Today's Must Read
Cisco (CSCO) Gains From Security Products & Strategic Deals
Southern (SO) Buoyed by AGL Buy, Project Overruns Hurt
Friday, November 16, 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 Pfizer (PFE), Cisco (CSCO) and Southern Company (SO). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Pfizer’s shares have outperformed its peer group year-to-date (the stock is up +19.2% over this period vs. a +7.2% increase for the Zacks Large-Cap Pharmaceuticals industry). Pfizer beat estimates for earnings while matching the same for in the third quarter.
Pfizer is facing top-line headwinds in the form of genericization of key drugs, supply challenges in the legacy Hospira portfolio, pricing pressure and rising competition. Nevertheless, the Zacks analyst thinks new products like Ibrance, cost-cutting efforts, a lower tax rate and share buybacks can support bottom-line growth.
Pfizer also boasts a strong pipeline and looks well positioned to deliver several potential new breakthrough innovative medicines in the next five years, which can drive long-term growth. Bavencio, though currently approved for two small indications, is being considered a key long-term growth driver for Pfizer if it can gain label expansion approvals. Pfizer also recently gained FDA approval for three new cancer medicines, which can boost oncology sales.
Shares of Cisco have outperformed the Zacks Computer Networking industry over the past year, gaining +30.3% vs. +27.7%. Cisco reported stellar first-quarter results. The Zacks analyst thinks the company is benefitting from expanding footprint in the rapidly growing security market, which represents a significant growth opportunity.
Strong contribution from security, Infrastructure Platforms and applications is a positive. Order strength and improving traction of the subscription-based model are other tailwinds. Strengthening collaboration portfolio which now includes Webex Teams and Accompany bodes well. Partnerships with Telenor, Apple, IBM, Microsoft and Google Cloud are notable.
Further, Duo Security buyout should help the company expand its IT and data security businesses. However, weakness in switching and routing is a headwind. Arista’s intention of manufacturing switches that connect campus networks is likely to hurt Cisco as it holds a dominant position in that market.
Southern Company's shares have outperformed the Zacks Electric Power industry over the past six months, gaining +8.2% vs +6.8%. The Zacks analyst thinks Southern Company is one of the largest and best-managed electric utility holding companies in the United States, dominating the power business across the southeastern region.
With good rate base growth and constructive regulation, it is expected to generate steady earnings and dividend growth in the coming years through long-term power contracts. Additionally, SO's $12 billion AGL Resources buy has significantly increased its customer base and diversified offerings. However, continued timing and cost overrun issues over two large construction projects – Vogtle and Kemper – are major overhangs.
While the $25 billion Vogtle nuclear plant has gone well over budget and is years behind schedule, Southern's Kemper project suffered yet another setback with the suspension of all coal gasification operations amid additional cost burden. Hence, Southern Company warrants a cautious stance from the investors.
Other noteworthy reports we are featuring today include Exelon (EXC), SunTrust Banks (STI) and AmerisourceBergen (ABC).
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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>>>