Today's Must Read
Emerging Markets Growth to Propel PepsiCo's (PEP) Revenues
Loan Growth Supports U.S. Bancorp (USB), Higher Costs a Woe
Friday, July 6, 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 Shell (RDS.A), PepsiCo (PEP) and U.S. Bancorp (USB). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Shell’s shares have gained 30.4% over the last year, outperforming the Zacks Integrated Oil industry, which has gained 21.4% over the same period. The performance is backed by impressive earnings surprise history.
The Zacks analyst thinks Shell’s $50 billion buyout of BG Group has boosted its strong and diversified portfolio of global energy businesses that offers attractive long-term growth opportunities. It has also made Shell the largest LNG producer which would help the company meet the fuel’s growing demand and boost cash flows.
Importantly, the aggressive divestment plans of Shell have streamlined its production and helped in debt reduction. However, at same time the divestment spree has affected the volumes growth. With the production going down as evidenced in the last few quarters, the near-to-medium term outlook remains cloudy. Hence, investors should wait for a better entry point before buying shares.
Shares of PepsiCo have decreased -8.6% year to date, underperforming the Zacks Soft Beverages industry, which has declined -5.3% over the same period. However, PepsiCo is witnessing strong performances in its international divisions, driven by higher revenue growth in the developing and emerging markets.
The Zacks analyst thinks the company is also gaining from its solid brand portfolio, product innovation and strong snacks business. Notably, the company has delivered positive earnings surprise for eight consecutive quarters. However, the consumers’ awareness on health and wellness, alongside new taxes on sugar-sweetened beverages and growing regulatory pressures are affecting CSD sales.
Notably, the company’s NAB division reported dismal results with revenues and operating profit decreasing 1% and 22%, respectively, in first-quarter 2018. Volumes declined 2.5%, led by 4% decline in CSDs and 1% decrease in Non CSDs. Estimates have been going down ahead of second quarter earnings.
U.S. Bancorp’s shares have underperformed the Zacks Major Banks industry over the last six months, losing -9.9% vs -7.1%. However, the company possesses an impressive earnings surprise history, beating expectations in three out of the trailing four quarters.
The Zacks analyst thinks U.S. Bancorp's prospects will likely get support from its solid business model, core franchise, lower tax rate, rising interest rate and diverse revenue streams. Also, the company’s organic growth remains solid and will likely benefit from the improving economic scenario. However, escalating expenses and litigations remain key concerns.
Other noteworthy reports we are featuring today include Twitter (TWTR), Nokia (NOK) and State Street (STT).
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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>>>