Today's Must Read
Robust Snacking Category to Drive PepsiCo's (PEP) Sales
3M (MMM) Gains from Portfolio Shuffling Moves Amid Cost Woes
Tuesday, September 11, 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 Merck (MRK), PepsiCo (PEP) and 3M (MMM). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Merck’s shares have outperformed the Zacks Large Cap Pharmaceuticals industry year to date, gaining +23.6% versus +4.7%. The Zacks analyst thinks Merck’s new products like Keytruda, Lynparza, and Bridion should continue to contribute meaningfully to the top line.
Keytruda sales are gaining strong 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. Animal Health unit is also strong and remains a core growth driver for Merck.
Meanwhile, Merck will continue to focus on cost-cutting initiatives to drive the bottom line. 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 on products like Isentress (HIV), Zepatier (HCV) and Zostavax (vaccine) will remain headwinds in 2018.
Shares of Buy-ranked PepsiCo have gained +8.7% in the past three months, outperforming the Zacks Soft Beverages industry's increase of +2.2%, driven by a solid earnings trend with beats recorded in the last 10 quarters, including second-quarter 2018. Strong performances in its international division, backed by higher revenue growth in developing and emerging markets have been aiding results.
Further, the company has reported positive sales surprise in six of the last eight quarters. The Zacks analyst thinks the company is also gaining from significant strength in the snacks business, which has mostly offset the sluggishness in beverage category.
Moreover, the company’s product innovations to include healthier food assortments and non-carbonated drinks in its portfolio should boost sales. However, consumers’ awareness on health and wellness, alongside new taxes on sugar-sweetened beverages and growing regulatory pressures are affecting CSD sales.
3M’s shares have gained +3.9% in the past three months, outperforming the Zacks Diversified Operations industry, which has increased +1.1% over the same period. The company perceives that stronger demand for household products like Nexcare, Post-it and Scotch and ongoing product portfolio restructuring moves will boost its revenues in the upcoming quarters.
The Zacks analyst thinks that escalating costs have become a major cause of concern for the company. Inflation in the prices of major inputs and escalating interest expenses might continue to raise the company’s aggregate costs, in turn, hurting its near-term profitability. Over the past 7 days, Zacks Consensus Estimate for the stock has remained unchanged for both 2018 and 2019.
(You can read the full research report on 3M here >>>).
Other noteworthy reports we are featuring today include Costco (COST), Broadcom (AVGO) and Phillips 66 (PSX).
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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>>>