Today's Must Read
Enbridge (ENB) Banks on C$22B Project Backlog, Debts High
Cost Cuts Aid CSX Corporation (CSX), Automotive Unit Ails
Tuesday, May 15, 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 General Dynamics (GD), Enbridge (ENB) and CSX Corp. (CSX). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
General Dynamics' shares have underperformed the Zacks Aerospace – Defense industry in the last one year (+4% vs. +40.6%). General Dynamics started off 2018 on a mixed note, with its first-quarter earnings surpassing expectations, while its revenues missed the consensus mark. However, results remained impressive on a year-over-year basis.
Meanwhile, the company remains one of the only two contractors in the world equipped to build nuclear-powered submarines and its diverse portfolio of products and services. The Zacks analyst thinks General Dynamics’ latest acquisition of CSRA will enable the company to secure more government IT contracts.
However, the company operates in a highly competitive market and has to rely on other companies to provide materials, components and subsystems for its products. The company’s dependence on international sales for a major portion of its revenues exposes it to the risk of currency fluctuations and other geo-political risks.
Shares of Enbridge have declined -16.2% over the last one year, underperforming the Zacks Oil Pipeline industry’s loss of -10.7% during the same period. Enbridge has the longest and most sophisticated crude and liquids pipeline system in the world that spreads over 17,018 miles.
The Zacks analyst likes the merger with Spectra Energy as it has made Enbridge the largest North American energy infrastructure player. The company’s huge backlog of growth projects that stands at roughly C$22 billion along with the C$12 billion worth midstream projects that are online will help it drive dividend by 10% annually through 2020. Enbridge reported strong first-quarter 2018 results, thanks to higher liquid delivery volumes.
But the firm’s significant exposure to debt is a matter of concern. We are also worried about the company’s year-over-year higher gas distribution costs for first-quarter 2018.
CSX Corporation’s shares have gained +25.5% over the past six months, outperforming the Zacks Rail industry, which has gained +14.3% over the same period. Ushering in further good news, the company reported better-than-expected earnings per share and revenues in the first quarter of 2018. Both metrics also improved year over year.
Apart from lower costs, higher intermodal revenues aided results. Improvement in operating ratio is also a positive. Moreover, the Precision Scheduled Railroading system, implemented by the company's former CEO — E. Hunter Harrison — seems to be paying off. Efforts to reward shareholders are encouraging as well.
However, decline in overall volumes in the quarter is concerning. The automotive unit continued with its dismal performance, thus limiting volume growth. The company's high debt levels represent a further challenge.
Other noteworthy reports we are featuring today include AB InBev (BUD), Humana (HUM) and Vertex (VRTX).
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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>>>