Today's Must Read
Enbridge's (ENB) C$22B Project Backlog to Offset Debt Load
ADP Rides on Strategic Business Moves, Strong Balance Sheet
Thursday, April 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 IBM (IBM), Enbridge (ENB) and ADP (ADP). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
IBM’s shares have underperformed the broader market on a year-to-date basis, losing -8.4% vs. the S&P 500’s +13.7% gain. IBM provides advanced information technology solutions, including computer systems, software, storage systems and microelectronics. Strength in cloud, security and analytics as well as cost savings bodes well for company’s top-line and bottom-line.
The company has been gaining a lot of traction in emerging markets. Accretive acquisitions have expanded company’s product portfolio into higher-growth segments, such as Cloud computing and Big Data. Further, expanding footprint in the rapidly growing blockchain market is a positive. Estimates have been stable lately ahead of the company’s Q1 earnings release.
Nevertheless, IBM is having a tough time, given the ongoing and heavily time-consuming business model transition to cloud. Modest IT spending growth along with foreign exchange volatility is a concern. Intensifying competition in most of the markets is a major headwind.
Shares of Enbridge have declined -24.5% over the last year, underperforming the Zacks Oil Pipeline industry’s loss of -17.5% during the same period. Enbridge has the longest and most sophisticated crude and liquids pipeline system in the world that spreads over 17,511 miles.
The Zacks analyst likes the merger with Spectra Energy as it has made Enbridge the largest energy infrastructure company in North America in terms of enterprise value. The company’s huge backlog of growth projects that stands at roughly C$22 billion along with the C$12 billion worth midstream projects that are online will help it drive dividends by 10% annually through 2020.
However, the company’s substantial debt load is a matter of concern. During 2017, long-term debt rose more than 70% while cash balance declined almost 73%, reflecting weak financials.
Buy-ranked ADP's shares have gained +14.2% over the last year, underperforming the Zacks Outsourcing industry, which has gained +18.2% over the same period. ADP has been focused on streamlining its business to strengthen core-operations in the long run. To this end, the company has divested a number of its divisions in the past few years.
Further, the Zacks analyst stresses that ADP holds a dominant position in the payroll processing and HCM market, primarily due to its robust product portfolio. Acquisitions have also been a key growth catalyst for ADP. The company’s strong balance sheet enables it to continue with its shareholder friendly activities alongside strategic buyouts and investments on product development.
However, investments in new initiatives may continue to weigh on its bottom-line results. Moreover, rising unemployment levels will negatively impact the company. Increasing competition is another major headwind.
Other noteworthy reports we are featuring today include Marathon Petroleum (MPC), Motorola Solutions (MSI) and United Continental (UAL).
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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>>>