Today's Must Read
Texas Instruments (TXN) Drives on Dividend Hike, $6B Buyback
Alphabet (GOOGL) Rides on Diversification; Litigation Hurts
Friday, September 22, 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 Caterpillar (CAT), Texas Instruments (TXN) and Alphabet (GOOGL). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
You can see all of today’s research reports here >>>
Strong-Buy rated Caterpillar’s shares have gained +34.6% year-to-date, outperforming the Zacks Construction and Mining industry which has increased +32.5% over the same period. Caterpillar's August sales rose 11%, driven by improvement in Asia Pacific and construction.
Caterpillar was awarded a five year $663.6 million fixed-price contract from the Pentagon to supply commercial construction equipment. Backed by improved order activity, Caterpillar guides revenue in the range of $42–$44 billion and earnings per share of $5.00 for 2017. The mid-point of the ranges reflects a year-over-year growth of 12% and 46%, respectively.
The Zacks analyst thinks Asia Pacific will continue to be a catalyst for growth, owing to increased infrastructure and residential investment in China. Leading indicators of U.S. construction signal robust conditions ahead that bode well for Caterpillar. Efforts to reduce costs will help boost margins.
Shares of Buy-rated Texas Instruments gained +17.9% year to date, underperforming the Zacks General Semiconductor industry which has gained +23% over the same period. However, Texas Instruments is one of the largest suppliers of analog integrated circuits.
The Zacks analyst expects margin expansion to continue driven by the secular strength in the auto and industrial markets, a stronger mix of analog and embedded processing products, benefits of restructuring initiatives and more than 300mm capacity coming online. Moreover, the recently announced 24% dividend hike and an additional $6 billion share buyback reflect the company's solid cash flow generation ability and balance sheet strength.
The only negative at this point appears to be intensifying competition particularly for auto chips, given recent market consolidation. There is also the question of negative currency effect and a high debt load.
Alphabet’s shares have underperformed the Zacks Internet Services in the year to date period (the stock is up +19.6% vs. +21% gain for the sector). Alphabet is one of the leading providers of target-based advertisements on the web. The company's second quarter earnings exceeded the Zacks Consensus Estimate.
The Zacks analyst likes Alphabet’s excellent execution, which is helped it to maintain its dominant share in a competitive, fast-growing search market. Its focus on innovation, strategic acquisitions and Android OS should continue to generate strong cash flows. Its diversification strategy is also positive, but requires significant investment and involves uncertain payback periods, particularly since these efforts are at the cutting edge of technology. However, increasing litigation issues continues to impact the company’s profits.
Other noteworthy reports we are featuring today include Abbott (ABT), Adobe (ADBE) and Anthem (ANTM).
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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>>>