Today's Must Read
PepsiCo's (PEP) Business Investments to Bolster Performance
IBM Rides on Hybrid Cloud & Analytics Growth Opportunities
Tuesday, September 13, 2022
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 Eli Lilly and Company (LLY), PepsiCo, Inc. (PEP) and International Business Machines Corporation (IBM). 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 >>>
Eli Lilly shares have outperformed the Zacks Large Cap Pharmaceuticals industry over the past year (+37.2% vs. +12.8%), reflecting the company's solid portfolio of core drugs in diabetes, autoimmune diseases and cancer. Its revenue growth is being driven by higher demand for drugs like Trulicity, Taltz, and others.
It is regularly adding promising new pipeline assets through business development deals. Lilly expects to launch five new medicines by 2023 end including Mounjaro for type II diabetes (already launched) and donanemab for early Alzheimer's disease. Both drugs have multibillion dollar sales potential.
However, generic competition for several drugs, rising pricing pressure in the United States mainly on key drug, Trulicity, and price cuts in some international markets like China, Japan and Europe are some top-line headwinds.
PepsiCo’s shares have outperformed the Zacks Beverages - Soft drinks industry over the past year (+13.7% vs. +9.7%) on the back of continued momentum in the company's business as reflected in the 16th straight quarter of sales beat in the last quarterly release. It benefits from the resilience and strength of global beverage and convenient food businesses. It expects to benefit by delivering convenience, variety and value proposition to customers through its brands. It raised its revenue view for 2022.
However, PepsiCo witnessed margin pressures in the second quarter driven by impacts of supply-chain disruptions and inflationary labor, transportation and commodity costs. PEP anticipates incremental input cost inflation for the balance of 2022. Adverse currency rates also remain headwinds.
IBM’s shares have outperformed the Zacks Computer - Integrated Systems industry over the past year (+4.8% vs. -6.4%). The company’s synergies from the Red Hat buyout are bolstering its competitive position in the hybrid cloud market. IBM’s growth is expected to be driven primarily by analytics, cloud computing, and security in the long haul.
A combination of a better business mix, improving operating leverage through productivity gains and increased investment in growth opportunities will likely drive profitability. However, IBM is facing stiff competition in the cloud computing market from the likes of Amazon Web Services and Microsoft Azure.
Higher debt levels amid extensive restructuring activities pose a concern for the company. High integration risk from continuous acquisition spree is another headwind. Muted cash flow outlook for 2022 due to the impact of dollar strength and winding down of business operations in Russia remain another downside for the company.
Other noteworthy reports we are featuring today include Booking Holdings Inc. (BKNG), Northrop Grumman Corporation (NOC), and Illinois Tool Works Inc. (ITW).
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>>>