Today's Must Read
Lowe's (LOW) Banks on Pro Customer Strategy, Margin a Concern
Expanding Portfolio, Strong Partner Base Aids VMware (VMW)
Tuesday, March 6, 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 Salesforce (CRM), Lowe’s (LOW) and VMware (VMW). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Buy-rated Salesforce’s shares have handily beat the broader Tech sector over the last year, with the stock up more than double the Zacks Technology sector's +23.3% gain. Salesforce reported stellar Q4 results and provided a strong outlook.
The Zacks analyst likes the fact that the company achieved the $10-billion mark in revenues faster than any other enterprise software company. The company’s diverse cloud offerings and strong spending on digital marketing remain key catalysts.
Additionally, strategic acquisitions and the resultant synergies are anticipated to prove conducive to growth over the long run. Furthermore, the company’s move of utilizing other data center operators like Amazon and Alphabet’s geographical reach to expand its international business is commendable and will help it in achieving its targeted $20 billion sales mark in next few years as well. Nonetheless, stiff competition and an increase in investments for international expansions and data centers could negatively impact near-term profitability.
Shares of Lowe’s have gained +6.8% over the last year, underperforming the Zacks Building Products industry, which has increased +17.1% over the same period. Lowe’s reported lower-than-expected fourth-quarter fiscal 2017 earnings and issued soft guidance for 2018.
The company’s revenues beat and comps growth failed to cushion the stock. For fiscal 2018, the company anticipates earnings per share in the band of $5.40-$5.50, which was sharply below analyst expectations. Of late, estimates are trending downwards. However, the Zacks analyst thinks improving job scenario, housing market recovery, merchandising initiatives and post hurricane construction activities along with efforts to enhance omni-channel capabilities bode well for Lowe’s.
The buyout of Maintenance Supply Headquarters is also strengthening relationship with Pro customers. Notably, Pro growth rate in the fourth quarter and fiscal 2017 have outpaced do-it-yourself (DIY). Also, Canadian and Mexican businesses have been doing quite well.
VMware’s shares have gained +32.3% over the last one year, underperforming the Zacks Software industry which is up +36.2% over the same period. VMware reported impressive fourth-quarter fiscal 2018 results. Both earnings and revenues increased on a year-over-year basis.
The company is benefiting from robust performance of its product offerings like NSX, vSphere and vSAN. The Zacks analyst thinks expanding product portfolio, partnerships with the likes of IBM, Amazon, Pivotal and Alphabet along with continuing enterprise deal wins continue to drive growth. However, several of the growth engines that the company is relying on could take longer to yield results. Thus, heavy spending on R&D may weigh on its margins.
Moreover, intensifying competition from Microsoft and Citrix Systems remains a headwind in the near term. Additionally, rumors of a reverse merger with parent Dell Technologies is expected to remain an overhang on the stock in the near term.
Other noteworthy reports we are featuring today include Allstate (ALL), Newmont (NEM) and Best Buy’s (BBY).
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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>>>