Today's Must Read
Occidental (OXY) Gains from Permian Resources Focus
Rising Rates Aid Schwab (SCHW), Higher Personnel Costs A Woe
Monday, November 13, 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 Pfizer (PFE), Occidental Petroleum (OXY) and Charles Schwab (SCHW). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Pfizer’s shares have underperformed the peer group so far this year (the stock is up +8.3% over this period vs. a +14.5% increase for the Zacks Large-Cap Pharmaceuticals industry). Pfizer’s Q3 results were mixed as it beat earnings estimates but delivered in-line sales. However, the company raised its earnings outlook for the year.
Pfizer is facing headwinds in the form of genericization of key drugs, supply challenges in the legacy Hospira portfolio, pricing pressure and rising competition, which are hurting the top line. Neverthetheless, we believe that new products like Ibrance, contribution from acquisitions, cost-cutting efforts and share buybacks should help the company achieve its guidance.
Pfizer also boasts a strong pipeline and expects approximately 25 to 30 drug approvals over the next five years, including around 15 products that have blockbuster potential. Its growing immuno-oncology portfolio offers a strong potential. Bavencio is being considered a key long-term growth driver for Pfizer.
Shares of Occidental Petroleum have outperformed the Zacks Domestic Integrated Oil industry over the last six months, gaining +11.2% vs. +6.7%. The company’s third-quarter earnings topped expectations but total revenues fell behind.
The Zacks analyst likes the fundamental strength of the company, which will help it overcome the adverse impact from natural disasters. Occidental Petroleum will benefit from more oil production from its Permian Resources and from concentrating on high margin production region. The company generates stable cash flow and its Chemical plant will further improve its cash flow.
Occidental Petroleum, like other oil and natural gas companies, faces the risks of cost overruns and development interruptions due to delays in drilling and other approvals, property or border disputes and equipment failures. As expected, Hurricane Harvey adversely impacted income and production in the third quarter as the company had to shut down operation in Texas to ward off the impact of the storm.
Schwab’s shares have outperformed the Zacks Investment Brokers industry over the last three months, gaining +7.7% vs +6.9%. The performance was supported by impressive earnings surprise history, as the company did not lag expectations in any of the trailing four quarters.
The company’s third-quarter 2017 results reflect higher revenues and benefits from rising rates. It remains well positioned to gain from the rising rate environment. Also, initiatives to strengthen trading income are likely to support its profitability in the long run despite the near-term reduction in the same.
However, a continuous rise in expenses (due to rise in compensation costs) remains a key concern for the company. Further, significant dependence on fee-based revenue streams makes us apprehensive.
Other noteworthy reports we are featuring today Bank of New York Mellon (BK), Prudential (PRU) and S&P Global (SPGI).
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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>>>