Today's Must Read
Broadcom (AVGO) Benefits from Buyout, Portfolio Strength
Defense Bill Aids General Dynamics (GD), Competition Ails
Tuesday, November 28, 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 Estee Lauder (EL), Broadcom (AVGO) and General Dynamics (GD). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Strong Buy-rated Estee Lauder’s shares are up +59.2% over the last one year, outperforming the Zacks Cosmetics industry, which is up +11.8% over the same period, gaining from its solid focus on buyouts and product launches; strength in emerging markets and robust online business. Driven by these efforts, Estee Lauder marked its 13th and 3rd straight earnings and sales beat, respectively in first-quarter fiscal 2018, wherein both top and bottom lines grew year over year.
Results were aided by contributions from BECCA and Too Faced. Moreover, the company witnessed strength across nearly all regions and product categories, with skin care and China standing out. Growth in travel retail and online channels also remained strong.
Management expects continued growth opportunities in the global prestige beauty industry, which encouraged it to raise its outlook. However, soft retail traffic in the United States remains a hurdle. Also, management remains cautious about other economic and political issues that can affect consumer spending.
Shares of Buy-rated Broadcom have handily beaten the technology sector as well as the red-hot semiconductor space in the year-to-date period, gaining +61%. The company is benefiting from strong demand of its wireless solutions, which is expected to continue in the fiscal fourth quarter. Broadcom now expects fourth-quarter revenue growth to be in the double-digit range on a year-over-year basis, much similar to the second and third quarter.
However, gross margin is expected to contract slightly due to unfavorable product mix (higher mix of low margin wireless business). The company recently completed the long-pending Brocade acquisition, which is positive for the stock.
Moreover, the company made an unsolicited bid for Qualcomm, which was rejected. Nevertheless, the company intends to pursue the Qualcomm deal more aggressively and is also planning to redomicile in the United States.
General Dynamics’ shares have gained +14.8% over the last one year, underperforming the Zacks Aerospace - Defense industry, which increased +29.5% over the same period. However, the company’s diverse portfolio of products and services along with its wide customer base provides it with an opportunity to generate solid revenues from different sources.
General Dynamics is one of the only two contractors in the world equipped to build nuclear-powered submarines. Moreover, the fiscal 2018 defense policy bill, which includes provisions to spend $6 billion on Navy shipbuilding, will surely boost the company's growth trajectory.
However, the company operates in a highly competitive market and has to rely on other companies to provide materials, components and subsystems for its products. It also faces foreign currency fluctuations.
Other noteworthy reports we are featuring today include Roche (RHHBY), Carnival (CCL) and Barclays (BCS).
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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>>>