Today's Must Read
Buyouts Aid General Dynamics (GD), Interest Expenses Ail
Emerson (EMR) Braves Cost Woes on Operational Excellence
Thursday, August 9, 2018
The Zacks Research Daily presents the best research output of our analyst team. Today's Research Daily features updated research reports on 16 major stocks, including Chevron (CVX), General Dynamics (GD) and Emerson Electric (EMR). These research reports have been hand-picked from roughly 70 reports published by our analyst team today.
Chevron’s shares have risen +12.5% in the past year, underperforming the Zacks Integrated Oil industry's +16.1% increase, while shares of larger rival Exxon Mobil have gained a meager +2.2% over the same time period. Shares of Chevron are up nearly 100% from their August 2015 lows and poised for further capital appreciation, riding on its healthy earnings growth prospects. The ‘oilier’ nature of the company’s volume mix positions it to benefit from strengthening oil prices in its upstream business with less encumbrance from its smaller downstream unit. Chevron’s existing oil and gas development project pipeline is among the best in the industry, targeting volume growth of 4-7% in 2018. Chevron's cash from operations has increased, allowing management to raise the dividend and announce a $3 billion per year share-buyback program recently. However, the Zacks analyst remains worried over drop in its downstream segment earnings on weaker margins. Also, exposure to production in the vulnerable and violence-prone regions in Nigeria poses additional risk. Hence, investors are advised to wait for a better entry point.
Shares of General Dynamics have underperformed the Zacks Aerospace & Defense industry in the past year (-1.5% vs. +22.7%). General Dynamics ended second-quarter 2018 on an impressive note. The company’s bottom as well as top line figures surpassed the respective expectations. The company remains one of the only two contractors in the world equipped to build nuclear-powered submarines and has a diverse portfolio of products and services. Its newly certified G500 jet is expected to boost revenues later in 2018. While solid demand for its varied defense products leads to organic growth, a notable acquisition strategy adds to the company's inorganic growth. In this line, the CSRA acquisition bears notable importance. However, a comparative analysis of the company’s historical EV/EBITDA ratio reflects a relatively gloomy picture that might be a cause for investors’ concern.
Emerson Electric’s shares have outperformed the Zacks Electrical Machinery industry over the past three months, gaining +2.8% vs. +0.7%. The company’s adjusted earnings per share in third-quarter fiscal 2018 outpaced expectations. The figure also came in higher than the year-ago tally of 68 cents per share. The company expects increased demand from mature and emerging end-markets, ongoing restructuring and cost-reduction moves, lower corporate taxes and greater operational efficacy to drive its profitability in the quarters ahead. However, looking at the stock's performance over the past three months, it appears overvalued and leveraged compared to the industry. Material cost inflation remains a cause of worry for Emerson. Also, the company expects unfavorable foreign currency translation impact to hurt its revenues in the fiscal fourth quarter.
Other noteworthy reports we are featuring today include American International Group (AIG), MetLife (MET) and HCA Healthcare (HCA).
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Note: Our Director of Research 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>>>