Today's Must Read
Southern Company (SO) Rides on AGL Buyout Amid Vogtle Woes
Rising Rates Aid BNY Mellon (BK), High Fee Dependence a Woe
Friday, January 11, 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 Boston Scientific (BSX), Southern Company (SO) and BNY Mellon (BK). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Boston Scientific’s shares have outperformed the Zacks Medical Products industry over the past three months, losing -2.8% vs. -8.5%. The Zacks analyst thinks the company is suffering from significant cost escalation, which is weighing on its margins.
Also, a delay in LOTUS relaunch is hampering sales through 2018. Declining worldwide pacemaker sales is also hurting the CRM business. On a brighter note, the company is seeing growth across all business lines and geographies. Boston Scientific received a number of FDA approvals within the Cardiovascular group.
This apart, it launched LithoVue within Urology and rolled out the GUIDE XT in Europe. Three recent acquisitions- Claret Medical, VENITI and Augmenix, provide cause for optimism. These are expected to strongly contribute to the company’s inorganic growth profile. Boston Scientific’s significant progress related to its LOTUS valve relaunch is also encouraging. Also, post the suspension of LOTUS valve in Europe, ACURATE TAVR continues to build momentum.
Shares of Southern Company have underperformed the Zacks Electric Power industry over the past six months, losing -3.4% vs +2.7%. The Zacks analyst emphasizes that the company is one of the largest electric utility holding companies in the United States and has managed to surpass estimates in each of the last seven quarters.
The company’s $12-billion AGL Resources buyout has significantly increased its customer base and diversified offerings. With good rate base growth and constructive regulation, it is expected to generate steady earnings and dividend growth in the coming years through long-term power contracts.
However, elevated leverage of the firm, along with continued timing and cost overrun issues over two of its major projects — Vogtle and Kemper — are major overhangs. While the company’s $25-billion Vogtle nuclear plant has already exceeded its budget and is years behind schedule, its Kemper project also suffered a setback with the suspension of all coal gasification operations amid additional cost burden. This is why Southern Company warrants a cautious stance from the investors.
BNY Mellon’s shares have outperformed the Zacks Major Regional Banks industry in the past year (-18.8% vs. -19.1%). The company’s earnings surpassed expectations in only two of the trailing four quarters. Further, the earnings estimates have been going downward ahead of the company’s fourth quarter results.
The Zacks analyst thinks elevated operating expenses will likely continue to hamper bottom line growth to some extent. Also, the concentration risk, arising from significant dependence on fee-based income, remains a matter of concern.
However, higher interest rates, increase in fee income and improving assets balance will support profitability. Further, enhanced capital deployment plan reflects strong balance sheet position.
Other noteworthy reports we are featuring today include Occidental Petroleum (OXY), Schlumberger (SLB) and Southwest Airlines (LUV).
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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>>>