Today's Must Read
Legal Disputes Weigh on Qualcomm (QCOM), Chipset Sales Aid
Medicare Business Aids Aetna (AET), Low Membership Hurts
Thursday, November 2, 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 Citigroup (C), Qualcomm (QCOM) and Aetna (AET). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Citigroup shares have outperformed the Zacks Major Banks industry over the last one year, gaining +53.6% vs +40%. This price performance is backed by impressive earnings surprise history. The company has surpassed expectations for earnings in all the trailing four quarters. Third-quarter 2017 results reflected lower expenses and higher revenues. However, weak fixed income market revenues and elevated costs of credit were undermining factors.
The Zacks analyst thinks the company’s restructuring and streamlining efforts, strategic investments in core business and expense management will likely support profitability going forward. Moreover, expansion of wealth management business in Australia will act as a tailwind. Yet several issues, including litigation burden, create apprehension. Also, in spite of rising rates, margins are under pressure, due to persistent decline in the company’s legacy holdings portfolio.
Shares of Qualcomm have gained +4.4% over the last three months vs. the -4% decline for the Zacks Wireless Equipment industry. Qualcomm posted strong fourth-quarter 2017 financial results with the shipment of 220 million CDMA-based MSM chipsets. The company achieved a 5G data connection with the Snapdragon X50 5G modem chipset on 28GHz mmWave spectrum. Qualcomm is teaming up with Verizon and Novatel Wireless for 5G NR mmWave technology trial. This marks Qualcomm’s leadership in 5G, chipset market and mobile connectivity.
Further, it is extending cash tender offer for its pending NXP Semiconductor deal. Qualcomm has launched Mesh Networking Platform and is planning to buy Scyfer B.V. to boost its Artificial Intelligence Research. However, the company continues to receive charges for unfair business practices and licensing royalty payments. Aggressive competition in the mobile phone chipset market remains a woe.
Aetna’s shares outperformed the Zacks Health Maintenance Organization industry year to date, increasing +39.4% vs. a gain of +34.4%. Aetna’s third-quarter earnings surpassed the expectations and grew year over year, driven by strong underwriting margin performance, disciplined pricing, a focus on high quality care management, and a decline in medical cost.
The Zacks analyst expects the company to witness long-term growth from its Government business and International expansion. Its cost-reduction initiatives will aid margins. The sale of its Group Life and Disability business will help it to focus on core growth areas.
Following strong third-quarter results, Aetna raised its earnings guidance, cementing investors' confidence in it. Aetna has, however, been incurring losses in its public exchange business and has been exiting exchanges. Furthermore, its membership growth remains under pressure. Increasing medical benefit ratios are also likely to hurt margins.
Other noteworthy reports we are featuring today Honda (HMC), Ecolab (ECL) and Electronic Arts (EA).
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Director of Research
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>>>