Today's Must Read
Adoption of Azure & Office 365 Strength Aids Microsoft (MSFT)
Rising Demand Aids General Dynamics (GD), Competition Hurts
Thursday, January 24, 2019
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 Caterpillar (CAT), Microsoft (MSFT) and General Dynamics (GD). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Buy-ranked Caterpillar’s shares have outperformed the Zacks Construction and Mining in the past three months (+17.3% vs. +16.2%). Backed by strong order rates, favorable commodity prices and increasing backlog, Caterpillar guides adjusted earnings per share at $11.00-$12.00 for 2018, reflecting year-over-year growth of 67% at the mid-point. The estimates for the fourth quarter and fiscal 2018 for the company have gone up, ahead of earnings release.
Notably, Caterpillar has a positive record of earnings surprises in the last few quarters. Improving demand across most of the end-markets and cost cutting efforts will aid results. In Construction Industries segment, continued improvement in residential and non-residential construction, and revival in infrastructure demand are likely to drive revenues.
Miners are resuming capital spending which bodes well for the Resource Industries segment. Focus on expanded offerings and services and investment in digital initiatives like e-commerce will also boost growth.
Shares of Buy-ranked Microsoft have gained +15.6% in the past year, outperforming the Zacks Computer Software industry’s gain of 11.1% during the same period. Microsoft is benefiting from growing user base of its different applications like Office 365 commercial, Dynamics, Outlook mobile and Teams. Moreover, Azure’s expanding customer base is a key catalyst.
Microsoft’s gaming segment is performing well, primarily driven by a combination of Xbox Live, Game Pass subscriptions and Mixer, which are driving user engagement. Further, acquisitions like PlayFab and GitHub expand Microsoft’s total addressable market (TAM) and penetration. Additionally, expanding partner base is notable.
General Dynamics’s shares have lost -1% in the past three months, outperforming the Zacks Aerospace & Defense industry's decrease of -3%. General Dynamics enjoys solid demand for its varied defense products leading to organic growth, while a notable acquisition strategy adds to its inorganic growth. It continues to proceed toward an anticipated FAA type certification for its G600 aircraft later this year, which is expected to enter service in 2019.
General Dynamics, being one of the only two contractors in the world equipped to build nuclear-powered submarines, as well as one of the prime U.S. shipbuilders, should certainly benefit from this increased budget proposal. The company also operates in a highly competitive market with some competitors having extensive or specialized business segments, superior to General Dynamics.
Other noteworthy reports we are featuring today include Estée Lauder (EL), IBM (IBM) and Deere & Company (DE).
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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>>>