Today's Must Read
Aviation and Healthcare Units to Aid General Electric (GE)
Wealth Management Focus, Trading Support Morgan Stanley (MS)
Tuesday, July 24, 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 Alphabet (GOOGL), General Electric (GE) and Morgan Stanley (MS). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Alphabet’s shares have outperformed the Zacks Internet Services industry in the last year (the stock is up +25% vs. a +7.6% increase for the industry). Alphabet delivered strong second-quarter earnings on robust mobile growth, strong network advertising revenues, cloud, hardware and Play revenues.
The Zacks analyst likes the company's focus on innovation, AI, cloud, home automation space, strategic acquisitions and Android OS. These initiatives should continue to aid its top-line growth. Further, its partnership with PayPal remains positive. Also, the company has shown good execution to date, more or less maintaining its dominant share in a competitive, fast-growing search market.
However, Alphabet suffers from litigation issues which might hurt its profitability. Moreover, it's increased spending on its consumer gadgets, YouTube video app and cloud computing services remain concerns. In addition, rising competition in the online advertisement market poses serious risk to the company's position.
Shares of General Electric have underperformed the S&P 500 index in the year-to-date period (-25.5% vs. +5.4%). General Electric had decided to restructure its business portfolio to evolve into a high-tech industrial company — focused on Aviation, Power and Renewable Energy. As a result, the company will gradually separate GE Healthcare into a stand-alone company and exit oil and gas businesses by disposing its 62.5% stake in Baker Hughes.
As planned earlier, GE Transportation will be divested to Wabtec Corp. and efforts are on track to shrink exposure in GE Capital business. The Zacks analyst thinks that when accomplished, these actions will help in improving shareholder value.
As for now, the company beat earnings and sales estimates in second quarter 2018. However, earnings fell 10% year over year on weakness in margins. For 2018, momentum will be strong for Aviation and Healthcare segments, while Power will continue to remain a drag.
Buy-ranked Morgan Stanley’s shares have underperformed the Zacks Investment Banking industry over the last six months (-10.7% vs. -6.9%). Also, the company possesses an impressive earnings surprise history, beating expectations in each of the trailing four quarters. Its second quarter 2018 results reflect better-than-expected trading and decent investment banking performances.
The Zacks analyst likes the company’s efforts to strengthen wealth management operations, focus on corporate lending and normalized levels of trading activities, which will continue to support revenues. While slowdown in debt underwriting and elevated expense levels are expected to hurt growth, higher interest rates and tax cuts will likely lead to increased profitability. Further, capital deployment activities reflect strong balance sheet position.
Other noteworthy reports we are featuring today include Capital One (COF), KeyCorp (KEY) and Manulife (MFC).
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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>>>