Today's Must Read
Visa (V) Rides on Acquisitions, Technological Enhancement
Interest Income Aids Wells Fargo (WFC), Legal Issues Linger
Wednesday, May 2, 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 Chevron (CVX), Visa (V) and Wells Fargo (WFC). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Chevron’s shares have risen +8.5% in the past six months, outperforming the Zacks Integrated Oil industry's +6.1% increase, while larger rival ExxonMobil has seen its scrip go down -7.5% over the same time period. The supermajor has been a beneficiary of the recovery in commodity prices, which helped its upstream unit profits to double from a year ago.
Chevron’s high-quality Permian acreage continues to drive production. Importantly, cash flow from operations, at $5 billion, was more than $1 billion higher than a year ago.
However, the Zacks analyst remains worried over drop in its downstream segment earnings on weaker margins, while exposure to production in the vulnerable and violence-prone regions in Nigeria poses additional risk. Hence, investors should wait for a better entry point before buying shares in Chevron.
Shares of Visa have outperformed the Zacks Financial Transaction Services industry over the last year (+37.9% vs. +33.4%). Visa’s second-quarter fiscal 2018 earnings beat expectations by 9.9% and was up 30% year over year. Results were driven by strong growth in payments volume, cross-border volume and processed transactions as a strong economy and a positive consumer sentiment led to higher spending.
Numerous strategic acquisitions and alliances, technology upgrades and effective marketing have paved the way for its long-term growth and consistent revenue improvement. The Zacks analyst thinks Visa is well poised to gain from growing electronic payment processing and strong international business.
A solid balance sheet ensures effective capital deployment. The stock has seen the Zacks Consensus Estimate for current-year earnings being revised 1.6% upward over the last seven days. Nevertheless, high client incentives might put pressure on revenues.
Wells Fargo’s shares have underperformed the Zacks Major Banks industry over the last six months (-6.7% vs. +1.9%). However, the company possesses a decent earnings surprise history, having beaten the expectations in two of the trailing four quarters.
The company’s first-quarter 2018 earnings reflected lower provisions and higher interest income, partly offset by elevated interest expense and lower mortgage revenues. Recently, the bank entered into a consent order with OCC and CFPB for paying $1 billion as civil penalty related to auto-loan issues.
Also, Wells Fargo was slapped with new sanctions, including a cap on the assets position by the Federal Reserve. Though continued growth in loans and deposits, lower tax rate and expansions will likely support the bank’s growth profile, the crisis related to the revelation of illegally opening millions of illegal accounts in 2016 will take some time to alleviate.
Other noteworthy reports we are featuring today include Toyota (TM), Weyerhaeuser (WY) and Expedia (EXPE).
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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>>>