Today's Must Read
Enterprise (EPD) to Grow on Fee-Based Contracts, Debts High
Prudential (PRU) Gains From Pension Risk Transfer Business
Friday, August 18, 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 Cisco (CSCO), Enterprise Products Partners (EPD) and Prudential (PRU). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Cisco’s shares have underperformed the Zacks Technology sector year to date, gaining +2.7% vs. +15.9%. Cisco’s fourth-quarter fiscal 2017 results were negatively impacted by lackluster switching and router revenues. The decline in top-line reflects intensifying competition from several smaller players, slowing order growth from service providers and challenges in the emerging markets. The time consuming transition to subscription-based business model will continue to hurt top line growth at least in the near term.
Nevertheless, the Zacks analyst thinks that the company’s expanding footprint in the rapidly growing security market presents significant growth opportunity. Further, the company’s focus on driving cost improvement, operational efficiencies and productivity will help in margin expansion. Additionally, extended partnerships with Apple, IBM and Microsoft are other positives.
Enterprise Products Partners has declined -6.8% over the last one year, even as the Zacks Oil Pipeline Industry declined by -16.4%. Enterprise Products’ extensive pipeline network of pipeline is connected to every major U.S. shale play and provides services to producers and users of commodities by transporting natural gas liquid (NGL), natural gas, crude oil and refined products. Cash distribution has increased for 52 successive quarters, reflecting stable fee-based cash flow from diversified midstream assets.
The Zacks analyst likes this trend, which is slated to continue as the partnership has a backlog of almost $9 billion fee-based growth projects. Despite these positives, Enterprise Products’ second-quarter 2017 results were lower than expected. Also, the partnership’s escalating debt since 2012 reflects its weak balance sheet. Moreover, over the last one year, the partnership’s price fell 7%, following the trend of the broader industry’s 16% decline over the same time frame.
Prudential shares have gained +34.8% over the last year, outperforming the Zacks Multiline Insurance industry, which has gained +28.2%% over the same period. Prudential’s second-quarter earnings missed estimates. However, the quarter witnessed positive net flows, favorable equity markets in fee-based businesses, revenue increase in international businesses and overall strong margins.
The Zacks analyst likes Prudential’s high performing asset management business, international operations and deeper reach in the pension risk transfer market. Expanded international presence provides it with better organic growth opportunities than peers. Also, a strong balance sheet and efficient capital management are tailwinds. It now expects ROE between 12% and 13% in the near to intermediate-term. However, exposure to low interest rates, unfavorable currency impact and regulatory control remain headwinds.
Other noteworthy reports we are featuring today include Public Storage (PSA), Zoetis (ZTS) and United Continental (UAL).
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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>>>