Today's Must Read
Netflix (NFLX) Gains From Solid Content, Subscriber Growth
Improving Demand, Cost Cuts Fuel Caterpillar's ???(CAT) Growth
Wednesday, April 18, 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 UnitedHealth (UNH), Netflix (NFLX) and Caterpillar (CAT). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
UnitedHealth’s shares have outperformed the Zacks Medical Insurance industry over the last three months (down -2.0% vs. -2.9%). UnitedHealth Group yet again delivered a positive earnings surprise with first-quarter bottom line beating estimates and increasing year over year on higher revenues and membership growth.
Additionally, each of the company’s business delivered double-digit earnings growth. The Zacks analyst likes its robust Government business and continued strong performance at Optum, which are together driving long-term growth. Its international business and strong capital position driving business investment are the other positives.
The company has been witnessing an increase in membership over the past many years. It again lifted its 2018 earnings guidance, buoying optimism among investors in the stock. However, membership loss in its fee-based commercial as well as Brazilian businesses will contract the overall membership growth for UnitedHealth Group. Additionally, higher medical care ratio raises concern.
Shares of Buy-rated Netflix have increased +140.5% over the last year, significantly outperforming the Zacks Broadcast Radio and Television industry’s gain of +26.6% during the same period. Netflix’s first-quarter results benefited from its robust library of original content that helped in expanding international subscriber base.
The company’s efforts to attract viewers through investments in regional programming resulted in better-than-expected net addition of subscribers. Increase in paid membership despite a rise in subscription charges shows its competitive edge. Netflix now has 125 million subscribers globally.
The Zacks analyst thinks continuing subscriber additions and expanding content portfolio are the key catalysts that will help Netflix to sustain growth going forward. However, increasing market spend and higher investments on original/acquired content will continue to hurt profitability, at least in the near term. Also, saturation in the domestic market poses concern.
Caterpillar’s shares have gained +64% over the past year, outperforming the Zacks Construction and Mining industry which has increased +61.5% over the same period. 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 demand 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.
Moreover, earnings estimates have been going up ahead of first-quarter earnings release. The company also has positive record of earnings surprises in recent quarters.
Other noteworthy reports we are featuring today include Halliburton (HAL), M&T Bank (MTB) and Infosys (INFY).
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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>>>