Today's Must Read
ConocoPhillips (COP) Banks on Eagle Ford Acreage, Debts High
Alibaba (BABA) Drives On Retail Strategy; Investments Hurt
Friday, May 11, 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 Philip Morris (PM), ConocoPhillips (COP) and Alibaba (BABA). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Philip Morris’ shares have underperformed the Zacks Tobacco industry over the last six months (-19.8% vs. -17.5%) due to persistent declines in cigarette volumes, stemming from consumers’ rising health consciousness and stringent government regulations on tobacco products. These factors, which have been marring cigarette industry volumes for a while now, led to a 5.3% drop in Phillip Morris’ cigarette volumes during first-quarter 2018.
Nevertheless, solid revenues from the reduced risk products (RRPs) category are a major driver for Phillip Morris. The company is making constant efforts to expand in the space. In fact, the top and the bottom line grew year over year during the first-quarter, courtesy of favorable cigarette pricing and solid RRP performance, with the latter being driven by consistent success of IQOS. Management uplifted its earnings view for 2018, as it expects recent tax reforms to aid bottom-line growth.
Shares of ConocoPhillips are up +47.6% over the last year, outperforming the Zacks U.S. Integrated Oil industry, which has gained +33.6% over the same period. The Zacks analyst likes the company’s initiative to divest non-core assets as the explorer could divert the proceeds toward oil-rich Eagle Ford and Bakken shale plays.
Significant opportunities are left for ConocoPhillips in the Eagle Ford where it owns 3,400 undrilled locations that could lend access to almost 2.3 billion barrels of oil equivalent estimated potential reserves. The company recently reported strong first-quarter 2018 results, courtesy of higher oil and natural gas price realizations.
However, we are cautious about ConocoPhillips’ expectations of a rise in production and operating expenses. Moreover, ConocoPhillips’ long-term debt is more than double its cash balance, which is a concern.
Alibaba’s shares have outperformed the Zacks Electronic Commerce industry over the last year, gaining +62.8% vs. +48.6%. The company's fiscal fourth quarter results were driven by strong momentum in the company’s core e-commerce business, New Retail strategy and expanding cloud business.
Its recent investment in Lazada will expand its presence in Asia. The Zacks analyst likes the company's solid growth in the company’s core e-commerce business, strong growth in metrics, expanding cloud business and international strength.
Other drivers include strong mobile strength and its continued efforts to develop new products. However, macro headwinds, continued investments and increasing competition from Tencent Holdings and Baidu remain the overhangs.
Other noteworthy reports we are featuring today include Anthem (ANTM), Activision Blizzard (ATVI) and Marriott (MAR).
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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>>>