Today's Must Read
Adobe (ADBE) Rides on Growing Adoption of Cloud Applications
Loyalty Program Aid McDonald's (MCD), China Comps Woes Stay
Tuesday, August 9, 2022
The Zacks Research Daily presents the best research output of our analyst team. Today's note including a real-time scorecard of the Q2 earnings season, in addition to featuring new research reports on 16 major stocks, including Roche Holding AG (RHHBY), Adobe Inc. (ADBE), and McDonald's Corporation (MCD). 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 >>>
Q2 Earnings Season Scorecard We now have Q2 results from 448 S&P 500 members or 89.6% of the index's total membership. Total earnings for these 448 companies are up +8.1% from the same period last year on +15.3% higher revenues, with 77.2% beating EPS estimates and 68.3% beating revenue estimates.
The beats percentages have been less frequent this earnings season relative to other recent periods.
Looking at Q2 as a whole, combining the actuals that have come out with estimates for the still-to-come companies, earnings and revenues are on track to be up +6.9% and +14% from the year-earlier levels, respectively. Excluding contribution from the Energy sector,
Q2 earnings for the rest of the index would be down -3.4%. On the other hand, the Q2 earnings growth pace improves to +14.1% once the Finance sector's drag is removed.
Estimates for the current period (2022 Q3) have come down lately, with the current +2.5% earnings growth rate down from +7.2% in early July. On an ex-Energy basis, Q3 earnings are currently expected to be down -4%, which represents a decline from +2.1% on July 6th.
Today's Featured Analyst Reports
Roche Holding shares have declined -15.2% over the past year against the Zacks Large Cap Pharmaceuticals industry’s decline of +7.4%. The Zacks analysts believes that the demand for COVID-19 tests is expected to decline in the second half, and this will adversely impact the Diagnostics division, which recorded solid growth last year.
Nevertheless, growth of routine business excluding COVID tests should maintain momentum. Competition is stiff for Tecentriq and incremental market share gains will be tough. The decline in sales of drugs like Herceptin, Avastin and MabThera will continue to drag sales.
However, the pharmaceuticals business remained stable and newer drugs continued to offset the decline in sales of legacy drugs. Strong demand for new drugs, namely Hemlibra (hemophilia), Ocrevus (multiple sclerosis), Evrysdi (spinal muscular atrophy), Phesgo (cancer) and Tecentriq (cancer) maintains momentum.
Adobe shares have declined -30.3% over the past year against the Zacks Computer - Software industry’s decline of -9.3%. The Zacks analyst believes that lower end-market demand, particularly in Europe, and high acquisition expenses remain major overhangs. Nevertheless, Adobe is benefiting from strong demand for its cloud products. The company’s Creative Cloud, Document Cloud and Adobe Experience Cloud products are helping it drive top-line growth.
Additionally, rising subscription revenues and solid momentum across the mobile apps remain major positives. Further, growth in emerging markets, robust online video creation demand, strong Acrobat adoption and improving average revenue per user remain tailwinds.
However, we remain optimistic about Adobe’s market position, compelling product lines, persistent innovation and solid adoption of Creative Cloud and Adobe marketing cloud. Further, the company’s strong balance sheet remains another positive.
McDonald's shares have outperformed the Zacks Retail - Restaurants industry over the past year (+12.4% vs. -12.4%). The company reported mixed second-quarter 2022 results, with earnings beating the Zacks Consensus Estimate and revenues missing the same. The top line fell year over year, while the bottom line increased on a year-over-year basis.
McDonald’s increased focus on menu innovation and loyalty program expansion is commendable. The company is also undertaking every effort to drive growth in international markets. Robust digitalization will help the company in driving long-term growth and capturing market share.
However, restaurant closures in Russia and Ukraine coupled with inflationary pressures on labor and commodities remain headwinds. The company stated that recovery in China remains challenging due to ongoing COVID resurgences and related lockdowns.
(You can read the full research report on McDonald here >>>)
Other noteworthy reports we are featuring today include Merck & Co., Inc. (MRK), Deere & Company (DE), and BP p.l.c. (BP).
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>>>