Today's Must Read
High Oil Production, Midstream Assets Aid Occidental (OXY)
Card Business Aids Capital One (COF), Asset Quality a Woe
Thursday, June 7, 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 Merck (MRK), Occidental Petroleum (OXY) and Capital One Financial (COF). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Buy-ranked Merck’s shares have outperformed the Zacks Large Cap Pharmaceuticals industry year to date, gaining +10% versus a loss of -4.0%. The Zacks analyst thinks Merck’s new products like Keytruda, Lynparza and Bridion should continue to contribute meaningfully to the top line in 2018.
Keytruda sales are gaining strong momentum with approval for additional indications especially in the first-line lung cancer setting as it is the only anti-PD-1 approved in this setting. Its Animal Health unit is also strong and remains a core growth driver for Merck.
Meanwhile, Merck will continue to focus on cost-cutting initiatives to drive the bottom line. However, generic competition for several drugs and pricing pressure will continue to be overhangs on the top line. Rising competitive pressure on the diabetes franchise and on products like Isentress (HIV), Zepatier (HCV) and Zostavax (vaccine) will remain headwinds in 2018.
Shares of Strong Buy-ranked Occidental Petroleum have outperformed the Zacks Domestic Integrated Oil industry in the last year, gaining +47.5% vs. +43.5%. As oil prices continue to improve, Occidental Petroleum gains from more oil production in the Permian Resources and concentrating on high-margin production region.
The Zacks analyst thinks ongoing capital investment will further strengthen the existing operations of the company. The company generates stable cash flow and its Chemical plant will further improve this metric. However, Occidental Petroleum, like other oil and natural gas companies, faces the risks of cost overruns and development interruptions due to delays in drilling and other approvals.
Capital One Financial’s shares have outperformed the Zacks Consumer Loans industry in the last six months, gaining +0.7% vs. -1.1%. Further, the company has an impressive earnings surprise history, having earnings expectations in three of the trailing four quarters.
The Zacks analyst thinks that its solid liquidity position, strength in credit card and online banking businesses, higher interest rates and solid loan balance will aid growth. Also, benefits from the lower tax rates and restructuring initiatives will support its financials.
However, mounting operating expenses are likely to keep the company’s bottom line under pressure. Expenses are expected to remain high driven by the company’s business restructuring efforts. Also, deteriorating asset quality remains a major near-term concern.
Other noteworthy reports we are featuring today include Kimberly-Clark (KMB), Anadarko Petroleum (APC) and Allstate (ALL).
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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>>>