Today's Must Read
Loan Growth Supports JPMorgan (JPM), Legal Hassles Persist
Azure Adoption, Office 365 Strength Drives Microsoft (MSFT)
Tuesday, August 29, 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 Johnson & Johnson (JNJ), JPMorgan (JPM) and Microsoft (MSFT). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Johnson & Johnson shares have gained +16.6% year to date, outperforming the large-cap pharma space (up +14.1%). Sales in J&J’s domestic Pharma segment have decelerated this year as a number of key growth drivers like Remicade and Concerta are facing competition.
However, J&J is optimistic that sales growth will accelerate in 2H17. The Zacks analyst thinks new drugs like Xarelto, Stelara, Darzalex and Imbruvica remain the keys to growth. Meanwhile, share buybacks and restructuring initiatives should provide bottom-line support.
J&J is also making rapid progress with its pipeline and line extensions. The Actelion buy adds an attractive new therapeutic area – PAH – which should contribute to sales growth. However, headwinds like negative currency movement, generics, pricing pressure and soft global market conditions remain. Sluggish growth in the Consumer segment is also a concern. Meanwhile, HCV sales continue to decline in the face of intense competition.
Shares of JPMorgan have gained +37.6% over the last year, outperforming the Zacks Major Regional Banks industry, which is up +29.9% over the same period. This price performance is backed by impressive earnings surprise history. The company has surpassed the Zacks Consensus Estimate for earnings in each of the trailing four quarters.
The Zacks analyst likes the company’s efforts to control expenses through streamlining and branch consolidation. These have been supporting bottom line growth. While the company faces a persistent fee income growth challenge, the improved rate scenario, potential lesser regulations (once the Financial Choice Act gets implemented) and rising loan demand should continue to benefit its financials. Also, the bank's impressive capital deployment plans reflect its strong balance sheet position.
Microsoft’s shares lagged the Zacks Technology sector through the fall, but have led the way over the last six months (up +12.7% versus +8.6%) on greater appreciation for the company's reorganization and repositioning. The Zacks analyst thinks Microsoft is benefiting from continuing enterprise strength, strong Office 365 and Windows 10 adoption and robust penetration of Azure.
LinkedIn has also improved the company's presence in the social media market, which improved top-line growth. The company's upcoming console, Xbox One X, has significant growth potential, as evident from the record pre-orders. However, the delay in launching Crackdown 3 doesn't bode well for the console's market share. Lack of exclusive games on the platform as compared with Sony's PS4 is a concern.
Moreover, management expects expenses to increase in fiscal 2018 due to continuing investments. This will weigh on profitability in the near term. Intensifying competition in the cloud space and unfavorable foreign exchange are other headwinds.
Other noteworthy reports we are featuring today include Motorola (MSI), J.M. Smucker (SJM) and Entergy Corp (ETR).
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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>>>