Today's Must Read
Caterpillar (CAT) Rides on Buoyant Global Demand, Cost Cuts
Schlumberger's (SLB) Higher Fracking Work Counters Debt Load
Wednesday, February 7, 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 Wells Fargo (WFC), Caterpillar (CAT) and Schlumberger (SLB). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Buy-rated Wells Fargo’s shares have underperformed the Zacks Major Banks industry over the last six months (+8.7% vs. +13.5%). Yet, the company has a decent earnings surprise history. The company surpassed expectations for earnings in two out of the trailing four quarters.
Wells Fargo’s fourth-quarter 2017 adjusted earnings improved from the prior-year quarter. Notably, results recorded tax benefit related to the Tax Cuts & Jobs Act. Recently, Wells Fargo has been slapped with new sanctions including a cap on its assets position related to its past misconducts and its outlook has been downgraded to negative by Moody’s.
While the current crisis related to the revelation of illegally opening millions of illegal accounts in 2016 at the company will take some time to alleviate, the Zacks analyst thinks consistent growth in loans and deposits, lower tax rate and expansions will likely support its growth profile.
Shares of Buy-rated Caterpillar have gained +68.3% over the past one year, outperforming the Zacks Construction and Mining industry which has increased +65.6% over the same period. Caterpillar’s Q4 adjusted earnings per share (EPS) surged 160% and revenues jumped 35%, on a year-over-year basis – the fourth consecutive quarter of growth in both metrics, after a string of dismal performances. December retail sales rose 34%, at levels last seen in August 2011.
Backed by strong order rates, lean dealer inventories and strong backlog, Caterpillar projects EPS in $8.25-$9.25 range for 2018, a 27% year-over-year rise at the mid-point. The Construction segment will benefit from continued improvement in North American residential, non-residential and infrastructure markets.
Rising commodity prices will drive Resource Industries and Energy & Transportation’s revenues. Ongoing cost cutting efforts and additional investments in expanded offerings and services will drive growth.
Schlumberger’s shares have lost -12.4% over the last one year, following the Zacks Oil and Gas Field Services industry’s -22.5% decline. Further, it has underperformed rival Halliburton (-8.7%) over the same period. The Zacks analyst stresses that Schlumberger is the largest oilfield services player in the world with presence in every energy market across the world.
Also, in all the operating business segments, the company is among the top players. The firm has been banking on growing hydraulic fracturing work in the North American land market. Schlumberger’s consistent efforts toward strengthening technologies helped it serve complex oilfield services projects globally.
The company is also expected to generate significant cashflow from the Palliser Block project where it is assisting Torxen Energy in setting up more than 1,600 oil wells. However, since 2015, Schlumberger’s long-term debt load increased considerably. Moreover, the company’s cash balance declined 45% year-over-year in 2017, reflecting significant balance sheet weakness.
Other noteworthy reports we are featuring today include Vertex (VRTX), Roper (ROP) and Republic Services (RSG).
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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>>>