Today's Must Read
Illinois Tool (ITW) to Benefit From Forex Gains & Tax Cuts
BNY Mellon (BK) Lower Margin Stress to Offset Fee Dependence
Monday January 29, 2018
The Zacks Research Daily presents the best research output of our analyst team. Today's Research Daily features new research reports on 14 major stocks, including Johnson & Johnson (JNJ), Illinois Tool Works (ITW), and Bank of New York Mellon (BK). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
You can see all of today’s research reports here >>>
Johnson & Johnson’s shares have gained +28.5% in the last one year, almost in line with the +29% gain of the Zacks Large Cap Pharmaceuticals industry. J&J's fourth-quarter results were mixed as it beat estimates for earnings while missing the same for sales. As expected, J&J’s sales growth accelerated in the second half backed by higher sales in the Pharmaceutical segment and improving performance in Medical Devices.
Though quite a few key products in J&J’s portfolio like Remicade and Concerta are facing generic competition, 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. However, headwinds like generics competition, pricing pressure, sluggish growth in the Consumer segment and soft global market conditions remain.
Shares of Buy rated Illinois Tool Works have outperformed the Zacks Industrial Machinery industry over the last three months, gaining +13.7% over the period versus the industry’s +11.7% gain. The Zacks analyst thinks the company is well positioned to benefit from its solid product portfolio and strengthening foothold in various end markets. Also, its strategic initiatives to improve margins and policy of rewarding shareholders handsomely will work in its favor. In fourth-quarter 2017, earnings of $1.70 per share surpassed expectations by 4.9%. For 2018, the company anticipates earnings to be within $7.45-$7.65 per share, reflecting 40 cents growth at mid-point. Organic revenue growth is expected to be 3-4% while total revenues are projected to be roughly within the $15-$15.2 billion range. Enterprise initiatives are likely to contribute 100 basis points (bps) to operating margin growth. Also, the company is working to increase its dividend payout rate to 50% in August 2018.
BNY Mellon’s shares have underperformed the Zacks Major Regional Banks industry in the last six months (+8.9% vs. +21.8%). The company’s earnings have surpassed expectations in two of the trailing four quarters. Its fourth-quarter 2017 results benefited from improvement in net interest revenues along with provision benefits. However, rise in expenses and lower fee income acted as headwinds. Easing margin pressure (driven by gradual higher interest rates) and rising loan demand are expected to further aid revenue growth. Also, potential lesser regulations, lower tax rates and cost-saving initiatives are likely to drive profitability. However, concentration risk arising from significant dependence on fee-based income remains a matter of concern for the company. If there are any changes in individual investment preferences, regulatory amendments or a slowdown in capital market activities, it could hurt the company’s financials.
Other noteworthy reports we are featuring today include Ford (F), Capital One Financial (COF) and Praxair (PX).
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Director of Research
Note: SherazMian 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>>>