Today's Must Read
Fierce Competition Weighs on McDonald's (MCD) Sales Efforts
Broadcom (AVGO) Drives on Wireless Products & Acquisitions
Wednesday, March 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 Merck (MRK), McDonald's (MCD) and Broadcom (AVGO). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Merck’s shares have underperformed the Zacks Large Cap Pharmaceuticals industry over the past year, losing -17.5% versus a gain of +8.4%. The Zacks analyst thinks Merck’s new products like Keytruda, Lynparza, and Bridion should continue to contribute meaningfully to the top line in 2018.
Keytruda sales are gaining strong momentum with approval for additional indications especially in the first-line lung cancer setting as it is the only anti-PD-1 approved in this setting. Animal Health unit is also strong and remains a core growth driver for Merck.
Meanwhile, Merck will continue to focus on cost-cutting initiatives to drive the bottom line. However, generic competition for several drugs and pricing pressure will continue to be overhangs on the top line. Rising competitive pressure on the diabetes franchise and on products like Isentress (HIV), Zepatier (HCV) and Zostavax (vaccine) will remain headwinds in 2018.
Shares of McDonald's have gained +18% over the past year, outperforming the Zacks Restaurants industry which has gained +11.6% over the same period. Notably, growing guest count remains McDonald’s top priority and it is undertaking various sales and digital initiatives to this end.
As a result, Q4 marked the fourth consecutive quarter of comparable guest count growth for the company. Increased focus on delivery, enhancement of digital capabilities, and accelerated deployment of Experience of the Future restaurants in the United States will drive growth.
In fact, global comps at McDonald’s have been positive over the past nine quarters. Meanwhile, augmented focus on refranchising will cut the company’s capital requirements and facilitate EPS growth and ROE expansion in the long run.
Yet, higher costs along with currency headwinds may hurt profits. Also, a soft industry backdrop in the United States and macroeconomic concerns in some parts of the world might limit sales growth.
Broadcom’s shares have handily beaten the Zacks Electronics - Semiconductors industry over the past year, gaining +14.3% vs. +11.2%. 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.
Other noteworthy reports we are featuring today include Activision (ATVI), Rockwell Collins (COL) and Marvell Technology (MRVL).
Breaking News: Cryptocurrencies Now Bigger than Visa
The total market cap of all cryptos recently surpassed $700 billion – more than a 3,800% increase in the previous 12 months. They’re now bigger than Morgan Stanley, Goldman Sachs and even Visa! The new asset class may expand even more rapidly in 2018 as new investors continue pouring in and Wall Street becomes increasingly involved.
Zacks’ has just named 4 companies that enable investors to take advantage of the explosive growth of cryptocurrencies via the stock market.
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>>>