Today's Must Read
Salesforce (CRM) Rides on Strong Product Portfolio & Buyouts
Rising Rates Aid Schwab (SCHW), Higher Personnel Costs a Woe
Friday, December 15, 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 Berkshire Hathaway (BRK.B), Salesforce (CRM) and Schwab (SCHW). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Berkshire Hathaway’s shares have gained +20.6% year to date, outperforming the Zacks Property and Casualty Insurance industry which increased +16.9% during the same period. The Zacks analyst likes it inorganic story which has yielded impressive strategic acquisitions.
Continuous investment through strategic buyouts testifies confidence in business environment in the Trump era. The company’s strong cash position allows it to make earnings-accretive bolt-on acquisitions. Demand for utilities is expected to rise in the future and drive earnings growth. Continued insurance business growth also fuels increase in float. A sturdy capital level further adds impetus to the company.
However, the company’s insurance business generates maximum return on equity and thus exposure to catastrophe loss remains a concern. Huge capital expenses on account of railroad operations remain headwinds. Capital expenditure is estimated at $2.6 billion for the remainder of 2017. Also there was no earnings momentum over the last 30 days.
Shares of Salesforce shares have handily beat the broader Tech sector this year, with the stock up almost double the Zacks Technology sector's +26.8% gain in the year-to-date period. Salesforce reported stellar Q3 results and provided a strong outlook.
The Zacks analyst is also encouraged by the company’s announcement of achieving $10 billion in sales in FY18. The company’s diverse cloud offerings and strong spending on digital marketing remain the catalysts. Additionally, strategic acquisitions and the resultant synergies are anticipated to prove conducive to growth over the long run. Furthermore, the company’s move to utilize Amazon’s data center’s geographical reach to expand its international business is commendable and will help it in achieving its targeted $20 billion sales mark in next few years as well. Nonetheless, stiff competition, currency fluctuations and an increase in investments for international expansions and data centers could negatively impact near-term profitability.
Schwab’s shares have outperformed the Zacks Investment Brokers industry over the last three months, gaining +23.5% vs +14.5%. The performance was supported by impressive earnings surprise history, as the company did not lag the Zacks Consensus Estimate in any of the trailing four quarters. The company 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, 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 is a major concern.
Other noteworthy reports we are featuring today include BNY Mellon (BK), SunTrust Banks (STI) and Kellogg (K).
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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>>>