Today's Must Read
Rates, New Branches Aid JPMorgan (JPM), Mortgage Fees a Woe
Guyana Discoveries Aid Exxon (XOM), Exploration Expenses Ail
Monday, December 10, 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 Berkshire Hathaway (BRK.B), JPMorgan (JPM) and Exxon Mobil (XOM). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Berkshire Hathaway’s shares have outperformed the Zacks Insurance - Property and Casualty industry over the past year (+4.2% vs. +0.5%). The Zacks analyst thinks the company is poised for growth since it banks on its sturdy insurance business in the long-term. Its property and casualty insurance business generate maximum return on equity.
The company’s inorganic growth story remains impressive with strategic acquisitions. A strong cash position allows it to make earnings-accretive bolt-on buyouts. Demand for utilities is expected to rise in the future and drive earnings growth. Continued insurance business growth also fuels increase in float. A sturdy capital level provides further impetus.
However, its exposure to catastrophe loss remains a concern. Huge capital expenses due to railroad operations pose concerns. Capital expenditure is estimated to be $9.8 billion in 2018.
Shares of JPMorgan have outperformed the Zacks Major Regional Banks industry over the past six months (-6.8% vs. -11.9%). Also, the company has an impressive earnings surprise history, having surpassed expectations in each of the trailing four quarters.
The Zacks analyst thinks expansion into new markets, focus on strengthening the card business, rising rate environment and increasing loan demand will benefit the bank’s financials. Also, lower tax rates, strong balance sheet position and easing of stringent regulations are expected to offer some support.
However, dismal mortgage banking performance (as originations continue to decline) remains a major concern. This is expected to hurt the bank's non-interest income growth to some extent.
ExxonMobil’s shares have underperformed the Zacks Integrated International Oil industry (-6.5% vs. -4.9%) over the past year. ExxonMobil has a leading position in the energy industry owing to the size and diversity of its asset base, both in terms of business mix and geographical footprint. With a stable cash position, the company’s balance sheet is one of the best in the industry.
The Zacks analyst thinks that this has allowed ExxonMobil to reward stockholders with a 6.3% average annual dividend hike over the past 35 years. Notably, major discoveries in the Stabroek Block, offshore Guyana, with more than 4 billion barrels of oil equivalent gross recoverable resources have enhanced prospects for ExxonMobil’s upstream businesses.
However, escalating capital & exploration expenditures might hurt the company’s free cashflow. Moreover, following the exit from a joint venture in Russia, ExxonMobil is foregoing significant growth opportunities from the region. Also, producing non-renewable energy is a burden for ExxonMobil as an increase in legal actions can prove costly.
Other noteworthy reports we are featuring today include Southern Copper (SCCO), General Mills (GIS) and Motorola (MSI).
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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>>>