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Research Daily

Monday, January 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 Bank of America (BAC), Merck (MRK) and Netflix (NFLX). 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 >>>

Buy-ranked Bank of America’s shares have outperformed the Zacks Major Regional Banks in the past year, losing -8.2% vs. -14.5%. Also, the company possesses an impressive earnings surprise history, beating expectations in each of the trailing four quarters. Its fourth-quarter 2018 results were driven by rise in net interest income, lower operating expenses and decline in provisions.

The Zacks analyst thinks rise in loan and deposit balances, higher interest rates and efforts to control expenses will likely support profitability. While dismal performance of capital markets has been hurting the company’s investment banking operations, its initiatives to expand into new markets and digital offerings are expected to further enhance cross selling opportunities. Also, the bank’s steady capital deployments reflect a strong liquidity position.

(You can read the full research report on Bank of America here >>>).

Shares of Buy-ranked Merck have gained +23.9% in the past year, significantly outperforming the Zacks Large Cap Pharmaceuticals industry, which has lost -0.8% over the same period. The Zacks analyst thinks Merck’s new products like Keytruda, Lynparza, and Bridion are contributing meaningfully to the top line. Keytruda sales are gaining momentum with approval for additional indications, especially in the first-line lung cancer setting as it is the only anti-PD-1 approved in this setting.

Animal health and vaccine products are also performing strongly and remain core growth drivers for Merck. Meanwhile, Merck will continue to focus on cost-cutting initiatives to drive the bottom line. However, generic competition for several drugs and pricing pressure will continue to be overhangs on the top line.

Rising competitive pressure on the diabetes franchise and on products like Isentress (HIV), Zepatier (HCV) and Zostavax (vaccine) remains. Estimates have gone down slightly ahead of Q4 results. Merck has a positive record of earnings surprises in the recent quarters.

(You can read the full research report on Merck here >>>).

Netflix’s shares have increased +49% in the past year, significantly outperforming the Zacks Broadcast Radio and Television industry’s gain of +9% during the same period. The Zacks analyst thinks Netflix’s fourth-quarter 2018 subscriber addition rate reflects growing appeal of the streaming platform, which is primarily driven by a solid content portfolio. This is also helping the company counter competition from the likes of HBO, Amazon Prime video and YouTube.

Moreover, partnerships with telcos like Telefonica in Spain, KDDI in Japan, Comcast and T-Mobile in the United States, and Sky in the U.K. and Germany are expected to drive subscriber addition. However, management’s weak guidance for U.S. streaming paid net additions for the first quarter of 2019 is expected drag down shares.

Netflix’s decision to raise prices is likely to boost top-line growth and offset increasing marketing expenditure. However, continuing cash burn and huge debt level are primary concerns.

(You can read the full research report on Netflix here >>>).

Other noteworthy reports we are featuring today include Amgen (AMGN), IBM (IBM) and The Bank of New York Mellon (BK).

Zacks' Top 10 Stocks for 2019

In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-holds for the year?

Who wouldn't? Our annual Top 10s have beaten the market with amazing regularity. In 2018, while the market dropped -5.2%, the portfolio scored well into double-digits overall with individual stocks rising as high as +61.5%. And from 2012-2017, while the market boomed +126.3, Zacks' Top 10s reached an even more sensational +181.9%.

See Latest Stocks Today >>

Mark Vickery
Senior Editor

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>>>

Featured Reports

New Upgrades

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The Zacks analyst appreciates the company's efforts to reward shareholders through buybacks. Impressive traffic growth on the back of strong demand for air travel also raises optimism.

New Downgrades

High Capex, Debt Weigh on Ryder System (R)

Ryder's high capital expenditures and debt levels have made the Zacks analyst turn bearish on the stock. High capex has the potential to hamper bottom-line growth in the long term.