Today's Must Read
Diageo's (DEO) Robust Pricing & Premiumization Aid Margins
Enbridge (ENB) to Gain From $8B Midstream Growth Projects
Thursday, December 8, 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 The Home Depot, Inc. (HD), Diageo plc (DEO) and Enbridge Inc. (ENB). 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 >>>
Shares of Home Depot have modestly lagged rival Lowe's (LOW) and the broader market this year (-22.9% vs. -20% for LOW and -18.7% for the S&P 500 index). The company reported soft gross margin in the fiscal third quarter driven by higher supply chain investments. Higher inventory levels and interest expense also remain concerning.
However, Home Depot reported 10th straight quarter of earnings and sales beat in the fiscal third quarter. Results also outpaced our estimate in Q3. It continues to gain from strong demand for home-improvement projects, robust housing market trends and ongoing investments.
It also witnessed continued strength in both Pro and DIY categories, and digital momentum. Its interconnected retail strategy and underlying technology infrastructure have helped consistently boost web traffic for the past few quarters, aiding digital sales.
(You can read the full research report on Home Depot here >>>)
Shares of Diageo have underperformed the Zacks Beverages - Alcohol industry over the past year (-9.4% vs. -1.5%). The company is facing continued inflationary pressures and currency headwinds are concerning. However, recovery in the on-trade channel, strong consumer demand in the off-trade and market share gains aided Diageo’s fiscal 2022 results.
It witnessed sales, operating margin and earnings growth in driven by organic sales growth across all regions. Price/mix gained from a positive mix due to the robust growth in super-premium-plus brands, particularly scotch, tequila and Chinese white spirits.
DEO’s margin trends were favorable in fiscal 2022, thanks to the its premiumization efforts, recovery in markets, pricing actions and supply productivity savings, which mostly offset the cost inflation. It provided a decent view for fiscal 2023, with net sales growth expected across North America, Europe and Asia-Pacific.
(You can read the full research report on Diageo here >>>)
Enbridge shares have gained +3.9% over the past year against the Zacks Oil and Gas - Production and Pipelines industry’s gain of +11.1%. The company has the longest and most sophisticated oil and liquids pipeline system in the world, which spreads across 17,809 miles. Hence, a significant portion of the midstream operator’s earnings is generated from transportation operations, driven by a string of long-term contracts.
Enbridge announced the increase of its annualized common share dividend to C$3.55 per share, thereby marking a dividend increase for 28 straight years. The company expects to put more than C$10 billion of growth projects into service in 2024 and beyond. This is expected to generate significant EBITDA growth in the coming years.
However, ENB has significant debt exposure since there has been a weakness in its operations. Also, Enbridge has mostly been yielding lower dividend than the industry over the past year. As such, the stock warrants a cautious stance.
(You can read the full research report on Enbridge here >>>)
Other noteworthy reports we are featuring today include Marathon Petroleum Corporation (MPC), eBay Inc. (EBAY), and Laboratory Corporation of America Holdings (LH).
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>>>