Today's Must Read
Strong Oncology Portfolio Boost Novartis (NVS), Sandoz Lags
Prudent Cost Control & Diversification Supports Goldman (GS)
Friday, July 20, 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 Microsoft (MSFT), Novartis (NVS) and Goldman Sachs (GS). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Buy-ranked Microsoft’s shares have outperformed the Zacks Technology sector on a year-to-date basis (up +22.1% versus +8.4%) Microsoft’s fourth quarter fiscal 2018 results were impressive. Both earnings and revenues increased on a year-over-year basis.
The Zacks analyst thinks the company is benefiting from growing user base of its different applications like Office 365 commercial, Dynamics, Outlook mobile and Teams. Moreover, Azure’s expanding customer base is a key catalyst. Microsoft’s gaming segment is performing well, primarily driven by a combination of Xbox Live, Game Pass subscriptions and Mixer, which are driving user engagement.
Further, acquisitions like PlayFab and GitHub expand Microsoft’s total addressable market (TAM) and penetration. Additionally, the company’s expanding partner base is a key catalyst. However, projections of a moderating growth rate in commercial cloud gross margin, and OEM Pro and Windows commercial businesses is a headwind.
Shares of Novartis have underperformed the Zacks Large-Cap Pharmaceuticals industry (-3.7% vs. -1.7%), on a year-to-date basis. Novartis’ beat sales estimate in the second-quarter on strong performance of Cosentyx and Entresto. Earnings, however, fell short. Both drugs continue to perform well driven by underlying demand. The label expansion of oncology drugs also lifted the top line.
Novartis is looking to transform into a core pharma company with focus on additional therapies like gene therapy with the acquisition of Avexis. The company intends to spin-off its ophthalmology division, Alcon, into a separately-traded standalone company and exit its antibacterial and antiviral research program as well.
However, the generic division, Sandoz continues to face pricing pressure in the United States. The division also suffered a blow when the FDA issued a CRL to its generic Advair Diskus. Additionally, the loss of patent protection for key drugs is a cause of concern.
Buy-ranked Goldman Sachs’ shares have lost -9.9% year to date, underperforming the -1.8% decline of the Zacks Investment Banking industry. However, the company boasts an impressive earnings surprise history. It surpassed expectations for earnings in all the trailing four quarters.
The company’s second-quarter 2018 results reflected strong Fixed Income, Currency and Commodities (FICC) Client Execution revenues, and a continued momentum in investment banking business. However, elevated expenses were an undermining factor.
Though litigation issues are concerns, the Zacks analyst thinks the company’s well-diversified business and focus to capitalize on growth opportunities through strategic moves will continue to strengthen the overall business. Further, its cost-control measures are commendable. Additionally, the company’s steady capital-deployment activities have boosted investors' confidence, along with the Fed's approval to 2018 Capital Plan.
Other noteworthy reports we are featuring today include Starbucks (SBUX), General Motors (GM) and Dominion (D).
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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>>>