Today's Must Read
Strong Balance Sheet Aids Boeing (BA), Deferred Costs Hurt
Subscriber Additions, Content Strength Drives Netflix (NFLX)
Thursday, July 12, 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), Boeing (BA) and Netflix (NFLX). 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 >>>
Strong Buy-ranked Chevron’s shares have risen +18.6% in the past year, marginally underperforming the Zacks Integrated Oil industry's +20.1% increase, while larger rival Exxon Mobil has seen its scrip go up a meager +2% over the same time period. Shares of Chevron are up nearly 100% off its August 2015 lows and poised for further capital appreciation, riding on its healthy earnings growth prospects.
The Zacks analyst thinks the company’s ‘oilier’ nature of its volume mix positions it to benefit from strengthening oil prices in its upstream business with less encumbrance from its smaller downstream unit. Chevron’s existing oil and gas development project pipeline is among the best in the industry, targeting volume growth of 4-7% in 2018. The production increase will be driven by the Australian LNG megaprojects, as well as Chevron’s stellar Permian operations.
The company’s balance sheet also seems healthy enough and the dividend yield of nearly 4% should remain safe going forward. Apart from rising commodity prices, conservative capital spending and cost control would ensure rapidly improving cash flow.
Shares of Boeing have surged +65.2% in the last year, outperforming the Zacks Aerospace & Defense sector, which gained +28.3% during the same time period. The Zacks analyst emphasizes that the company is the largest aircraft manufacturer in the world in terms of revenues, orders and deliveries.
Considering the huge global demand for commercial jets, Boeing has been enjoying an enormous flow of orders from all over the world. In this regard, the company’s 20-year market outlook forecasts commercial jetliner demand to increase by 3.6%. Boeing expects single-aisle jets to be the major driver behind this demand growth.
However, this aerospace giant continues to face challenges from stiff competition. Boeing’s 787 Dreamliner's deferred production cost remains a cause of concern for Boeing. Although the company is witnessing declining deferred costs, it hasn’t been able to completely waive off these costs.
Netflix’s shares have increased +118.1% year to date, significantly outperforming the Zacks Broadcast Radio and Television industry’s gain of +41% during the same period. The Zacks analyst thinks continuing subscriber additions and expanding original content portfolio will help the company to sustain growth going forward.
Moreover, rapid international penetration and expanding regional content are major growth drivers. However, the company has mixed record of earnings surprises in recent quarters. The company’s increasing marketing spends and higher investments on original and acquired content will continue to hurt profitability, at least in the near term.
Saturation in the domestic market poses a concern. The company’s increase in subscription charges in the U.S. might lead to a backlash on subscriber growth going forward. Further, rising competition from players like Amazon and Apple is a major headwind.
Other noteworthy reports we are featuring today include Morgan Stanley (MS), ADP (ADP) and S&P Global (SPGI).
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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>>>