Today's Must Read
Cost-Cutting & 5G Boom to Aid Verizon (VZ) Amid Competition
International & Online Business Boost NIKE's (NKE) Performance
Monday, January 7, 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), Verizon (VZ) and Nike (NKE). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Buy-ranked Berkshire Hathaway’s shares have outperformed the Zacks Insurance - Property and Casualty industry over the past year (-3.7% vs. -5.9%). The Zacks analyst thinks the company is poised for growth over a longer-term banking on sturdy insurance business. 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 Verizon have gained +7.5% over the past year, outperforming the Zacks Wireless National industry’s decline of -5.2% during the same period. The Zacks analyst thinks Verizon remains poised to benefit from the upcoming 5G boom, driven by healthy traction in the wireless business.
The company is seeking a first mover advantage in the 5G race as it plans to launch commercial 5G smartphones in the market in the first half of 2019 in collaboration with Samsung. Focus on online content delivery, mobile video and online advertising should also drive future growth. However, the company continues to struggle in a competitive and saturated U.S. wireless market, where spectrum crunch has become a major issue, hurting its profitability.
Verizon continues to face softer wireline revenues and margins due to technology shifts and ongoing secular pressures from legacy technologies. In an effort to expand its customer base, Verizon is spending heavily on promotion and is offering lucrative discounts, which is further weighing on margins.
Nike’s shares have gained +15.6% in the past year, outperforming the Zacks Shoes and Retail Apparel industry, which gained +8.7% over the same period, driven by a strong earnings trend stemming from the solid execution of Consumer Direct Offense. NIKE has delivered positive earnings surprise for over three years now, with second-quarter fiscal 2019 marking 26th straight quarter of earnings beat.
Moreover, sales topped estimates for the seventh straight quarter. The Zacks analyst thinks strong progress on Consumer Direct Offense through innovation and focus on direct-to-customer are the key drivers. Growth at international and NIKE Direct businesses alongside momentum in North America also aided the fiscal second quarter results.
Meanwhile, continued strength in NIKE Digital is driving the top line. However, higher SG&A expenses due to increased demand creation expense and operating overheads are likely to remain a drag. Further, the unfavorable currency environment due to the global trade and geopolitical dynamics is likely to weigh on the company’s sales.
Other noteworthy reports we are featuring today include Dominion Energy (D), Williams Companies (WMB) and Intercontinental Exchange (ICE).
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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>>>