Today's Must Read
Oracle (ORCL) Gains from Cloud Suite Adoption & Partnerships
E-commerce Growth Buoys UPS Amid Cost Woes
Friday, December 21, 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 Procter & Gamble (PG), Oracle (ORCL) and United Parcel Service (UPS). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Procter & Gamble’s shares outperformed the Zacks Soap and Cleaning Materials industry in the past three months, gaining +8% vs +1.6%. The Zacks analyst thinks that this can be attributed to the company’s robust earnings history, having outpaced estimates for 14 straight quarters when it reported first-quarter fiscal 2019.
Moreover, earnings grew year over year. Also, sales beat estimates, though it remained flat due to adverse currency fluctuations – which acted as a major deterrent in the first quarter and is likely to remain a concern in the second quarter. The company has been witnessing strained margins for last few quarters due to higher commodity and shipping costs, adverse currency, increased business investments and aggressive pricing from private-label products.
Soft baby care business is also a concern. Nonetheless, the company is focused on improving productivity and cost savings to boost margins. Its focus on product improvement, packaging and marketing initiatives is encouraging.
Shares of Oracle have underperformed the Zacks Computer Software industry in the past year, losing -2.4% vs. +12.2%. Oracle is one of the largest enterprise-grade database, middleware and application software providers. The Zacks analyst thinks the company 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 the company rapidly expand its cloud-base clientele. Also, anticipated strong demand for the next-generation autonomous database supported by machine learning will boost competitive position against Amazon Web Services (AWS).
Nonetheless, 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.
United Parcel Service’s shares have outperformed the Zacks Transportation - Air Freight and Cargo industry over the past year, losing -20.8% vs. -27.1%. United Parcel Service has been benefitting from strong e-commerce growth. The company anticipates cross-border e-commerce volume to grow by 28% over the next three years.
The company's transformation plan, unveiled in September 2018, is aimed at boosting its bottom line. Approval of the deal by its freight workers is an added positive. The Zacks analyst is also impressed by UPS' efforts to reward its shareholders.
UPS' bullish full-year forecast on free cash flow supports the possibility of a dividend hike in the near future. However, the company's high capital expenditures are a cause for concern. UPS spent $4.5 billion as capital expenditure in the first nine months of 2018.
Trade-war related tensions and high debts pose further challenges to the company. In a year’s time, the UPS stock has declined more than 20%.
Other noteworthy reports we are featuring today include Schlumberger (SLB), FedEx (FDX) and AstraZeneca (AZN).
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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>>>