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Research Daily

Wednesday, May 30, 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 Chevron (CVX), Wells Fargo (WFC) and Eli Lilly (LLY). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.

You can see all of today’s research reports here >>>

Chevron’s shares have risen +17.3% in the past year, outperforming the Zacks Integrated Oil industry's +14.8% increase, while larger rival Exxon Mobil has seen its scrip go up a meagre 1.3% over the same time period.

The supermajor has been a beneficiary of the recovery in commodity prices, which helped its upstream unit profits to double from a year ago. Further, Chevron’s high-quality Permian acreage continues to drive production. Importantly, cash flow from operations, at $5 billion, were more than $1 billion higher than a year ago.

However, the Zacks analyst remains worried over a drop in Chevron’s downstream segment earnings on weaker margins, while exposure to production in the vulnerable and violence-prone regions in Nigeria poses additional risk. Hence, investors are advised to wait for a better entry point before buying shares in Chevron.

(You can read the full research report on Chevron here >>>).

Wells Fargo’s shares have underperformed the Zacks Major Banks industry over the last six months (-5.7% vs. -2.3%). The company possesses a decent earnings surprise history, having beaten the Zacks Consensus Estimate in two of the trailing four quarters.

Recently, the bank entered into a consent order with OCC and CFPB for paying $1 billion as civil penalty related to auto-loan issues. Also, Wells Fargo was slapped with new sanctions, including a cap on the assets position by the Federal Reserve. Though continued growth in loans and deposits, lower tax rate and expansions will likely support the bank’s growth profile, the crisis related to the revelation of illegally opening millions of illegal accounts in 2016 will take some time to alleviate.

(You can read the full research report on Wells Fargo here >>>).

Shares of Buy-rated Eli Lilly have outrperformed the Zacks Large-Cap Pharmaceuticals industry in the last year (+3.6% vs. -0.8%). The Zacks analyst thinks Lilly’s presence across a wide range of therapeutic areas provides support in the face of generic competition. Lilly’s new products like Trulicity, Taltz, Basaglar, Cyramza, Jardiance and Lartruvo have been driving revenues and the trend is expected to continue in 2018.

Lilly expects to launch 20 new products between 2014 and 2023, including at least two new indications/line extensions on an average every year. Also, competitive pressure on Lilly’s drugs is expected to rise this year.

Meanwhile, challenges remain for the company in the form of loss of patent exclusivity for products like Cialis and the impact of generic competition for Strattera, Effient and Axiron. U.S. pricing access pressure will also remain a headwind in 2018.

(You can read the full research report on Eli Lilly here >>>).

Other noteworthy reports we are featuring today include 3M (MMM), FedEx (FDX) and Valero Energy (VLO).

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Senior Editor

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>>>

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