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Research Daily

Monday, November 19, 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 Union Pacific (UNP), United Parcel Service (UPS) and American Tower (AMT). 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 >>>

Union Pacific’s shares have outperformed the Zacks Rail industry (+30.5% vs. +25.5%) but lagged fellow railroad operator CSX Corporation (+46.1%) over the past one year. The Zacks analyst thinks the upbeat freight scenario is a huge positive for the company as bulk of its revenues stem from this source.

Over the past few quarters, freight revenues boosted its third-quarter 2018 results and were up 10%. The uptick was driven by volume growth and increased fuel surcharge revenues among other factors. A low effective tax rate also aided results. Efforts to reward investors are encouraging as well.

The company intends to repurchase shares worth $20 billion during 2018-2020 period. Dividend payout ratio is anticipated between 40% and 45% during the same time frame. Union Pacific’s focus on promoting safety and enhancing productivity are impressive too. However, high operating expenses and debts are major concerns.

(You can read the full research report on Union Pacific here >>>).

Shares of United Parcel Service have underperformed the Zacks Transportation - Air Freight and Cargo industry over the past one year, losing -2.8% vs. -0.6%. United Parcel Service has been grappling with high operating expenses for quite some time and the third quarter of 2018 was no different.

Operating expenses increased 9.4% in the third quarter, leading to a contraction in operating margin. The Zacks analyst thinks trade-war related tensions and high debts pose further challenges to the company. However, solid e-commerce growth aided its third-quarter results. Additionally, the company's transformation plan, unveiled in September 2018, is aimed at boosting its bottom line.

Approval of the deal by its freight workers is an added positive. UPS' efforts to reward its shareholders are also impressive. UPS' bullish full-year forecast on free cash flow supports the possibility of a dividend hike in the near future.

(You can read the full research report on United Parcel Service here >>>).

American Tower’s shares have outperformed the Zacks REIT and Equity Trust industry over the past three months (+8.7% vs. -2.4%). In third-quarter 2018, American Tower’s adjusted funds from operations (AFFO) and revenues surpassed their respective expectations.

Revenues from the property and service segments recorded robust year-over-year growth. However, results were marred by escalating selling, general, administrative and development expenses.

The Zacks analyst emphasizes that the company continues to benefit from increased investment of wireless carriers in 4G LTE and 5G networks. Its asset base expansion in emerging markets and long-term tower leases with major wireless carriers lend it a competitive edge over rivals.

However, the company has a substantially leveraged balance sheet. Further, high customer concentration remains a risk. Particularly, the accelerated Indian carrier consolidation-driven churn has emerged as a near-term headwind for the company.

(You can read the full research report on American Tower here >>>).

Other noteworthy reports we are featuring today include AstraZeneca (AZN), Marriott (MAR) and Sony (SNE).

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Mark Vickery
Senior Editor

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>>>

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