Today's Must Read
Loan Growth Aids Wells Fargo (WFC), Legal Issues Linger
Low-Risk Tobacco Products Boosts Altria's (MO) Top-line
Wednesday, October 11, 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 Apple (AAPL), Wells Fargo (WFC) and Altria Group (MO). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Buy-rated Apple’s shares are up +34.6% in the year-to-date period, handily outperforming the S&P 500 (up +13.8%) and the Zacks Technology sector (up +21.2%). Apple’s enriched product portfolio that now includes the new iPhones, Watch 3 and 4K TV will help the stock sustain momentum against S&P 500 going forward. This, along with the company's $1-billion investment for acquiring original content and its plan to break into film distribution market will further boost services’ revenues.
Apple recently collaborated with Steven Spielberg's Amblin TV and NBCUniversal to revive Amazing Stories. Additionally, foray into fast-growing technologies like AI & AR/VR are long-term growth catalysts. However, the new iPhone X at $999 is quite pricey, particularly for markets like China and India. Moreover, slight delay in launching the product as compared with iPhone 8 and 8 Plus, reflects supply chain issues. This can be a concern during the upcoming holiday season. Moreover, intensifying competition from cheaper Chinese handset-makers cannot be ignored.
Shares of Wells Fargo have underperformed the Zacks Major Banks industry year to date, increasing +0.9% vs. a gain of +10.5%. However, the company has an impressive earnings surprise history. The company has surpassed the Zacks Consensus Estimate for earnings in all the trailing four quarters. Wells Fargo plans $4 billion of cost cuts by 2019.
Moreover, though lesser regulations on lending and capital levels are not expected any time soon, these are likely to reduce costs of compliance significantly and allow banks to grow lending. Further, rising rates are easing margin pressure to an extent.
While the current crisis related to the revelation of illegally opening millions of illegal accounts last year at the company will take some time to alleviate, the Zacks analyst believes that consistent growth in loans and deposits and expansions will likely support its growth profile.
Shares of Altria have underperformed the Zacks Tobacco industry in the last three months (-6% vs. -12%), owing to declining demand of tobacco. The ongoing anti-tobacco campaigns and price rise to offset surging taxes have been hurting the demand for tobacco.
Nevertheless, the Zacks analyst believes the company’s shift to low-risk, smokeless tobacco products to boost market share remains appealing. Altria has proactively responded to the changing market scenario toward low-risk tobacco products and offered several reduced risk tobacco products which helped it to maintain market share. MarkTen e-cigarette and Green Smoke e-vapor are few flagship products belonging to this category.
Further, Altria is expected to sell Philip Morris’s iQOS heated tobacco product in the domestic market, once it gains approval from the FDA. The company is also on track with its cost-reduction initiatives and consolidation of certain manufacturing facilities to streamline operations.
Other noteworthy reports we are featuring today include Pioneer Natural Resources (PXD), Caterpillar (CAT) and Charles Schwab (SCHW).
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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>>>