Today's Must Read
Subscriber Additions, Content Strength Drives Netflix (NFLX)
Solid Products & Buyouts Aid Danaher (DHR), High Costs Ail
Tuesday, October 23, 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 Oracle (ORCL), Netflix (NFLX) and Danaher (DHR). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Oracle’s shares have underperformed the Zacks Computer Software industry over the past year, losing -4.1% vs. +24.4%. Oracle is one of the largest enterprise-grade database, middleware and application software providers.
The Zacks analyst thinks the company is benefiting from strong adoption of its cloud-based solutions, comprising Fusion ERP and Fusion HCM, among others. Partnerships with the likes of Accenture are helping the company rapidly expand its cloud-base clientele.
Also, anticipated strong demand for the next-generation autonomous database supported by machine learning will boost competitive position against Amazon Web Services (AWS). Nevertheless, stiff competition in the cloud market from dominant players is anticipated to limit margin expansion.
Lower hardware volumes are anticipated to hurt top-line growth consequently keeping margins under pressure. Additionally, integration risks from buyouts remain a concern.
Shares of Netflix have increased +71.6% year to date, significantly outperforming the Zacks Broadcast Radio and Television industry’s gain of +23.8% during the same period. Netflix’s third-quarter 2018 subscriber addition rate reflected growing appeal of the streaming platform.
The Zacks analyst thinks that this appeal is primarily derived from a solid content portfolio mix of in-house originals and licensed content. The portfolio strength helped the company win 23 trophies in different categories, equal to HBO, in Emmy Awards 2018. This is also helping the company steer away competition from the likes of HBO, Amazon Prime and YouTube.
Moreover, partnerships with telcos like Telefonica in Spain and Latin America, and KDDI in Japan are expected to boost subscriber additions. In the third quarter, Netflix rolled out its first mobile bundle in Japan with KDDI. The company also expanded its collaboration with Verizon to pre-install the Netflix app on Android phones. Further, the inclusion of Netflix into Sky’s pay-TV packages, which it expects to rollout in the fourth quarter, presents a significant growth opportunity.
Danaher’s shares have gained +6.2% year to date, outperforming the Zacks Diversified Operations industry, which has declined -10.6% over the same period. In the third quarter of 2018, the company surpassed earnings and sales estimates by 2.8% and 0.9%, respectively.
The company believes sturdier demand for innovative products 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 bolster profitability.
Moreover, Danaher anticipates that the acquisition of Integrated DNA Technologies and divestiture of its dental business will boost its competency. It increased adjusted earnings per share projection for 2018 from $4.43-$4.50 to $4.49-$4.52.
However, rising cost of sales remains a major cause of concern. Extensive governmental regulations on import laws, export control, economic sanctions laws and unfavorable movements in foreign currencies might continue to restrict Danaher's growth.
Other noteworthy reports we are featuring today include BB&T Corporation (BBT), State Street (STT) and Rogers Communications (RCI).
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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>>>