Today's Must Read
Pfizer's (PFE) New Drugs, Cost Cuts & Low Tax to Aid Profits
Loan Growth Supports U.S. Bancorp (USB), High Costs a Woe
Tuesday, May 8, 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 Berkshire Hathaway (BRK.B), Pfizer (PFE) and U.S. Bancorp (USB). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Berkshire Hathaway’s shares have gained +20.6% in the last year, outperforming the Zacks Property and Casualty Insurance industry which increased +16.5% during the same period. Berkshire Hathaway’s first-quarter 2018 earnings soared 48.7% year over year, driven by lower effective tax rate.
Though revenues declined, lower costs limited the downside. The Zacks analyst thinks Berkshire’s inorganic growth story remains impressive with strategic acquisitions. A strong cash position allows it to make earnings-accretive bolt-on acquisitions. Demand for utilities is expected to rise in the future and drive earnings growth. Continued insurance business growth also fuels its float increases.
A sturdy capital level further adds an impetus to the company. The insurance business generates maximum return on equity but its exposure to catastrophe loss remains a concern. Huge capital expenses due to railroad operations also emerge as headwinds. Capital expenditure is estimated at $10 billion in 2018.
Shares of Pfizer have outperformed the peer group over the last three months (the stock is up +2.2% over this period vs. a -2.7% decline for the Zacks Large-Cap Pharmaceuticals industry). Pfizer beat estimates for earnings but missed the same for sales in the first quarter of 2018.
Pfizer is facing headwinds in the form of genericization of key drugs, supply challenges in the legacy Hospira portfolio, pricing pressure and rising competition, which are hurting the top line. Nonetheless, the Zacks analyst thinks new products like Ibrance, contribution from acquisitions, cost-cutting efforts, a lower tax rate and share buybacks should help the company achieve its guidance.
Pfizer also boasts a strong pipeline and expects approximately 25 to 30 drug approvals through 2022, including around 15 products that have blockbuster potential. Pfizer’s growing immuno-oncology portfolio offers a strong potential. Bavencio is being considered a key long-term growth driver for Pfizer.
U.S. Bancorp’s shares have underperformed the Zacks Major Banks industry over the last six months, losing -3.4% vs +6%. However, the company possesses an impressive earnings surprise history, beating expectations in three out of the trailing four quarters.
The company’s first-quarter 2018 earnings reflected rise in net interest income backed by easing margin pressure and higher fee income. Further, elevated average loans and deposit balances were tailwinds. The Zacks analyst thinks U.S. Bancorp's prospects will likely get support from its solid business model, core franchise, lower tax rate, rising interest rate and diverse revenue streams.
Also, the company’s organic growth remains solid and will likely benefit from the improving economic scenario. However, escalating expenses and litigations remain key concerns. Additionally, stretched valuation underlines limited upside potential.
Other noteworthy reports we are featuring today include Tesla (TSLA), CME Group (CME) and Celgene (CELG).
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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>>>