Today's Must Read
Shell (RDS.A) Buoyed by Return to Full Cash Dividend
Oracle (ORCL) Drives on Robust Cloud-based Product Portfolio
Wednesday, December 6, 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 ExxonMobil (XOM), Oracle (ORCL) and Shell (RDS.A). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Strong Buy-rated ExxonMobil’s shares have underperformed the Zacks Integrated Oil industry (-8.2% vs. +4.3%) as well as peer Chevron (+2.2%) in the year to date period. However, ExxonMobil has a leading position in the energy industry owing to the size and diversity of its asset base, both in terms of business mix and geographical footprint. With a stable cash position, the company’s balance sheet is one of the best in the industry, reflecting declining debt load over the first nine months of 2017.
The Zacks analyst likes ExxonMobil’s plans to combine its refining & marketing businesses as this will allow the company to take better decisions and boost performance. ExxonMobil will generate more cashflow from downstream activities, also helping it counter the volatility in its upstream business.
Moreover, ExxonMobil’s decision to invest in the pre-salt Carcara oil field, comprising as much as 2 billion barrels of high-quality recoverable oil reserves, will boost the company’s production.
Shares of Oracle have underperformed the Zacks Software industry year-to-date, gaining +24.8% vs. +31.8%. The company’s soft outlook for the second quarter reflects intensifying competition from Microsoft Azure and Amazon Web Services (AWS) in the cloud. Moreover, higher investments on PaaS and IaaS will keep margins under pressure in the near term.
Nevertheless, the Zacks analyst thinks the company is benefiting from significant momentum in SaaS offerings. Oracle claims that it is wining market share against salesforce.com and Workday, which is a significant growth driver. Further, the company’s growing cloud market share will continue to drive top-line growth in the foreseeable future.
Moreover, the next-generation autonomous database, which is supported by machine learning, is a key catalyst. Additionally, the company has positive record of earnings surprises in recent quarters.
Shell’s shares have gained +17.7% year to date, substantially outperforming the +4.3% rally of the Zacks Integrated Oil industry, with shares getting a boost from the restoration of its full-cash dividend and strong Q3 earnings report. The integrated behemoth recently announced plans to resume full-cash dividend payouts and share repurchase program, signaling the success of its cost-containment efforts and divestment strategies.
The company’s solid third-quarter results also underscore the fact that it has successfully adapted itself to thrive at $50-barrel crude. Importantly, the Anglo-Dutch company generated healthy cash flows yet again, allowing it to cut debt and cover its cash dividend.
However, with production volumes going down, Shell's near-to-medium term revenue outlook remains cloudy. Hence, the Zacks analyst thinks investors should wait for a better entry point before buying shares in Europe's largest oil company.
Other noteworthy reports we are featuring today include HP (HPQ), Tyson Foods (TSN) and T. Rowe Price (TROW).
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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>>>