Today's Must Read
Growing e-commerce Demand, Dividends & Buybacks Aid UPS
PayPal (PYPL) Benefits From Increasing Total Payment Volume
Thursday, October 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 Wells Fargo (WFC), United Parcel Service (UPS) and PayPal (PYPL). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Wells Fargo’s shares have underperformed the Zacks Major Banks industry over the past three months (-6.5% vs. -0.2%). But estimates have been stable lately ahead of the company’s Q3 earnings release. However, the company possesses a disappointing earnings surprise history, having beaten expectations in only one of the trailing four quarters.
Following its sales scandal and other issues, Wells Fargo has been slapped with new sanctions, including a cap on the assets position by the Federal Reserve. Also, the crisis related to the revelation of illegally opening millions of accounts in 2016, auto-lending issues and impact of other malpractices will take some time to alleviate.
Recently, the company’s chief financial officer, John Shrewsberry, revealed a dismal picture for the bank’s loan book as well. However, lower tax rate, easing of regulations and expansions will likely support the bank’s growth profile.
Shares of Buy-ranked United Parcel Service have outperformed the Zacks Air Freight and Cargo industry over the past six months, gaining +9.1% vs +1.2%. Solid e-commerce growth is a huge positive for the company and should aid its third-quarter results, scheduled to be disclosed on Oct 24.
Additionally, the company's transformation plan, unveiled in September 2018, is aimed at boosting its bottom line. The Zacks analyst is impressed by UPS' efforts to reward shareholders. To this end, in February 2018, UPS hiked quarterly dividends by 10%. UPS' bullish full-year forecast on free cash flow supports the possibility of a dividend hike in the near future.
Moreover, UPS is leaving no stone unturned to perform well in the upcoming holiday season. It intends to hire roughly 100,000 seasonal workers during the season. However, high operating expenses continue to limit bottom-line growth.
Buy-ranked PayPal’s shares have outperformed the Zacks Internet Software industry over the past year (+9.6% vs. +5.2%). PayPal continues to expand its customer base with the help of its robust Venmo, Choice and One Touch. Also, the company’s tie-up with MasterCard is aiding the adoption rate of Venmo.
Further, the company’s ongoing partnership with ShinhanCard remains positive for its presence in South Korea. Also, its extended partnership with Google and eBay will continue to strengthen its customer base further. This will keep adding strength to PayPal’s total payments volume.
The Zacks analyst thinks an expanding product & services portfolio and global presence will continue to benefit the company’s market share. However, continuous exposure to foreign exchange and interest rate risks are major concerns. Also, intensifying competition from major players in the finance and payment industry poses a risk to the company’s market position.
Other noteworthy reports we are featuring today include United Technologies (UTX), Northrop Grumman (NOC) and Morgan Stanley (MS).
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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>>>