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Research Daily

Thursday, July 19, 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 Wells Fargo (WFC), IBM (IBM) and Abbott (ABT). 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 >>>

Buy-ranked Wells Fargo’s shares have outperformed the Zacks Major Banks industry over the last three months (+7.6% vs. +1.1%). However, the company possesses a disappointing earnings surprise history, having beaten expectations in only one of the trailing four quarters.

The company’s second-quarter 2018 results were impacted by lower mortgage banking revenues and high expenses. Lower provisions and higher net interest income aided results. Following the sales scandal and other issues, Wells Fargo has been 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 Zacks analyst thinks the crisis related to the revelation of illegally opening millions of accounts in 2016, auto-lending issues and impact of other malpractices will take some time to alleviate. Nevertheless, the recent 2018 capital plan approval boosts investors' confidence.

(You can read the full research report on Wells Fargo here >>>).

Shares of IBM have underperformed the broader market on a year-to-date basis, losing -5.8% vs. the S&P 500’s +5.6% gain. IBM’s second-quarter 2018 top-line benefited from strong demand for z14 Mainframe and Power products. Moreover, improving pre-tax margin and lower share count drove earnings growth. However, the Zacks analyst thinks IBM will find it difficult to sustain the Mainframe momentum in the long haul.

Nevertheless, the company’s improving position in the cloud, security and analytics bodes well. Moreover, accretive acquisitions have expanded IBM’s product portfolio into higher-growth segments, such as cloud computing, AI and Big Data.

The strategic imperatives will take some more time to report meaningful growth and offset weakness in the traditional business. IBM’s ongoing heavily time-consuming business model transition to cloud continues to hurt the stock.

(You can read the full research report on IBM here >>>).

Buy-ranked Abbott’s shares have gained +27.3% over the last year, outperforming the Zacks Medical Products industry, which has gained +12.3% over the same period. In the second quarter 2018, Abbott has once again posted better-than-expected earnings and revenues numbers.

The Zacks analyst likes the strong and consistent performance across all segments by Abbott. Within Structural Heart, worldwide strong uptake of MitraClip therapy improves further following the recent FDA approval of its next-generation version. This apart, synergies from Alere consolidation in the form of revenues from Rapid Diagnostics have been driving growth.

Meanwhile, emerging market performance has been extremely promising. The company has been taking the limelight within Diabetic Care on progress with its FreeStyle Libre. On the flip side, sluggish Vascular business continues to dent growth. However, the FDA approval for XIENCE Sierra coronary stent system as well as a reimbursement approval in Japan should help Abbott to revive the dull Vascular business.

(You can read the full research report on Abbott here >>>).

Other noteworthy reports we are featuring today include Texas Instruments (TXN), Crown Castle (CCI) and Praxair (PX).

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Mark Vickery

Senior Editor

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>>>

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