Today's Must Read
Interest Income Aids Wells Fargo (WFC), Legal Issues Linger
Honeywell's (HON) Future Bright on Solid Product Portfolio
Monday, July 2, 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 Bank of America (BAC), Wells Fargo (WFC) and Honeywell (HON). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Bank of America’s shares have outperformed the Zacks Major Regional Banks industry over the last six months, losing -5.4% vs. -6%. Also, the company possesses an impressive earnings surprise history, beating expectations in each of the trailing four quarters.
The Zacks analyst thinks increase in loan and deposit balances, rising interest rates and efforts to manage expenses as well as expand into new markets will support profitability. Lower tax rates and easing of banking regulations will aid growth.
Further, approval of its capital plan reflects strong balance sheet position. However, fall in mortgage banking income due to lower volumes and a decline in refinancing activity along with uncertainty related to performance of capital markets remain major concerns. These are expected to hurt the bank's revenues to some extent.
Shares of Wells Fargo have underperformed the Zacks Major Banks industry over the last six months (-9.9% vs. -5.9%). The company possesses a decent earnings surprise history, having beaten expectations in two of the trailing four quarters.
Recently, the bank received the judge’s final approval for the settlement of $142 million worth class-action lawsuit related to the 3.5 million fake accounts scandal. Also, Wells Fargo was slapped with new sanctions, including a cap on the assets position by the Federal Reserve.
Though lower tax rate, easing of regulations 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. Moroever, rising rates are expected to aid net interest income. Furthermore, the recent 2018 capital plan approval boosts investors' confidence.
Buy-ranked Honeywell’s shares have outperformed the Zacks Diversified Operations industry in the last one year, increasing +7.7% vs. a -16.4% decline. The Zacks analyst thinks Honeywell’s diversified business portfolio has the potential to earn consistent above-average returns and mitigate operating risks.
The company’s diligent focus on working capital management, free cash flow generation and a conservative balance sheet are encouraging amid a challenging macroeconomic environment. With a flexible yet disciplined focus on cost and productivity, Honeywell remains focused on increasing its presence in high-growth regions.
Additionally, the company’s balanced mix of long- and short-cycle businesses along with a decent organic growth in new products and expansion in high-growth regions auger well on a long-term perspective.
Other noteworthy reports we are featuring today include General Dynamics (GD), Allergan (AGN) and Enterprise Products Partners (EPD).
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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>>>