Today's Must Read
Amgen (AMGN) Counts on New Drugs Amid Rising Competition
End-Market Strength, Patheon Buyout Aid Thermo Fisher (TMO)
Tuesday, October 2, 2018
The Zacks Research Daily presents the best research output of our analyst team. Today's Research Daily features new research reports on 12 major stocks, including Chevron (CVX), Amgen (AMGN), and Thermo Fisher (TMO). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
You can see all of today’s research reports here >>>
Buy-ranked Chevron’s shares have risen +4.2% over the past year, underperforming the Zacks Integrated Oil industry's +12.2% increase. However, 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 company’s ‘oilier’ nature of its 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. The production increase will be driven by the Australian LNG megaprojects, as well as Chevron’s stellar Permian operations.
The company also improved its cash from operations, allowing management to raise the dividend and announce a $3 billion per year share buyback program recently. Consequently, Chevron is viewed as a preferred energy play to own now.
Shares of Buy-ranked Amgen have gained +19.2% year to date versus the Zacks Biomedical and Genetics industry's decline of -1.2%. Amgen’s newer drugs – Prolia, Xgeva, Blincyto, Repatha, Kyprolis – are performing well. Amgen is also progressing with its pipeline and the recent approval of migraine candidate, Aimovig was a huge boost.
The Zacks analyst thinks Amgen’s restructuring plan is making it leaner and more cost efficient. Lower taxes and share buybacks should provide some bottom-line support. However, Amgen has some challenges in store, given the slowdown in sales of mature drugs like Enbrel, Aranesp and Neulasta, which are facing an array of branded and generic competitors. Volume growth of new drugs may not be enough to offset lost sales due to the decline in mature brands.
While Neupogen is already facing U.S. biosimilar competition, Neulasta, Epogen and Sensipar could start facing the same this year. Meanwhile, uptake of key new drug, Repatha has been slow due to payer restrictions.
Buy-ranked Thermo Fisher’s shares have outperformed the Zacks Medical Instruments industry over the past three months (+18.8% vs. +13.7%). The Zacks analyst likes the company’s solid international performance on strong growth in China in the last reported quarter. Thermo Fisher also saw strength in all end markets categorized either by customer type or geography.
Also, a series of product launches along with major progress in precision medicine initiatives aided the company’s performance. Moreover, the Patheon buyout has been substantially adding to the company’s value proposition for biopharma customers.
Thermo Fisher’s initiative to buy Gatan in order to boost electron microscopy suite buoys optimism. On the flip side, in the reported quarter, Thermo Fisher’s business segments were impacted by unfavorable business mix. Also, competitive headwinds and rising operating costs continue to pose a threat.
Other noteworthy reports we are featuring today include Marriott (MAR), Estee Lauder (EL) and Delta Air Lines (DAL).
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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>>>