Today's Must Read
Volume Growth Buoys Union Pacific (UNP) Amid High Costs
Mondelez's (MDLZ) Margins Strong on Cost Saving Initiatives
Monday, May 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 Texas Instruments (TXN), Union Pacific (UNP) and Mondelez (MDLZ). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Strong Buy-ranked Texas Instruments’ shares have gained +31.8% in the last year, underperforming the Zacks General Semiconductor industry which has gained +58.4% over the same period. However, Texas Instruments reported strong first quarter results on the back of strength in auto and industrial markets.
The Zacks analyst likes the fact that the company continues to prudently invest its R&D dollars in several high margin, high-growth areas of the analog and embedded processing markets. This is gradually increasing its exposure to industrial and automotive markets and dollar content at customers, while reducing exposure to volatile consumer/computing markets.
Margins continue to expand on secular strength in the auto and industrial markets and manufacturing efficiencies that include growing 300-millimeter Analog output. Continuous dividend hike is a big positive. However, increasing competition, unfavorable currency effect and a high debt load remain concerns.
Shares of Union Pacific have outperformed the Zacks Rail industry (+13.9 vs. +8.6%) as well as fellow railroad operator Norfolk Southern Corp. (+11.3%) over the last year. Ushering in further good news, the company reported better-than-expected earnings per share and revenues in the first quarter of 2018. Both the metrics also improved year over year.
Apart from higher freight revenues, volume growth and lower tax rates aided results. Efforts to reward shareholders are also encouraging. Additionally, efforts of the company toward promoting safety are commendable. However, Union Pacific’s decision to withdraw its operating ratio guidance of around 60% in 2019 due to operational issues raises concerns. Other factors like high operating expenses and debt levels are worrisome as well.
Mondelez’s shares have lost -12.8% in the last year, outperforming the -17.4% decline of the Zacks Food Preparation industry. Mondelez reported first-quarter 2018 results, with earnings and revenues beating the consensus mark. The company posted impressive results on the back of strong performance in Asia, Middle East & Africa and Europe.
Adjusted earnings grew 9.6%, primarily driven by favorability on interest and less number of shares outstanding. Net revenues increased 5.5 % driven by currency tailwinds. Emerging markets’ net revenues rose 7.6% and the same for Power Brands rose 8.2%. Regionally, Asia, Middle East & Africa and Europe registered an increase of 3.4% and 14.4% in revenues, respectively.
However, revenues in the North America and Latin America declined 1.3% and 2.1%, respectively. Also, gross margin was down 110 basis points (bps) due to unfavorable mix, higher commodity costs and freight inflation.
Other noteworthy reports we are featuring today include Estee Lauder (EL), MetLife (MET) and Marsh & McLennan (MMC).
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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>>>