Today's Must Read
Focus on Core Operations Aids Citigroup (C), Legal Woes Linger
AstraZeneca's (AZN) New Drugs Back Sales, MYSTIC Failure Hurts
Wednesday, August 2, 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 Merck (MRK), Citigroup (C) and AstraZeneca (AZN). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Merck shares have outperformed the Zacks Large Cap Pharmaceuticals industry over the last year, gaining +10.6% versus the industry’s -1.9% decline. This momentum reflects the progress it has made with product pipeline. Merck beat estimates for both earnings and sales in the second quarter, backed primarily by strong sales of PD-1 inhibitor, Keytruda.
While generic competition for several drugs and pricing pressures as are material in the Merck story as they are for many of its peers, the Zacks analyst points out that the company's new products like Keytruda and Zepatier hold great potential. Also, Merck will continue to focus on cost-cutting initiatives to drive the bottom line.
However, generic competition for several drugs and pricing pressure will continue to overhang on the top line. The Zacks analyst discusses all of these issues in the updated research report issued today.
Shares of Citigroup shares have outperformed the Zacks Major Banks industry over the last six months, gaining +20.4% vs +5%. The company’s second-quarter 2017 earnings outpaced expectations riding on higher revenues. However, expenses and costs of credit escalated. The Fed’s recent approval to the company's 2017 capital plan also remains encouraging.
Moreover, the recently approved Financial Choice Act will act as a tailwind for the company in coming quarters. However, several issues including Citigroup’s litigation pressures are cause for concern. Moreover, in spite of rising rates, margin is under pressure, due to persistent decline in the company’s legacy holdings portfolio.
The Zacks analyst likes the company’s restructuring and streamlining efforts, strategic investments in core business and expense management, which should support profitability, going forward.
AstraZeneca’s shares have gained +10.3% year to date, underperforming the Zacks Large Cap Pharmaceuticals sector which has gained +10.5% over the same period. Despite doing well this year, the stock plunged sharply after the company announced the failure of a pivotal first-line lung cancer study (MYSTIC) on Imfinzi. AstraZeneca’s second quarter results were mixed with earnings beating estimates but sales remaining in line.
Core products like Nexium and Crestor are facing generic competition, which is hurting sales growth. However, AstraZeneca’s newer drugs like Tagrisso and Brilinta should keep contributing to the top line. Meanwhile, cost-cutting initiatives should drive the bottom line.
AstraZeneca also has a promising late-stage pipeline that includes immuno-oncology candidates. Imfinzi’s approval in May 2017 for bladder cancer was encouraging. The Zacks analyst is enthused by the fact that the company expects a lot of activity on the regulatory and pipeline front in the second half of 2017.
Other noteworthy reports we are featuring today include HSBC (HSBC), Telefonica (TEF) and Sprint (S).
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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>>>