Today's Must Read
Philip Morris' (PM) Reduced Risk Products to Fuel Top Line
3M (MMM) Focuses on Key Levers for Higher Organic Growth
Tuesday, January 23, 2018
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), Philip Morris (PM) and 3M (MMM). 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 over the last year (up +41.6% versus +29.5%) The company is dealing with the recent security bug which poses a huge risk for users. In this context, it is rolling out patches to fix Windows kernels in order to address the vulnerability.
Additionally, Microsoft’s recent blockchain deals with Hapoalim and Accenture and its Coco framework are tailwinds. The Zacks analyst expects rapid adoption of Azure and Office 365 to remain the key catalysts in the near future. 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 also be positives. However, intense competition from Sony’s PS4 is a headwind.
Shares of Philip Morris have underperformed the Zacks Tobacco industry over the last six months (-8.4% vs. -2.9%). Though the company has been benefiting from enhanced volumes and revenues in the reduced risk products category, it has been suffering majorly due to consistent declines in cigarette volumes stemming from the shift of customer preference away from tobacco products.
Owing to such headwinds, Philip Morris continued with its drab performance in third-quarter 2017, wherein both earnings and revenues lagged the Zacks Consensus Estimate. These factors also compelled management to lower its 2017 view.
However, the Zacks analyst likes Philip Morris’ consistent efforts to improve the performance of its low risk products. In this category, the company’s IQOS smokeless cigarette has been steadily expanding owing to consumer demand. Higher cigarette pricing has also been favoring the company.
Buy-rated 3M’s shares have gained +5.8% over the past three months, outperforming the Zacks Diversified Operations industry, which has declined -1.9% over the same period. The Zacks analyst likes 3M's global footprint, diversified product portfolio and ability to penetrate different markets.
The company’s ability to convert high R&D spends into up-cycle market share gains and strong pricing power determines its success. It remains focused on inventing new products, giving it a competitive advantage worldwide. Portfolio management, investment in innovation and business transformation are the three key levers on which the company intends to focus on.
3M also intends to continue investing in capital expenditures and R&D to support organic growth as it aims a prudent capital structure strategy and increased capital deployment. However, as exports form a significant part of the company’s operations and growth prospects, sustained strength in U.S. dollar will continue to negatively impact the company’s earnings in the short-term.
(You can read the full research report on 3M here >>>).
Other noteworthy reports we are featuring today include Stryker (SYK), Schlumberger (SLB) and TJX Companies (TJX).
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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>>>