Today's Must Read
Higher Input Costs & Lower US Sales Hurt Kraft Heinz (KHC)
Sinopec (SNP) Banks on Weirong Gas Field, Refining Yield Low
Tuesday, May 22, 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 Cisco (CSCO), Kraft Heinz (KHC) and Sinopec (SNP). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Cisco's shares have outperformed the Zacks Networking industry year to date, gaining +14.3% vs. +13.2%. Cisco delivered stellar third quarter results. Strong contribution from acquisitions, security, Infrastructure Platforms and applications drove year-over-year growth.
The Zacks analyst thinks Cisco’s expanding footprint in the rapidly growing security market presents a significant growth opportunity. Strengthening collaboration portfolio which now includes Webex Teams and AI-based Accompany bodes well. Partnerships with Telenor, Apple, IBM, Microsoft and Google Cloud are positives. Divestiture of a portion of Cisco’s NDS video assets is likely to mitigate the sluggishness witnessed in other product segment.
However, weakness in switching and routing is a headwind. Ongoing transition to subscription-based model will continue to hurt the top line. Further, dampening service provider business and intense competition from the likes of Huawei, Juniper and Arista Networks are other concerns.
Shares of Kraft Heinz have declined -27.4% year to date, underperforming the Zacks Diversified Food industry which is down -13.8% over the same period. Kraft Heinz posted first-quarter 2018 results, wherein earnings beat expectations while revenues missed the same. Higher input costs, lower sales in the United States along with higher investments to boost capabilities seemed to have adversely affected this food company’s quarterly performance.
However, lower taxes and higher pricing have benefited the results. Adjusted earnings increased 6% but revenues declined 0.3% (down 1.5% organically). The top line was adversely impacted due to soft consumer demand in North America and Rest of World. Sales in the United States, Kraft Heinz's largest segment, declined 3.3% from a year ago.
Kraft Heinz has been struggling due to the shift in consumer preference toward natural and organic ingredients over packaged and processed food. Kraft Heinz’s estimates are trending downward for 2018 and 2019 over the past 60 days
Sinopec's shares have gained +27.9% over the past year, underperforming the Zacks Integrated Oil industry which has gained +58% over the same period. Sinopec posted impressive first-quarter 2018 results driven by higher oil price realizations. Earnings and revenues improved significantly on a year-over-year basis.
The Zacks analyst appreciates Sinopec’s large-scale natural gas discoveries, especially in the Hangjinqi of Nei Mongol, Dongpo of west Sichuan and Weirong block in southwestern Sichuan province, which will support long-term production. Sinopec is strongly committed toward returning cash to shareholders.
The company paid RMB 60.5 billion as cash dividend through 2017, the highest since its IPO. However, Sinopec’s escalating operating expenses are a concern. Also, lower refining yield through first-quarter 2018 is hurting the company’s downstream business.
Other noteworthy reports we are featuring today include PetroChina (PTR), Glaxo (GSK) and Progressive (PGR).
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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>>>