Today's Must Read
AIG Gains from Divestitures, Commercial Business Ails
Unit Revenue Growth, Dividends & Buybacks Aid Delta (DAL)
Monday, March 12, 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 Visa (V), AIG (AIG) and Delta (DAL). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Buy-rated Visa’s shares have marginally underperformed the Zacks Financial Transaction Services industry over the last one year (+38.2% vs. +38.6%). But Visa’s key business drivers, payments volume, cross model volume and process transactions remained strong and stable across the globe.
Numerous strategic acquisitions and alliances, technology upgrades and effective marketing have paved the way for its long-term growth that have led to consistent revenue growth over the past several years. The Zacks analyst thinks Visa is well poised to gain from the growing electronic payment processing and strong international business.
A solid balance sheet ensures effective capital deployment. Visa's first-quarter fiscal 2018 results beat the estimates and were up year over year. Nevertheless, high client incentives, forex volatility are some of the headwinds.
Shares of AIG have underperformed the Zacks Multi-Line Insurance industry over the last three months, losing -4.1% vs. -3.6%. AIG’s fourth-quarter 2017 earnings missed the Zacks Consensus Estimate and deteriorated from the year ago quarter.
The underperformance stemmed from the negative impact of huge catastrophe losses and low premium in the General Insurance segment. However, the Zacks analyst thinks a number of asset sale and business divestitures made over the past many years have streamlined the company to some extent.
Recently, the insurance giant appointed Brian Duperreault as its new CEO with expectations of improving operations by completing ongoing restructuring initiatives and making additional changes. The company has been suffering from tough market conditions and its massive size with numerous uncorrelated businesses creating little or no synergy. Weakness in its General Insurance segment and an exposure to catastrophes continue to remain concerns.
Buy-rated Delta’s shares rallied +18.5% over the last one year, outperforming the Zacks Airline industry's +17.4% gain. Delta has been performing well on the unit revenue front and is expected to continue doing so in 2018 as well.
Notably, it expects total unit revenues (excluding refinery sales) to increase in the band of 2.5% to 4.5% (on a year-over-year basis) in the first quarter of 2018. The company's efforts to reward shareholders are also impressive. In 2017, it returned $2.4 billion to shareholders.
The Zacks analyst also likes the company's initiatives to reduce its debt levels. The new tax law, which reduces its corporate tax rate significantly, is anticipated to aid the company’s performance, going forward.
However, high fuel costs do not bode well for the company. Fuel price, including taxes and refinery impact, is envisioned between $2.05 and $2.10 per gallon in the first quarter of 2018.
Other noteworthy reports we are featuring today include Public Service Enterprise (PEG), Square (SQ) and Mohawk (MHK).
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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>>>