Today's Must Read
Improving Demand, Cost Cuts Fuel Caterpillar's (CAT) Growth
Volume Growth, Dividends & Buybacks Aid Union Pacific (UNP)
Wednesday, February 14, 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 ExxonMobil (XOM), Caterpillar (CAT) and Union Pacific (UNP). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
ExxonMobil’s shares have underperformed the Zacks Integrated Oil industry (-6.1% vs. -0.2%) as well as peer Chevron (-2.7%) in the last three months. ExxonMobil has a leading position in the energy industry owing to the size and diversity of its asset base, both in terms of business mix and geographical footprint.
With a stable cash position, the company’s balance sheet is one of the best in the industry. The Zacks analyst likes the fact that the integrated energy firm has combined its refining & marketing businesses. This will allow the company to take better decisions and boost performance. ExxonMobil will generate more cashflow from downstream activities, also helping it counter the volatility in its upstream business.
However, ExxonMobil posted lower-than-expected results in fourth-quarter 2017. The company’s rising exploration expenses is cause for concern. During fourth-quarter 2017, ExxonMobil’s exploration cost surged more than 106%.
Shares of Buy-rated Caterpillar have gained +55.5% over the past one year, outperforming the Zacks Construction and Mining industry which has increased +53.2% over the same period. Caterpillar reported a rise of 34% in global retail sales for the three months ended January 2018, at par with the performance witnessed in December 2017 and 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.
Buy-rated Union Pacific’s shares have outperformed the Zacks Rail industry as well as fellow railroad operator Norfolk Southern Corporation over the last six months. While Union Pacific has gained 22.4%, the industry it belongs to and Norfolk Southern have rallied 10.3% and 16.9%, respectively, in the same time period.
Ushering in further good news, Union Pacific's earnings per share as well as revenues increased in the fourth quarter of 2017. Higher freight revenues on the back of volume growth contributed to the uptick.
Also, in February 2018, the company announced its decision to increase quarterly dividends which is encouraging. In fact, this is the company’s second dividend hike in three months. The new tax law is also a positive for the company. Its efforts to promote safety and enhance productivity are noteworthy as well. However, declining automotive volumes and high debt levels are concerning.
Other noteworthy reports we are featuring today include Anadarko (APC), Alexion (ALXN) and Sanofi (SNY).
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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>>>