifying competition in most of the markets remains a major concern. (You can read the full research report on IBM here >>>).
Shares of Buy-rated Lockheed Martin have gained +11.7% over the past year, underperforming the aerospace/defense sector, which has gained +26.2% over the same period. Lockheed Martin’s second-quarter results comfortably surpassed expectations on both the top- and bottom-line fronts. In particular, the Aeronautics segment posted a strong, double-digit growth, which, in turn, boosted the company’s sales.
The increased outlook for 2017 also buoyed optimism. The Zacks analyst likes the fact that since it is the largest defense contractor in the world, Lockheed Martin continues to be a strong cash generator. Apart from its formidable domestic presence, the company also boasts of strong opportunities in the ever-expanding international defense market.
The recently passed defense policy bill for 2018, which promises a $696 billion budget, is also expected to boost growth of defense majors. However, a comparative analysis of the company’s historical EV/EBITDA ratio reflects a relatively gloomy picture when compared with its broader industry. (You can read the full research report on Lockheed Martin here >>>).
Netflix’s shares have gained +108.8% over the past 12 months, outperforming the Zacks Broadcast Radio/TV industry, which has gained +30.4% over the same period. Netflix’s second-quarter earnings missed expectations but revenues beat the same. In the second quarter, Netflix added more subscribers than the guided number, benefitting from its focus on original programming and international expansion.
In the third quarter, Netflix expects to add 0.75 million subscribers in the domestic streaming segment and 3.65 million in the international segment. Moreover, the company expects to report profits from International operations in the upcoming quarter. Nonetheless, investments in original/acquired content remain a drag on profitability. The Zacks analyst thinks Netflix’s ability to effectively manage costs will dictate its future prospects. (You can read the full research report on Netflix here >>>).
Other noteworthy reports we are featuring today include PayPal (PYPL), BlackRock (BLK) and Nucor (NUE).
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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>>>