Today's Must Read
Capital Investment & E&P Activities to Aid Occidental (OXY)
AGL Acquisition Buoys Southern (SO), Project Overruns Hurt
Thursday, July 26, 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 PayPal (PYPL), Occidental Petroleum (OXY) and Southern Company (SO). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
PayPal’s shares have outperformed the Zacks Internet Software industry over the last year (+51.9% vs. +38.2%). PayPal reported second quarter results wherein both earnings and revenues have reflected impressive year over year growth.
The company continued to witness an expanding customer base with help of its robust Venmo, Choice and One Touch. Also, the company’s tie-up with MasterCard aided the adoption rate of Venmo. Further, the company’s ongoing partnership with ShinhanCard remained positive throughout the quarter and aided its presence in South Korea.
Its extended partnership with Google and eBay will continue to strengthen its customer base further. This will keep adding strength to PayPal’s total payments volume. The Zacks analyst thinks an expanding product & services portfolio and global presence will continue to benefit the company’s market share.
However, exposure to foreign exchange and interest rate risks are major concerns. Also, intensifying competition remains a headwind.
Shares of Buy-ranked Occidental Petroleum have outperformed the Zacks Domestic Integrated Oil industry in the last three months, gaining +9.5% vs. +8.6%. As oil prices continue to improve, Occidental Petroleum gains from more oil production in the Permian Resources and concentrating on high-margin production region.
The Zacks analyst thinks ongoing capital investment will further strengthen the existing operation of the company. The company generates stable cash flow and its Chemical plant will further improve its cash flow. However, Occidental Petroleum, like other oil and natural gas companies, faces the risks of cost overruns and development interruptions due to delays in drilling and other approvals.
Southern Company's shares have outperformed the Zacks Electric Power industry in the last six months, gaining +8.1% vs +0.7%. The Zacks analyst thinks that Southern Company is one of the largest and best-managed electric utility holding companies in the United States, dominating the power business across the southeastern region. With good rate base growth and constructive regulation, it is expected to generate steady earnings and dividend growth in the coming years through long-term power contracts.
Additionally, the $12 billion AGL Resources buy has significantly increased its customer base and diversified offerings. However, continued timing and cost overrun issues over two large construction projects – Vogtle and Kemper – are major overhangs.
While the $20 billion Vogtle nuclear plant has gone notably over budget and is years behind schedule, Southern's Kemper project suffered yet another setback with the suspension of all coal gasification operations amid additional cost burden. The interplay of these factors leads to a conservative investment thesis.
Other noteworthy reports we are featuring today include Delta (DAL), Pioneer Natural (PXD) and Petrobras (PBR).
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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>>>