Today's Must Read
New Products, Acquisitions to Support J&J's (JNJ) Top-Line
Exxon's (XOM) Solid Downstream Margin Offsets Drilling Costs
Thursday, December 14, 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 Microsoft (MSFT), Johnson & Johnson (JNJ) and ExxonMobil (XOM). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Microsoft’s shares have outperformed the Zacks Technology sector in the year to date period (up +37.3% versus +27%) The Zacks analyst expects rapid adoption of Azure and Office 365 to remain the key catalysts for Microsoft in the near future. This, along with lower spending will drive operating margin expansion in fiscal 2018. Further, collaborations with the likes of Amazon, Red Hat, Symantec, Cray and PAREXEL are positive for the company's growth prospects.
Microsoft’s strategic initiatives to enter the augmented reality and virtual reality market with the acquisition of Altspace VR and launch of mixed reality headsets will be other positives. Additionally, its recent blockchain deals with Hapoalim and Accenture and its Coco framework are tailwinds. However, intense competition from Sony’s PS4 is a major headwind. Additionally, declining PC shipments doesn't bode well for the company.
Shares of Johnson & Johnson have gained +24.1% in the year-to-date period, outperforming the +17.7% gain of the Zacks Large Cap Pharmaceuticals industry. Sales in J&J’s domestic Pharma segment decelerated in the first half of 2017 as a number of key growth drivers like Remicade and Concerta are facing competition. However, sales growth accelerated in Q3 and the positive trend is expected to continue in Q4.
The Zacks analyst thinks new products in all segments, label expansion of drugs like Imbruvica and Darzalex and contribution from recent acquisitions -- mainly Actelion -- can support top-line growth. Meanwhile, share buybacks and the restructuring initiative should provide bottom-line support. J&J is also making rapid progress with its pipeline and line extensions.
However, headwinds like generics, pricing pressure and soft global market conditions remain. Sluggish growth in the Consumer segment is also a concern.
ExxonMobil’s shares have underperformed the Zacks Integrated Oil industry (-7.9% vs. +5.2%) as well as peer Chevron (+1.9%) 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. However, dependence on costly offshore drilling might dent ExxonMobil’s cashflow.
Other noteworthy reports we are featuring today include American Airlines (AAL), BHP Billiton (BHP) and Honda (HMC).
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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>>>