Today's Must Read
Life Sciences Business Drives Danaher (DHR), High Costs Ail
Cost Control Aids Wells Fargo (WFC) Amid Declining Revenues
Tuesday, April 19, 2022
The Zacks Research Daily presents the best research output of our analyst team. Today's Research Daily features a real-time update on the ongoing Q1 earnings season and new research reports on 16 major stocks, including UnitedHealth Group Incorporated (UNH), Danaher Corporation (DHR), and Wells Fargo & Company (WFC). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
You can see all of today’s research reports here >>>
Q1 Earnings Season Scorecard
Including all of this morning's reports, we now have Q1 results from 40 S&P 500 members. Total earnings for these companies re down -16.6% from the same period last year on +8.4% higher revenues, with 77.5% beating consensus EPS estimates and an equal proportion beating consensus revenue estimates.
The sampe of results at this stage of the reporting cycle is weighted towards the Finance sector, but we can nevertheless say with some degree of confidence that companies appear to be struggling to beat consensus EPS estimates.
In fact, the 2022 Q1 EPS beats percentage at 77.5% for this group of 40 S&P 500 members is the lowest since the second quarter of 2020, the worst Covid-affected quarterly reporting cycle. This suggests to us that management teams as well as analysts are finding it hard to fully handicap the ongoing inflationary trends.
For the Finance sector, we now have Q1 results from 33.6% of the index's total market capitalization in the index. Total Q1 earnings for these Finance companie are down -28.8% from the same period last year on -2.6% lower revenues, with 73.3% beating EPS estimates and 60% beating revenue estimates.
Shares of UnitedHealth have outperformed the Zacks Medical - HMOs industry over the past year (+37.6% vs. +31.8%) The Zacks analyst believes that the company’s top line has been growing and the momentum should continue in the years ahead on the back of a strong market position and an attractive core business that continues to be driven by new deals, renewed agreements and expansion of service offerings. Its solid health services segment provides diversification benefits. UnitedHealth reported strong first-quarter 2022 results thanks to growth in its business segments.
A sturdy balance sheet enables investments and prudent capital deployment through share buybacks and dividends. However, softness in commercial business due to the COVID-induced volatilities persists. Also, rising operating costs are hurting its profits. As such, the stock warrants a cautious stance.
Shares of Danaher have outperformed the Zacks Diversified Operations industry over the past year (+13.7% vs. -11.4%). The Zacks analyst believes that the company should continue to benefit from Danaher Business System (“DBS”), healthy rewards to shareholders, buyout benefits, and product innovation in the quarters ahead. In the fourth-quarter 2021, its earnings and sales surpassed estimates. The company anticipates year-over-year core revenue growth of 10% for the first quarter of 2022.
The impact of COVID-related testing is predicted to boost sales in the low-single digits in the first quarter. However, cost inflation and woes related to supply-chain restrictions might be worrying in the quarters ahead. High debts might inflate financial obligations and forex woes might be concerning.
Shares of Wells Fargo have outperformed the Zacks Banks - Major Regional industry over the past year (+14.5% vs. -2.1%). The Zacks analyst believes that the growing deposit trend strengthens the company's liquidity position. Given its robust capital position, its capital deployment activities seem sustainable. Improving credit quality poses a tailwind. Expense-control moves will aid its bottom line.
However, legal hassles exacerbated with Wells Fargo being penalized with business restrictions and a monetary fine. Restrictions on balance sheet growth hinder loan expansion ability. A decline in originations might limit Wells Fargo’s mortgage banking income and overall top line.
Other noteworthy reports we are featuring today include Vertex Pharmaceuticals Incorporated (VRTX), Canadian Pacific Railway Limited (CP), and Schlumberger Limited (SLB).
Director of Research
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>>>