Today's Must Read
Loan Growth Supports U.S. Bancorp (USB), Higher Costs a Woe
EMEA & ROW Regions to Drive Kraft Heinz's (KHC) Top Line
Thursday, September 6, 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 Chevron (CVX), U.S. Bancorp (USB) and Kraft Heinz (KHC). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Chevron’s shares have risen +6.3% in the past year, underperforming the Zacks Integrated Oil industry's +10.9% increase, while shares of larger rival Exxon Mobil have gained a meager +2.9% over the same time period. Shares of Chevron are up nearly 100% off its August 2015 lows and poised for further capital appreciation, riding on its healthy earnings growth prospects.
The Zacks analyst thinks the ‘oilier’ nature of the company’s volume mix positions it to benefit from strengthening oil prices in its upstream business with fewer encumbrances 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 also improved its cash from operations, allowing management to raise the dividend and announce a $3 billion per year share buyback program recently. However, there are worries over drop in its downstream segment earnings on weaker margins, while exposure to production in the vulnerable and violence-prone regions in Nigeria poses additional risk. Hence, investors should wait for a better entry point before buying shares in Chevron.
Shares of U.S. Bancorp have outperformed the Zacks Major Banks industry over the past three months, gaining +4.8% vs +2.4%. The company possesses an impressive earnings surprise history, beating expectations in three out of the trailing four quarters.
The Zacks analyst thinks U.S. Bancorp's prospects will likely get support from its solid business model, core franchise, lower tax rate, rising interest rate and diverse revenue streams. Also, its organic growth remains solid and will likely benefit from the improving economic scenario.
Nevertheless, escalating expenses due to its ongoing investments in technology remains a key concern. Also, involvement in legal hassles is likely to increase legal expenses and provisions in the near term.
Kraft Heinz’s shares have declined -15.5% over the past six months, underperforming the Zacks Diversified Food industry which is down -1.5% over the same period. Kraft Heinz has solid innovation initiatives planned in the foodservice space to fuel growth across all regions, while it is also making innovation efforts in its growing e-commerce channel.
Further, improvements in EMEA and ROW regions, buoyed by gains in condiments and sauces, helped the company post sales growth in the second quarter of 2018, which was otherwise hurt by soft U.S. sales and hurdles related to input cost inflation. In fact, Kraft Heinz’s U.S. sales have been declining for more than a year now, with lower cheese shipments being a concern in many quarters.
Coming back to the second quarter, high freight and resin expenses led to a rise in input costs, thereby hurting the adjusted EBITDA. Management expects cost inflation to remain a pressure on EBITDA in the near term.
Other noteworthy reports we are featuring today include Interactive Brokers (IBKR), General Mills (GIS) and Workday (WDAY).
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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>>>