Today's Must Read
McDonald's (MCD) Rides on Re-Franchising & Delivery Sales
3M (MMM) Gains From Restructuring Moves, Costs Remain High
Wednesday, December 5, 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 Oracle (ORCL), McDonald’s (MCD) and 3M (MMM). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Oracle’s shares have outperformed the Zacks Computer Software industry in the past six months, gaining +2.1% vs. +1.9%. Oracle provides enterprise-grade database, middleware and application software.
The Zacks analyst thinks Oracle is benefiting from strong adoption of its cloud-based solutions, comprising Fusion ERP and Fusion HCM, among others. Partnerships with the likes of Accenture are helping Oracle to rapidly expand its cloud-based clientele. Also, anticipated strong demand for the next-generation autonomous database supported by machine learning will boost competitive position against AWS.
However, stiff competition in the cloud market from dominant players is anticipated to limit margin expansion. Further, lower hardware volumes are anticipated to hurt top-line growth consequently keeping margins under pressure. Additionally, integration risks from buyouts remain a concern.
Shares of Buy-ranked McDonald's have gained +14% in the past six months, outperforming the Zacks Restaurants industry which has gained +8.3% over the same period. The Zacks analyst likes McDonald's impressive earnings surprise history, various sales and digital initiatives as well as positive comparable sales. Also, its earnings estimate for 2018 has increased over the past month.
Furthermore, increased focus on delivery and accelerated deployment of Experience of the Future restaurants in the United States should boost its performance. These factors apart, the company’s efforts to drive growth in International Lead & High Growth Markets bode well. In fact, global comps at McDonald’s have been positive over the trailing 13 quarters.
Yet high labor costs and currency headwinds remain major concerns. Revenues have been under pressure for quite some time due to strategic refranchising initiatives. Even its heightened focus on refranchising should cut capital requirements and facilitate EPS growth.
3M’s shares have lost 4.9% in the past three months, outperforming the Zacks Diversified Operations industry, which has declined 14.1% over the same period. The Zacks analyst thinks the company stands to gain from its innovation efforts, solid household product’s demand, healthy liquidity position and portfolio restructuring moves.
The company remains committed to rewarding shareholders handsomely. However, over the past month, the stock looks overvalued compared to its industry. 3M reported weaker-than-expected third-quarter 2018 results. Inflation in prices of major inputs and rising interest expenses remain concerns for the company, posing threats to near-term profitability.
Additionally, stiff competition from local players remains another cause for worry. Over the past 7 days, the Zacks Consensus Estimate for the company’s earnings has remained unchanged for both 2018 and 2019.
(You can read the full research report on 3M here >>>).
Other noteworthy reports we are featuring today include Stryker (SYK), Broadcom (AVGO) and Costco (COST).
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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>>>