Today's Must Read
Volume Growth, Dividends & Buybacks Aid Union Pacific (UNP)
DBS Execution & Inorganic Moves to Benefit Danaher (DHR)
Wednesday, September 19, 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 Microsoft (MSFT), Union Pacific (UNP) and Danaher (DHR). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Microsoft’s shares have outperformed the Zacks Technology sector on a year-to-date basis (up +32.3% versus +9.5%). Microsoft has a dominant position in the desktop PC market, with its operating systems being used in the majority of PCs worldwide.
The Zacks analyst thinks the company is benefiting from growing user base of its different applications like Office 365 commercial, Dynamics, Outlook mobile and Teams. Moreover, Azure’s expanding customer base is a key catalyst. Microsoft’s gaming segment is performing well, primarily driven by a combination of Xbox Live, Game Pass subscriptions and Mixer, which are driving user engagement.
Further, acquisitions like PlayFab and GitHub expand Microsoft’s total addressable market (TAM) and penetration. Additionally, the company’s expanding partner base is a key catalyst. However, projections of a moderating growth rate in commercial cloud gross margin, and OEM Pro and Windows commercial businesses is a headwind.
Shares of Buy-ranked Union Pacific have outperformed the Zacks Rail industry (+42.4% vs. +29.9%) as well as fellow railroad operator CSX Corporation (+40.3%) over the past one year. The upbeat freight scenario is an added positive for the company as bulk of its revenues is derived from this source.
The Zacks analyst thinks strong freight revenues will boost its third-quarter results, scheduled to be released on Oct 25. Furthermore, the Zacks Consensus Estimate for current-quarter earnings moved north approximately 0.5% over the last 60 days, reflecting the positive sentiment surrounding the stock. Its efforts to reward investors through share buybacks and dividend payouts are also encouraging.
The company intends to repurchase shares worth $20 billion during 2018-2020 period. Dividend payout ratio in the period is anticipated between 40% and 45%. Union Pacific’s focus on promoting safety and enhancing productivity are impressive too. However, high operating expenses and debts remain major concerns.
Buy-ranked Danaher’s shares have gained +7.7% over the past three months, outperforming the Zacks Diversified Operations industry, which has gained +7% over the same period. The company reported better-than-expected results for second-quarter 2018. Danaher believes sturdier demand for innovative products like DxH 520 analyzer will continue to drive its revenues in the quarters ahead.
The Zacks analyst thinks robust top-line performance and effective Danaher Business System (DBS) implementation will likely bolster profitability. Moreover, Danaher anticipates that the acquisition of Integrated DNA Technologies and divestiture of its dental business will boost its competency.
The company even remains on track to roll out capital-deployment programs with stronger free cash flow generation. Over the past 60 days, the Zacks Consensus Estimate for the stock remained unchanged for 2018, but moved up for 2019.
Other noteworthy reports we are featuring today include Bank of New York Mellon (BK), Travelers (TRV) and Northern Trust (NTRS).
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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>>>