Today's Must Read
Volume Growth, Buybacks Aid Union Pacific (UNP), Debts Ail
Broadcom (AVGO) Drives on Wireless Products & Acquisitions
Friday, June 8, 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 Pfizer (PFE), Union Pacific (UNP) and Broadcom (AVGO). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Pfizer’s shares have outperformed the peer group in the year-to-date period (the stock is up +0.7% over this period vs. a -4.1% decline for the Zacks Large-Cap Pharmaceuticals industry). Pfizer has been working on strengthening its product portfolio through acquisitions and licensing deals.
However, Pfizer is facing headwinds in the form of genericization of key drugs, supply challenges in the legacy Hospira portfolio, pricing pressure and rising competition, which are hurting the top line. Nevertheless, the Zacks analyst thinks new products like Ibrance, contribution from acquisitions, cost-cutting efforts, a lower tax rate and share buybacks should help the company achieve its guidance.
Pfizer also boasts a strong pipeline and expects approximately 25 to 30 drug approvals through 2022, including around 15 products that have blockbuster potential. Pfizer’s growing immuno-oncology portfolio offers a strong potential. Bavencio is being considered a key long-term growth driver for Pfizer.
Shares of Union Pacific have outperformed the Zacks Rail industry (+10.2% vs. +8.3%) as well as fellow railroad operator Norfolk Southern Corp. (+7.5%) over the last six months. In further good news, the company unveiled a bullish picture at its Investor Day on May 31. At the event, Union Pacific stated that it intends to repurchase shares worth $20 billion during 2018-20. Dividend payout ratio in the period is anticipated between 40% and 45%. Operating ratio is expected to come down to 60% by 2020.
Moreover, volume growth is expected over the next three years. The Zacks analyst thinks the company’s efforts toward promoting safety are commendable as well. However, high operating expenses and debt levels are worrisome. Declining automotive volumes, due to sluggish vehicle production in the United States, also raise concerns.
Broadcom’s shares have underperformed the Zacks Electronics - Semiconductors industry over the past year, gaining +8.8% vs. +11.5%. Broadcom delivered an impressive second-quarter fiscal 2018 results. Both top and bottom line increased on a year over year basis, primarily driven by seasonal retrieval in demand for broadband access and robust demand for cloud data centers.
The Zacks analyst thinks Broadcom is benefiting from strong demand of its wireless solutions and expanding product portfolio, which makes it well-positioned to address the needs of rapidly growing technologies like IoT and 5G. Strong ties with leading OEMs across multiple target markets will help the company to gain key insights into the requirements of customers.
The company faces intensifying competition and integration risks due to frequent acquisitions. Its leveraged balance sheet and customer concentration continue to be headwinds.
Other noteworthy reports we are featuring today include Canadian Pacific (CP), KeyCorp (KEY) and Ulta Beauty (ULTA).
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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>>>