Today's Must Read
Upstream Startups, Ongoing Cost Savings Drives TOTAL (TOT)
Ford (F) Rides on Fitness Initiatives and Winning Portfolio
Thursday, May 17, 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 United Parcel Service (UPS), TOTAL (TOT) and Ford (F). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
United Parcel Service’s shares have underperformed the Zacks Air Freight and Cargo industry in the past year, gaining +13.1% vs +23%. Despite this unimpressive price performance, the company’s earnings per share and revenues surpassed expectations in first-quarter 2018. Both metrics also improved year over year.
Results were aided by the strong performance of its international segment. Robust e-commerce growth is a positive too. In February 2018, UPS had hiked quarterly dividends by 10%. The Zacks analyst thinks that a further uptick in such shareholder-friendly activities cannot be ruled out, in the light of the savings induced by the Tax Cuts and Jobs Act. In fact, UPS' solid free cash flow in first-quarter supports the possibility of a dividend hike in the near future.
However, high operating expenses continue limiting bottom-line growth. Also, UPS' 2018 capex forecast, which is higher than 2017 levels, is expected to weigh on the bottom line.
Shares of TOTAL have gained +17% in the last six months, outperforming the Zacks Integrated International Oil industry which has increased +14.4% over the same period. TOTAL’s earnings per share in the first quarter lagged expectations but surpassed the year-ago quarter’s earnings, due to strong operational performance, cost control and contribution from new projects.
The Zacks analyst thinks TOTAL is gaining from higher oil production and the improvement in commodity prices. Going forward, the company will benefit further from upstream startups and cost management initiatives. It continues to gain from the strategic acquisitions and non-core asset divestures. The company is utilizing its strong cash flow generating capacity to strengthen its balance sheet, pay dividend and buy back shares.
However, operations in some politically troubled regions and increasing competition could impact the company’s profitability. Due to its global presence, it is also exposed to risks associated with doing business abroad.
Ford’s shares have outperformed the Zacks Domestic Automotive industry over the last three months (+7.8% vs -6.4%). In first-quarter 2018, Ford’s adjusted earnings and revenues surpassed expectations. Both earnings and revenues were higher on a year over year basis.
The company’s fitness initiatives have identified an additional $11.5 billion of cost and efficiency opportunities, promising a better future. Also, Ford is focusing more on building up a winning portfolio and investing more on trucks, utilities and commercial vehicles. Also the acquisitions of Autonomic and TransLoc are critical for its mobility strategy.
However, frequent vehicle recalls to fix safety issues are adding to Ford's expenses and is also reducing consumers’ confidence in the brand. Also, rising metal prices are hurting its profit.
Other noteworthy reports we are featuring today include TD Ameritrade (AMTD), American Electric (AEP) and TELUS (TU).
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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>>>