Today's Must Read
Declining RFP Prospects Worry CVS Health (CVS), AET Pact Advances
Higher Trading Volume Aids CME Group (CME), Rising Costs Ail
Friday, August 10, 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 Merck (MRK), CVS Health (CVS) and CME Group (CME). These research reports have been hand-picked from roughly 70 reports published by our analyst team today.
Merck’s shares have outperformed the Zacks Large Cap Pharmaceuticals industry year to date, gaining +17.3% versus +2.9%. The company beat both earnings and sales estimates in Q2. The Zacks analyst thinks new products like Keytruda, Lynparza, and Bridion should continue to contribute meaningfully to the company's top line. Keytruda sales are gaining momentum with approval for additional indications, especially in the first-line lung cancer setting, as it is the only anti-PD-1 approved in this setting. The Animal Health unit is also strong and remains a core growth driver for Merck. Meanwhile, Merck will continue to focus on cost-cutting initiatives. However, generic competition for several drugs and pricing pressure will continue to be overhangs on the top line. Rising competitive pressure on the diabetes franchise and products like Isentress ("HIV"), Zepatier ("HCV") and Zostavax (vaccine) will remain headwinds in 2018.
Shares of CVS Health have outperformed the Zacks Retail Pharmacies and Drug Stores industry in the last three months, gaining +6.5% versus +4.2%. CVS Health ended the second quarter of 2018 on a promising note with its earnings and revenues beating the respective expectations. The year-over-year growth in the top line was driven by strong Pharmacy Services segment, which benefitted from the upside in the specialty services. Also, year-over-year Retail/LTC comparisons were encouraging. The Zacks analyst thinks strong 2019 PBM selling season is another upside. The company currently is moving forward to the completion of the Aetna deal. According to CVS Health, this landmark acquisition might change the Healthcare landscape in the United States. On the flip side, the company apprehends to see fewer RFP opportunities in the market than what it has seen over the past few years. Also, according to management, Omnicare business performance should continue to remain soft through the second half of 2018.
CME Group’s shares have outperformed the Zacks Securities and Exchanges industry year to date, gaining +11.6% versus +5%. CME Group’s second-quarter 2018 earnings beat expectations and also improved year over year on higher trading volumes as well as revenues. The Zacks analyst thinks the company remains well-positioned for growth on a strong market position with diverse derivative product lines. Efforts to expand and cross sell its core exchange-traded business via new product initiatives and global reach also support growth. It intends to exit its credit default swap clearing business by mid-2018 and focus on over-the-counter clearing services on interest rate swaps as well as foreign exchange. This will free up $650 million as clearing member capital. Also, the buyout of Nex Group will help CME generate $200 million in run-rate cost synergies annually, by the end of 2021. However, exposure to interest-rate volatility and limited credit availability might hamper liquidity.
Other noteworthy reports we are featuring today include Manulife (MFC), Public Storage (PSA) and TD Ameritrade (AMTD).
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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>>>