Today's Must Read
Opdivo Label Expansion Fuels Growth For Bristol-Myers (BMY)
Solid Comps Run to Continue Driving Costco's (COST) Top Line
Friday, October 5, 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 Home Depot (HD), Bristol-Myers (BMY) and Costco (COST). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Buy-ranked Home Depot’s shares have gained +19.9% over the past year, marginally underperforming the Zacks Retail Building Products industry’s +20.9% increase. The Zacks analyst thinks that this performance is attributable to its five-year long trend of beating earnings estimates, which continued in second-quarter fiscal 2018.
Moreover, sales reverted to a positive surprise trend after a miss in the last-reported quarter. Results gained from a rebound in the seasonal business that impacted sales in the fiscal first quarter and the solid execution. Further, its relentless focus on affording innovative products, boosting interconnected customer experience and driving productivity seems to be paying off. A steady housing market recovery and strong customer demand also remain tailwinds.
Backed by the solid performance in the first half of fiscal 2018, the company raised the earnings and sales forecast for fiscal 2018. However, commodity cost inflation in various categories, including rising raw material and transportation costs as well as recently enacted tariffs are likely to pressure margins.
Shares of Buy-ranked Bristol-Myers have underperformed the Zacks Large Cap Pharmaceuticals industry year to date, increasing +1.8% vs. a gain of +7.2%. However, Bristol-Myers' blockbuster immuno-oncology drug Opdivo continues to maintain momentum. Opdivo’s performance is being boosted by the uptake in new indications, first line renal cell and adjuvant melanoma.
Several label expansion applications for Opdivo are under review in the United States and Europe. The drug was recently approved for small cell lung cancer in the United States and melanoma in Europe. Potential approval in other indications will further boost the prospects of this blockbuster drug.
Eliquis is expected to drive further growth in 2018 driven by increases in market share in the novel oral anticoagulant (NOAC) market. The label expansion of other drugs like Sprycel and Empliciti also bode well for the company. However, pricing concerns, stiff competition in the immuno-oncology space are expected to remain an overhang.
Buy-ranked Costco’s shares have outperformed the Zacks Discount Retail industry over the past six months, gaining +25.9% versus the industry's +19.2% increase. Costco continues to be one of the dominant retail wholesalers based on the breadth and quality of merchandise offered.
The Zacks analyst thinks the stock has been gaining from sturdy comps performance and upbeat results. Notably, comps for fourth-quarter fiscal 2018 advanced 9.5% year over year, while revenues improved 5%. In fact, this marks the company’s sixth consecutive revenue beat.
Undoubtedly, the robust performance indicates that the company’s growth efforts have been fueling traffic across both the online and brick-and-mortar platforms. Moreover, the company is augmenting merchandise offerings and delivery services to further boost e-commerce sales.
However, lower core merchandise margins have been weighing on Costco’s gross margin. Further, rising SG&A expenses, stiff competition and unfavorable currency changes continue to pose threats.
Other noteworthy reports we are featuring today include Raytheon (RTN), Ecolab (ECL) and Ameriprise Financial (AMP).
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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>>>