Today's Must Read
High Cigarette Pricing to Boost Philip Morris (PM)
Strong Aerospace Segment Drives Honeywell's (HON) Revenues
Wednesday, October 24, 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 Procter & Gamble (PG), Philip Morris (PM) and Honeywell (HON). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Procter & Gamble’s shares have declined -5.1% year to date, underperforming the Zacks Soap and Cleaning Materials industry, which lost -4.7% over the same period. The Zacks analyst attributes the underperformance to strained margins, which in turn have been caused by increased commodity and shipping costs, adverse currency, higher business investments and aggressive pricing from private-label products amid intense competition.
Moreover, sales remain muted due to weak demand and lower prices. While the company expects recently announced price increases to help rebound sales and margins, analysts’ fear of impacts on demand and consumption. Also, softness in the grooming and baby care businesses remains concerns.
However, the company has an impressive earnings surprise history, which continued in fourth-quarter fiscal 2018 marking its 13th consecutive beat. The company’s focus on product improvement, packaging and marketing initiatives, and productivity cost-savings plan bodes well. Further, it is benefiting from higher demand for skincare products, along with fabric and home care products.
Shares of Philip Morris have outperformed the Zacks Tobacco industry over the past three months (+5.6% vs. +0.2%) buoyed by sturdy top- and bottom-line performances as well as a positive view for 2018. In fact, the third-quarter 2018 results mark fifth and sixth straight quarter of year-on-year earnings and revenue growth, respectively. Results also surpassed estimates in the period.
The quarter’s robust performance was backed by favorable pricing and strong brand performances in the combustible category. Further, the company is undertaking initiatives to strengthen RRPs, which have been gaining market popularity.
However, Philip Morris has been grappling with persistent declines in total shipment volumes, mainly stemming from weak cigarette sales. Stringent government regulations on tobacco products have been marring cigarette industry volumes for a while. Moreover, unfavorable currency movements are a viable threat.
Honeywell’s shares have outperformed the Zacks Diversified Operations industry over the past six months, increasing +2.4% vs. a -1.6% decline. In third-quarter 2018, the company's earnings grew 16.7% year over year and also exceeded expectations by 2%.
The company believes that solid demand for innovative technology solutions will continue to drive its segmental revenues in the quarters ahead. The Zacks analyst thinks stronger sales volumes, increased productivity and ongoing commercial effectiveness actions will likely boost near-term profitability.
However, the stock looks overvalued compared to the industry for the past six-month period. The company is presently facing inflationary headwinds across its entire supply-chain process. Escalating costs might dent Honeywell's profitability in the quarters ahead.
Other noteworthy reports we are featuring today include Lockheed Martin (LMT), Chubb (CB) and Illumina (ILMN).
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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>>>