Today's Must Read
Strong Global Business, Accretive Deals Aid Mastercard (MA)
Shell (RDS.A) Aided by BG Integration Amid Renewed Oil Slump
Monday, August 7, 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 ExxonMobil (XOM), MasterCard (MA) and Shell (RDS.A). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
ExxonMobil’s shares tracked the S&P 500 index through year-end 2016, but have lagged the broader index as well as the peer super majors group in the year-to-date period, likely reflecting the company's perceived defensiveness that disadvantages it relative to its 'oilier' peers. Exxon's resilient integrated business model has long been the industry gold standard, which makes it an attractive and relatively low-risk Energy sector option for many investors.
A fortress balance sheet, an attractive and totally safe dividend and a history of returning excess cash to shareholders are some of the other positives in the Exxon story. The company has been investing heavily in its chemical and refining businesses, which will likely help it counter downturns in upstream businesses owing to volatile commodity prices.
In fact, the upside in year-over-year earnings in the second quarter was supported by increased refining margins and refining volumes. However, the company’s second-quarter earnings missed expectations. The Zacks analyst discusses the pros and cons of investing in Exxon shares in the updated research report issued today.
Shares of Buy-rated MasterCard have outperformed the Zacks Financial Services Transaction industry over the last year (up +34.1% vs. +22.9%) and is also ahead of rival Visa (up +26.1%). Second-quarter 2017 earnings surpassed expectations, driven by strong transaction, higher cross border volumes and gains from the Vocalink acquisition.
The Zacks analyst thinks MasterCard is well positioned for growth given its solid market position, ongoing expansion and digital initiatives, and significant opportunities from the secular shift toward electronic payments. The acquisition of VocaLink and NuData Security, complement the company’s efforts to participate in new payment flows and enhance its safety and security offerings.
However, Mastercard continues to face escalating costs, a volatile forex environment and legal issues. Also, higher incentives and rewards will weigh on the bottom line.
Shell’s shares are up +5.4% in the year-to-date period vs. the -3.3% loss for the broader industry and the -2.8% decline in BP’s stock. Additionally, the stock has received a boost from the strong Q2 earnings report (the stock has gained in excess of +5% since then). The integrated behemoth's upstream unit swung to a Q2 profit from a year-ago loss thanks to steady oil price recovery during the period and production contribution of BG assets.
The Hague-based supermajor was also able to reduce operating costs and progress on its large divestment program. Importantly, the Anglo-Dutch company generated a surge in cash flows, allowing it to cut debt and cover its cash dividend.
However, with oil falling below the psychologically-critical $50 threshold again, Shell's near-to-medium term revenue outlook remains cloudy. Hence, the Zacks analyst thinks investors should wait for a better entry point before buying shares in Europe's largest oil company.
Other noteworthy reports we are featuring today include Aetna (AET), Regeneron (REGN) and BP (BP).
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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>>>