Today's Must Read
Robust Snacking Category to Drive PepsiCo's (PEP) Sales
Focus on Core Operations Aid Citigroup (C), Legal Woes Linger
Tuesday, November 27, 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 Boeing (BA), PepsiCo (PEP) and Citigroup (C). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Buy-ranked Boeing’s shares have surged +18.1% over the past year, outperforming the Zacks Aerospace & Defense industry, which gained +1.7% during the same time period. The Zacks analyst emphasizes that the company is the largest aircraft manufacturer in the world in terms of revenues, orders and deliveries.
The company’s 20-year market outlook forecasts commercial jetliner demand to increase by 4.1%, with single-aisle jets being the major driver behind this demand growth. Boeing expects the commercial fleet to be fueled by sustained annual growth in commercial passenger traffic along with a big wave of retiring, old planes. Boeing’s strong balance sheet and cash flows provide financial flexibility in matters of incremental dividend, ongoing share repurchases and earnings accretive acquisitions.
However, this aerospace giant may face competitive challenges if new manufacturers like China enter the commercial jet space. Engine-related issues pertaining to its 787 fleet may also hurt company's growth.
Shares of PepsiCo have gained +15.5% in the past six months, outperforming the Zacks Soft Beverages industry's increase of +1%, due to its robust surprise trend. Earnings topped estimates in the last 11 quarters, while it delivered positive sales surprise in five of the last seven quarters.
The Zacks analyst thinks the improvement is mainly attributable to strong performances in international divisions, propelled by higher revenue growth in developing and emerging markets. Also, the company is benefiting from its strong and growing snacks business.
However, PepsiCo is witnessing strained margins for quite some time due to operating and commodity cost inflation, including higher transportation costs and stepped-up advertising expense. This trend is likely to continue through the rest of 2018. Additionally, consumers’ awareness on health and wellness, alongside new taxes on sugar-sweetened beverages and growing regulatory pressures are affecting CSD sales, which has caused sluggishness in beverage category.
Citigroup’s shares have underperformed the Zacks Major Regional Banks industry year to date (-14.3% vs. -6.5%). However, the company possesses an impressive earnings surprise history, beating expectations in all the trailing four quarters.
The Zacks analyst thinks the company’s restructuring and streamlining efforts, strategic investments in core business, lower tax rate and expense management will likely support profitability. Though several issues, including litigation burden and declining fee income, are cause for apprehension, with rates rising, margin pressure seems to be easing.
Other noteworthy reports we are featuring today include United Technologies (UTX), NIKE (NKE) and Monster Beverage (MNST).
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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>>>