Today's Must Read
Dividends & Buybacks Aid Canadian National (CNI), Costs Ail
CVS Health (CVS) Rides on PBM, Aetna Deal Holds Promise
Tuesday, February 13, 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 Broadcom (AVGO), Canadian National (CNI) and CVS Health (CVS). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Buy-rated Broadcom’s shares have handily beaten the technology sector as well as the red-hot semiconductor space over the last one year, gaining +19%. Broadcom is benefiting from strong demand of its wireless solutions and expanding product portfolio, which makes it well-positioned to address the needs of rapidly growing technologies like IoT and 5G.
Broadcom has recently inked financing agreements with various institutions to fund Qualcomm’s proposed takeover. If completed, then this deal will make it the third-largest chipmaker, behind Intel and Samsung. The company also has strong ties with leading OEMs across multiple target markets that will help it to gain key insights into the requirements of customers.
Moreover, the upcoming launch of the next generation WiFi products is expected to be a growth driver for the segment. However, customer concentration, intensifying competition, integration risks due to frequent acquisitions and leverage balance sheet are key headwinds.
Shares of Canadian National have gained +7.4% over the last one year, but failed to outperform the Zacks Rail industry which gained +12.9% over the same period. Also, the company has underperformed Canadian Pacific Railway’s shares that have gained 17.6% in the same time period.
Adding to its woes, Canadian National reported lower-than-expected earnings per share and revenues in the fourth quarter of 2017. Deterioration in operating ratio owing to high labor and fuel costs also raise concerns. However, the volume growth witnessed in the quarter raises optimism.
The year-over-year increase in revenues and earnings per share bodes well for the stock as well. Moreover, the Zacks analyst is impressed by the 10% dividend hike announced by the company in January 2018.
CVS Health’s shares have been trading above the Zacks Drug Stores industry over the last year losing -11.2% vs. a decline of -16.7%. CVS Health ended the year 2017 on a solid note with a better-than-expected fourth-quarter performance.
The year-over-year growth in the top line was driven by a strong Pharmacy Services segment, benefiting from the upside in the specialty services. CVS Health’s strong 2018 PBM selling season is another upside. The Zacks analyst is also looking forward to an upbeat 2019 selling season.
Also, CVS Health’s plan to acquire Aetna might change the Healthcare landscape in the United States. On the flip side, the company has been suffering from softness in Retail/LTC business and a weak margin scenario. However, year-over-year Retail/LTC comparisons were still unimpressive. A weak margin scenario continues to put pressure on the bottom line.
Other noteworthy reports we are featuring today include Aflac (AFL), Marathon Petroleum (MPC) and DXC Technology (DXC).
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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>>>