Today's Must Read
Strong International Business, Balance Sheet Aids Visa (V)
Chevron (CVX) Buoyed by Cash Flow Amid U.S. Output Headwind
Altria (MO) to Benefit From Strength in Smokeless Products
Tuesday, February 6, 2018
The Zacks Research Daily presents the best research output of our analyst team. Today's Research Daily features new research reports on 17 major stocks, including Apple (AAPL), Visa (V), Chevron (CVX) and Altria (MO). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Apple’s shares are up +20.1% over the last one year, outperforming the S&P 500 (up +16.1%) and in line with the Zacks Technology sector (up +20.1%). Apple reported strong earnings and top-line growth in first-quarter 2018. The company’s top-line growth benefited from iPhone X’s higher average selling price (ASP), which offset sluggish unit sales growth. Paid subscriber base grew in the Services segment, which reflected strength in portfolio.
Going forward, the Zacks analyst thinks Apple’s foray into fast-growing technologies like autonomous vehicles and artificial intelligence (AI) & AR/VR will drive growth in the long haul. Moreover, Apple’s new investment plan will boost its subscription-based services business and put an end to the criticism it is facing for not creating enough jobs in the United States. However, sluggish demand for iPhone X remains a concern amid intensifying competition from cheaper Chinese handset-makers.
Shares of Buy-rated Visa have marginally outperformed the Zacks Financial Transaction Services industry over the last one year (+35.5% vs. +34.9%). Visa’s first-quarter fiscal 2018 results beat earnings estimates and were up year over year. Growth of key business drivers, payments volume, cross model volume and process transactions remained strong and stable across the globe.
Numerous strategic acquisitions and alliances, technology upgrades and effective marketing have paved the way for the company's long-term growth that have led to consistent revenue growth over the past several years. Visa is well poised to gain from the growing electronic payment processing and strong international business. A solid balance sheet ensures effective capital deployment.
The stock has seen the Zacks Consensus Estimate for current-year earnings revised 3.1% upward over the last seven days. Nevertheless, high client incentives, forex volatility are some of the headwinds.
Chevron’s shares have risen +2.6% in the past six months, underperforming the Zacks Integrated Oil industry's +7.7%, despite being a beneficiary of the recovery in commodity prices. In particular, the stock slumped more than 5% after missing fourth-quarter estimates badly. Nevertheless, Chevron saw strong profit growth in its upstream unit on better price realizations.
More importantly, Chevron was able to bolster its cash from operations -- something investors really want right now. The improving cash position allowed the company to raise its dividend by almost 4%. However, the Zacks analyst remains worried over disappointing earnings in Chevron's international refining business, while signs of headwinds in U.S. production pose additional risk. Hence, investors are advised to wait for a better entry point before buying shares in the oil major.
Shares of Buy-rated Altria have outperformed the Zacks Tobacco industry in the last six months (+0.1% vs. -6.4%), aided by expansion in the smokeless products category. Altria has been progressing well with expansion in the smokeless products category, which has helped it surpass the industry in the past six months.
Notably, the company’s flagship MarkTen brand is now a leading U.S. e-vapor brand, with a substantial retail market share. These factors fueled Altria’s smokeless product revenue in fourth-quarter 2017, wherein earnings kept its stellar year-over-year growth trend intact. Results were backed by solid pricing, higher OCI and lower tax rates, stemming from recent tax reforms.
However, rising health consciousness and stern government regulations to curb tobacco consumption has been hurting cigarette volumes and denting Altria’s top line for quite some time. Moreover, the Wine category remains sluggish due to stiff competition. Nonetheless, investments in key growth areas, efforts to lift Marlboro’s share and expected gains from tax reforms led to a robust earnings view.
Other noteworthy reports we are featuring today include Anthem (ANTM), Schwab (SCHW) and Roche (RHHBY).
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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>>>