Today's Must Read
End-Market Strength, Global Business Aid Thermo Fisher (TMO)
Strong Global Demand to Drive Caterpillar (CAT), Costs Hurt
Friday, October 26, 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 McDonald’s (MCD), Thermo Fisher (TMO) and Caterpillar (CAT). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Buy-ranked McDonald's shares have gained +10.8% over the past six months, outperforming the Zacks Restaurants industry which has gained +3.7% over the same period. The Zacks analyst likes McDonald’s impressive earnings surprise history, various sales and digital initiatives as well as positive comparable sales.
Earnings surpassed estimates for the 17th straight quarter as it reported third-quarter 2018 results. Furthermore, increased focus on delivery and accelerated deployment of Experience of the Future restaurants in the United States should boost its performance.
These apart, the company’s efforts to drive growth in International Lead & High Growth Markets bode well. In fact, global comps at McDonald’s have been positive over the trailing 13 quarters. Yet, high labor costs and currency headwinds remain major concerns.
Moreover, revenues have been under pressure for quite some time due to strategic refranchising initiatives. Even its heightened focus on refranchising should cut the capital requirements and facilitate EPS growth.
Shares of Buy-ranked Thermo Fisher have outperformed the Zacks Medical Instruments industry over the past three months (-0.4% vs. -4.9%). Thermo Fisher ended the third quarter on a promising note with both earnings and revenues surpassing the consensus mark.
The company saw strength in all end markets categorized by customer type or geography. It particularly registered solid international performance with strong growth in Asia-Pacific including China. Also, a series of product launches with progress in precision medicine initiatives aided its performance.
The Zacks analyst thinks the company’s recently-closed acquisition of Advanced Bioprocessing business from BD should add complementary cell culture products to Thermo Fisher’s bioproduction offerings. Also, the company’s initiative to buy Gatan to boost electron microscopy suite buoys optimism.
On the flip side, Thermo Fisher’s business segments are getting impacted by unfavorable business mix. Also, competitive headwinds and escalating costs pose a threat.
Caterpillar’s shares have outperformed the Zacks Construction and Mining industry over the past year, losing -16.1% vs. -16.8%. Caterpillar’s third-quarter adjusted earnings per share (EPS) rose 47%, while revenues improved 18% from the year-ago tallies.
Both the top and bottom line came ahead of respective expectations. This was driven by strength in its end markets and cost control efforts. Backed by strong order rates, favorable commodity prices, increasing backlog, Caterpillar guides adjusted earnings per share to be $11.00-$12.00 for 2018, reflecting year-over-year growth of 67% at the mid-point.
The Zacks analyst thinks improved end-user demand across all regions and most end markets is likely to aid its top line. Cost cutting efforts and additional investments in expanded offerings and services, and digital initiatives like e-commerce will also drive growth. However, material cost inflation due to the impact of tariffs and increased transportation costs will affect its near-term margins.
Other noteworthy reports we are featuring today include Biogen (BIIB), CSX Corporation (CSX) and Celgene (CELG).
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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>>>