Today's Must Read
Strong Customer Card Spending, Balance Sheet Aid AmEx (AXP)
Growing e-commerce Demand Aids FedEx (FDX), High Capex a Woe
Tuesday, October 9, 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 JPMorgan (JPM), American Express (AXP) and FedEx (FDX). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
JPMorgan’s shares have outperformed the Zacks Major Regional Banks industry over the past six months (+2.5% vs. +0.5%). Also, the company has an impressive earnings surprise history, having surpassed expectations in each of the trailing four quarters.
The Zacks analyst thinks expansion into new markets, focus on strengthening the card business, higher interest rates and rising loan demand will benefit the bank’s financials. Further, lower tax rates and easing of stringent regulations are expected to offer some support.
However, dismal mortgage banking performance (as originations continue to decline) remains a major concern. This is expected hamper revenue growth to some extent.
Shares of Buy-ranked American Express are up +16.4% over the past year, outperforming the Zacks Financial Miscellaneous Services industry, which has declined -10.3% over the same period. The Zacks analyst thinks a solid market position, strength in card business and significant opportunities from the secular shift toward electronic payments are growth drivers. It continues to witness strong loan growth and credit metrics.
A number of growth initiatives such as new products, enhancements of features on existing ones, changes to pricing, seem to be bearing fruit now. Its international business seems attractive. However, it is faced with an increase in reward expense led by enhancements to its U.S. platinum products.
Cost of card member services has been increasing over the past three years and continues to do so this year, reflecting higher engagement levels across its premium travel services. It is also witnessing an increase in provision of loan losses for the past two and half years.
FedEx’s shares have underperformed the Zacks Air Freight and Cargo industry (-0.3% vs. +4.9%) and rival United Parcel Service (+9.5%) over the past three months. Adding to its woes, FedEx reported lower-than-expected earnings per share in the first quarter of fiscal 2019. Results were hurt by high operating expenses.
With FedEx investing significantly to upgrade facilities at its key divisions, capital expenses are also on an upswing. For fiscal 2019, capital expenses are expected to be $5.6 billion. However, e-commerce growth is a positive.
FedEx's top line increased 11.5% in the fiscal first quarter mainly owing to growing e-commerce demand. The Zacks analyst likes the company’s decision to raise the fiscal 2019 earnings guidance. Low tax rates are aiding bottom-line growth. FedEx's efforts to reward shareholders through dividend payments and share buybacks are encouraging as well.
Other noteworthy reports we are featuring today include AstraZeneca (AZN), PepsiCo (PEP) and CVS Health (CVS).
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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>>>