Today's Must Read
Philip Morris' (PM) Earnings Lags on Higher Currency Impact
Project Streamline Aids Morgan Stanley's (MS) Profitability
Monday, July 24, 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 Microsoft (MSFT), Philip Morris (PM) and Morgan Stanley (MS). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Microsoft’s shares lagged the Zacks Technology sector through the fall, but have led the way over the last six months (up +15.9% versus +12.1%) on greater appreciation for the company's reorganization and repositioning. Microsoft reported strong fourth-quarter fiscal 2017 results. Both earnings and revenues increased on a year-over-year basis.
The impressive results demonstrated that the company is benefiting from continuing enterprise strength, strong Office 365 and Windows 10 adoption and robust penetration of Azure. Also, the Zacks analyst thinks LinkedIn has improved the company's presence in the social media market, which improved top-line growth.
Management expects expenses to increase in fiscal 2018 due to continuing investments. This will weigh on profitability in the near term. Nevertheless, the company's expanding product portfolio is a key catalyst in the long haul. However, intensifying competition in the cloud space and unfavorable foreign exchange are headwinds.
Philip Morris posted weaker-than-expected second-quarter 2017 results, with both earnings and revenues lagging expectations. While earnings dipped due to lower cigarette volumes, net revenue gained from higher iQOS device sales, as well as favorable pricing and volume/mix. But the Zacks analyst likes the fact that the company is churning its portfolio and taking steps to develop smoke-free products as customers are shifting away from tobacco products.
In fact, Philip Morris remains focused on the growing e-cigarettes and less harmful alternative products such as heatsticks and iQOS products. Shares of the company also outperformed the Zacks categorized Tobacco industry in the past six months gaining +23.9% vs. +13.1%. However, strict government regulations from around the world, declining demand for cigarettes and currency headwinds remain major concerns.
Morgan Stanley’s shares have outperformed the Zacks Finance sector over the last one year, gaining +60.2% versus the sector’s +22% increase. The company’s second-quarter 2017 earnings surpassed expectations, primarily driven by improved equity trading and a rise in underwriting income. The Zacks analyst likes the company’s efforts to offload its non-core assets to lower balance sheet risk and cost saving efforts, which will likely lead to improvement in profitability.
These initiatives, along with enhanced capital deployment should boost investors’ confidence in the stock. However, continued fall in corporate loan balances remains a concern for the company. This is most likely the primary reason for decrease in net interest income despite rise in interest rates.
Other noteworthy reports we are featuring today include General Electric (GE), Union Pacific (UNP) and Bank of New York Mellon (BK).
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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>>>