Today's Must Read
Strong Optum, Solid Balance Sheet Aids UnitedHealth (UNH)
AT&T (T) to Ramp Up FirstNet Despite Legacy Services Woes
Robust Adoption of FPGAs & Product Launches Aid Intel (INTC)
Monday, October 29, 2018
The Zacks Research Daily presents the best research output of our analyst team. Today's Research Daily features new research reports on 17 major stocks, including Johnson & Johnson (JNJ), UnitedHealth (UNH), AT&T (T) and Intel (INTC). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Buy-ranked Johnson & Johnson's shares have outperformed the Zacks Large Cap Pharmaceuticals in the past six months, gaining +8.3% vs. +7%. J&J beat estimates for both earnings and sales in Q3 and raised its outlook for the year.
The Zacks analyst thinks J&J’s sales growth has accelerated lately backed by above-market sales growth in the Pharmaceutical segment and improving performance in Medical Devices unit. Though quite a few key products in J&J’s portfolio are facing generic competition, new products in all segments, successful label expansion of cancer drugs like Imbruvica and Darzalex and contribution from recent acquisitions will continue to drive top-line growth.
J&J is also making rapid progress with its pipeline and line extensions. Meanwhile, share buybacks and restructuring initiatives should provide bottom-line support. Headwinds like generics, pricing pressure and soft global market conditions remain.
Shares of Buy-ranked UnitedHealth have outperformed the Zacks Medical Insurance industry's rally in the past year (up +23.3% vs. +22.7%). UnitedHealth Group’s third-quarter earnings surpassed expectations and increased year over year. Higher revenues, strength in both segments — UnitedHealthcare and Optum — plus membership growth led to this outperformance.
The Zacks analyst thinks UnitedHealth has been performing well on the back of solid performance by UnitedHealthcare and Optum segments. The company's robust Government business is also driving long-term growth. Its international business and strong capital position are other positives. It has been witnessing an increase in membership over the past several years.
The company’s raised earnings guidance for 2018 should instill optimism among its investors. However, the company is witnessing pressure in membership in its commercial business. Increasing consolidation will also intensify competition in the industry.
AT&T’s shares have decreased -13.3% in the past year, underperforming the Zacks Wireless National industry's increase of +0.5%. AT&T reported solid third-quarter 2018 results with year-over-year increase in the top line driven by solid wireless performance, although adjusted earnings failed to beat estimates.
The Zacks analyst likes the fact that the company is ramping up its FirstNet program and revamping its lineup of video products, pricing and promotion initiatives. AT&T is also gearing up to launch the first standards-based 5G services in multiple U.S. markets by the end of 2018. The company reiterated its guidance on healthy growth dynamics.
AT&T is facing a steady decline in linear TV subscribers and legacy services. The company’s wireline division is facing losses in access line due to competitive pressure from voice-over-Internet protocol service providers. As AT&T tries to woo customers with healthy discounts, freebies and cash credits, margin pressures tend to escalate.
Shares of Buy-ranked Intel have outperformed the Zacks General Semiconductor industry in the past year, gaining +3% vs. a decline of -2.3%. Intel reported stellar third-quarter results and provided encouraging forthcoming view. Both revenues and earnings increased on a year-over-year basis, primarily on the back of impressive results from both data-centric and PC-centric businesses.
The Zacks analyst likes the company’s strategy of expanding TAM beyond CPU to adjacent product lines like silicon photonics, fabric, network ASICs, and 3D XPoint memory. Further, expanding customer base in the PSG segment drove top-line growth. Moreover, stable PC market is also positive for the company.
Additionally, lower spending helped in expanding operating margins. Intel raised 2018 guidance based on these solid growth trends. However, delays in transition to 10-nm process is a concern. Moreover, intensifying competition remains a headwind.
Other noteworthy reports we are featuring today include 3M (MMM), Gilead (GILD) 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>>>