Today's Must Read
Asia, Cost Cuts Continue to Spur Caterpillar's (CAT) Growth
Mondelez (MDLZ) Strong on Cost Savings, Volume Trend Weak
Monday, August 21, 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 Wal-Mart (WMT), Caterpillar (CAT) and Mondelez (MDLZ). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Wal-Mart’s shares have been strong performers lately, with the stock up +10.6% over the last six months, outperforming the S&P 500's +2.9% gain in the same time period. Walmart’s earnings and revenues exceeded expectations in second-quarter fiscal 2018. The company has also raised the lower end of its fiscal 2018 earnings guidance.
The Zacks analyst likes the company’s efforts to boost sales, focus on building e-Commerce capabilities and forays into new markets through acquisitions. The company has posted positive comps at Walmart U.S. for 12 successive quarters.
Further, the company’s acquisition of four e-Commerce businesses since the Jet.com acquisition is in line with its efforts to grow online activities. However, currency headwinds, decline in international revenues, stiff competition are serious concerns. Huge investments in e-Commerce activities leading to margin pressure is another worry.
Shares of Strong Buy-rated Caterpillar have gained +22.9% year-to-date, outperforming the Zacks Construction and Mining industry which has increased +20.4% over the same period. Caterpillar reported 12% rise in sales in July, its best performance so far in 2017 thanks to continuing improvement in Asia Pacific and a turnaround performance in Resource Industries. Caterpillar delivered better-than-expected earnings in first-half 2017 driven by cost-control actions.
The Zacks analyst thinks Asia Pacific will continue to be a catalyst for both Resource Industries as well as construction, owing to increased infrastructure and residential investment in China. Also, leading indicators of U.S. construction signal robust conditions ahead that bode well for Caterpillar. Further, efforts to reduce costs will boost margins.
Mondelez shares have been weighed down recently - the stock is down -6.9% vs. -5.1% decline for the Zacks Food Miscellaneous industry in the year-to-date period. Mondelez’s second-quarter 2017 earnings and revenues surpassed expectations. Mondelez’s volume trends have remained weak since 2014 due to volume erosion from higher pricing and category weakness.
Emerging markets’ net revenues decreased 1.5% while developed markets reported revenue decline of 7.1%. Power Brands also witnessed a 3% decline in revenues. Adjusted gross margin decreased 10 basis points or bps as strong net productivity and pricing gains were primarily offset by an unfavorable mix and higher input costs. However, adjusted operating margin increased 90 bps year over year on the back of lower selling, general and administrative costs.
Other noteworthy reports we are featuring today include Salesforce (CRM), Estée Lauder (EL) and Deere (DE).
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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>>>