Today's Must Read
Amgen's (AMGN) New Drugs Driving Sales Amid Headwinds
Cost-Cuts Aid Union Pacific (UNP) Amid Automotive Unit Woes
Friday, September 15, 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 Philip Morris International (PM), Amgen (AMGN) and Union Pacific (UNP). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Shares of Philip Morris have outperformed the Zacks categorized Tobacco industry on a year-to-date basis (+27.6% vs. +9.3%), primarily due to its strong portfolio of tobacco brands and pricing power. It is encouraging that the company is churning its portfolio and taking steps to develop smoke-free products as customers are shifting away from tobacco products. In fact, Philip Morris remains focused on the growing e-cigarettes and less harmful alternative products such as heatsticks and iQOS products.
Furthermore, the marketing and technology-sharing agreement between Philip Morris and its peer Altria Group is also boosting the businesses of both the companies and will help them maintain the market share. However, strict government regulations, declining demand for cigarettes and currency headwinds remain major concerns for the company.
Amgen’s shares have outperformed the industry so far this year, increasing +29.6% vs. +15.4%. Amgen is well positioned for growth with several blockbuster drugs in its portfolio. Amgen’s newer drugs – Prolia, Xgeva, Vectibix, Nplate and Sensipar – are all performing well. Additionally, Amgen’s restructuring plan should make it leaner and more cost efficient. Amgen is also progressing with its pipeline, including biosimilar drugs.
However, the company has some challenges in store, given the presence of biosimilar competition and slowdown in sales of mature products. Volume growth of new drugs may not be enough to offset lost sales due to the decline in mature brands. While Neupogen is already facing U.S. biosimilar competition, Neulasta and Epogen could start facing the same next year. Also the softness in Enbrel sales due to stiff competitive pressure is a key cause for concern. Meanwhile, uptake of Repatha has been slow due to payer restrictions.
Shares of Union Pacific have underperformed its industry as well as fellow railroad operator Norfolk Southern on a year-to-date basis. While the company has gained +6.9%, the industry in belongs to and Norfolk Southern have rallied +17% and +17.5%, respectively, so far this year. Notably, the bleak outlook for the third quarter of 2017 unveiled by Union Pacific on its automotive unit is a matter of concern. Units like agricultural products and chemicals are also expected to registar below-par volumes in the same quarter.
However, the company's efforts to cut costs to drive the bottom line are encouraging. In fact, we are also impressed with Union Pacific’s plans to reward investors through share buybacks and dividend payouts. Additionally, improvement in the coal-related scenario raises optimism, going forward.
Other noteworthy reports we are featuring today include Oracle (ORCL), United Technologies (UTX) and Aflac (AFL).
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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>>>