Today's Must Read
Digital Focus Helps Revive NIKE's (NKE) North America Business
Offshore Projects Aid Schlumberger (SLB), Start-Up Costs Ail
Monday, July 23, 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 Johnson & Johnson (JNJ), Nike (NKE) and Schlumberger (SLB). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Johnson & Johnson’s shares have lost -9.9% year to date, underperforming the -1.2% decline of the Zacks Large Cap Pharmaceuticals industry. J&J beat estimates for both earnings and sales in Q2 and raised its organic growth outlook for the year. J&J’s sales growth has accelerated since the second half of 2017 backed by higher sales in the Pharmaceutical segment and improving performance in Medical Devices segment.
Though quite a few key products in J&J’s portfolio are facing generic competition, the Zacks analyst thinks new products in all segments, successful label expansion of cancer drugs like Imbruvica and Darzalex and contribution from recent acquisitions will continue to drive top-line growth. J&J is also making rapid progress with its pipeline and line extensions.
Meanwhile, share buybacks and restructuring initiatives should provide bottom-line support. Headwinds like generics, pricing pressure, sluggish growth in the Consumer segment and soft global market conditions remain.
Shares of Nike have outperformed the Zacks Shoes and Retail Apparel industry year to date (+23% vs. +18.7%), driven by a strong earnings trend stemming from the solid execution of Consumer Direct Offense. NIKE has delivered positive earnings for over three years now, with fourth-quarter fiscal 2018 marking the 24th straight quarter of earnings beat. Moreover, sales topped estimates for the fifth straight quarter.
Strong progress on Consumer Direct Offense through innovation and focus on direct-to-customer are the key drivers. Additionally, continued growth at international and NIKE Direct businesses, as well as the return of the North America business to growth in the fiscal fourth quarter, aided results. Driven by these positives, the company raised its revenue guidance for fiscal 2019.
However, higher SG&A expenses due to increased demand creation expense and operating overheads are likely to remain a drag to the company’s results. Also, intense competition and currency headwinds remain an impediment.
Schlumberger’s shares have outperformed the Zacks Oil and Gas - Field Services industry over the last year, losing -0.5% vs. -6.5%. Schlumberger is the largest oilfield services player in the world with presence in every energy market.
The Zacks analyst thinks that being the leading provider of technology for complex oilfield projects, Schlumberger is better placed than most peers to take up new offshore projects in the shallow water basins. In fact, the company is expecting more exploration and drilling activities to ramp up in the offshore resources, which will meet the growing demand for crude in the world.
The firm reported strong second-quarter 2018 earnings, thanks to rebound in drilling activities in Russia and the North Sea. However, Schlumberger’s rising project startup costs is a concern since the company is starting up many new developments outside North America.
Other noteworthy reports we are featuring today include Danaher (DHR), CSX Corp. (CSX) and Intuitive Surgical (ISRG).
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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>>>