Today's Must Read
AbbVie's (ABBV) Mavyret Sales Strong Despite Humira Woes
McDonald's (MCD) Gains From Re-Franchising & Robust Comps
PepsiCo (PEP) Strong on Innovations, Weak NAB Results Hurt
Monday, May 21, 2018
The Zacks Research Daily presents the best research output of our analyst team. Today's Research Daily features new research reports on 17 major stocks, including Procter & Gamble (PG), AbbVie (ABBV), McDonald’s (MCD) and PepsiCo (PEP). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Procter & Gamble's shares have underperformed the Zacks Soap and Cleaning Materials industry over the last six months (-16.9% vs. -10.2%). P&G reported third-quarter fiscal 2018 results, wherein earnings and revenues surpassed expectations, benefiting from higher demand for skincare products, along with fabric and home care products.
Adjusted earnings grew 4% from the year-ago level, aided by productivity cost savings. Top line grew 4% on organic sales growth of 1%, comprising 2% volume growth. The Zacks analyst emphasizes that Procter & Gamble remains focused on improved product, packaging and marketing initiatives, and productivity cost-savings plan.
Meanwhile, it intends to acquire the consumer-health unit of Merck KGaA, which will enhance P&G's existing consumer healthcare capabilities. However, core gross and operating margin declined 110 bps and 100 bps, respectively, in the quarter.
Lower pricing, higher commodity costs and increased competition continued to hurt results. P&G's shares have lost around 20.1% year to date. Estimates for fiscal 2018 and 2019 have moved down 0.2% and 1.3%, over the past 60 days.
Shares of AbbVie have gained +9.6% year to date, outperforming the Zacks Large Cap Pharmaceuticals industry, which has declined -3.8% over the same period. AbbVie beat estimates for both earnings and sales in the first quarter. It also raised its earnings expectations for 2018 based on strong Q1 performance and an optimistic outlook for future quarters.
AbbVie’s key drug, Humira, has been performing well based on strong demand trends, despite new competition. Moreover, Imbruvica has multibillion dollar potential and AbbVie is exploring the possibility of label expansion into solid tumors and autoimmune diseases. Mavyret’s launch has also been stronger than expected. AbbVie has an impressive late-stage pipeline with label expansions for both new and existing products expected over the next few years.
The Zacks analyst thinks promising data from several pivotal studies and settlement of its second Humira patent dispute with Biogen are key positives. However, Viekira’s sales continue to be hurt by intensifying competition.
McDonald's shares have gained +8.6% over the past one year, outperforming the Zacks Restaurants industry which has gained +1.7% over the same period. The Zacks analyst thinks McDonald’s impressive earnings surprise history, various sales and digital initiatives as well as positive comparable sales are major positives.
Earnings surpassed the estimate for 15th straight quarter, as it reported first-quarter 2018 results. Furthermore, increased focus on delivery and accelerated deployment of Experience of the Future restaurants in the United States should boost its performance.
Efforts to attract customers in International Lead & High Growth Markets also bode well. In fact, global comps at McDonald’s have been positive over the trailing eleven quarters. Yet, high labor costs and currency headwinds are major concerns.
Moreover, revenues have been under pressure for quite some time due to strategic refranchising initiative. Even so, its augmented focus on refranchising should cut the capital requirements and facilitate EPS growth in the long run.
Shares of PepsiCo have decreased -18.7% year to date, underperforming the Zacks Soft Beverages industry, which has declined -12.3% over the same period. PepsiCo’s first-quarter 2018 earnings and revenues both beat expectations. Notably, this is the eighth consecutive quarter of positive earnings surprise.
The improvement was mainly due to strong performances in its international divisions, propelled by higher revenue growth in the developing and emerging markets. Core earnings and revenues grew 3% and 4.3% year over year, respectively. Organic revenues were 2.3% in the quarter, same as the prior quarter.
However, NAB division reported dismal results with revenues and operating profit decreasing 1% and 22%, respectively. Volumes declined 2.5%, led by 4% decline in CSDs and 1% decrease in Non CSDs. Shift in consumer preferences toward healthier options is a potent headwind. Earnings estimates have moved 0.2% and 0.5% south for 2018 and 2019, respectively, over the past 30 days.
Other noteworthy reports we are featuring today include Applied Materials (AMAT), ABB Ltd. (ABB) and Itau Unibanco (ITUB).
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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>>>