Today's Must Read
International Humira Sales Erosion Weighs on AbbVie (ABBV)
Rising Demand Aids General Dynamics (GD), Interest Rates Hurt
Thursday, January 31, 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 Union Pacific (UNP), AbbVie (ABBV) and General Dynamics (GD). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Buy-ranked Union Pacific’s shares have outperformed the Zacks Rail industry (+20.4% vs. +12%) in the past year. Union Pacific reported better-than-expected earnings per share and revenues in the fourth quarter of 2018. Both the metrics also increased year over year. Higher freight revenues on the back of volume growth aided top-line growth.
For 2019, the company anticipates volumes to increase in the low single-digit range. The Zacks analyst thinks Union Pacific’s efforts to reward its shareholders are encouraging. Notably, the company has hiked dividends thrice since November 2017.
Improvement in operating ratio and low tax rates are added positives. Its efforts to promote safety are noteworthy as well. However, high debt levels and operating expenses are concerns. Escalated capital expenditures are contributing to rise in costs.
Shares of AbbVie have lost -29.6% in the past year, underperforming the Zacks Large-Cap Pharmaceuticals industry's decline of -1.2%. AbbVie missed estimates for earnings and sales in the fourth quarter. The Zacks analyst thinks AbbVie’s key drug, Humira has been performing well in the United States based on strong demand trends despite new competition.
Moreover, Imbruvica has multibillion dollar potential. Mavyret saw a stronger-than-expected launch and has become a significant contributor to sales. AbbVie has also been successful in expanding approvals for its cancer drugs, Imbruvica and Venclexta.
AbbVie has an impressive late-stage pipeline comprising several products with multibillion-dollar potential expected to be launched in the near term. Sales erosion due to direct biosimilar competition to Humira in international markets will be a big headwind in 2019. Also costs to support expected new product/line extension launches are likely to hurt profits in 2019.
General Dynamics’ shares have lost -23.2% in the past year, underperforming the Zacks Aerospace & Defense industry's decrease of -6.3%. General Dynamics ended fourth-quarter 2018 with both earnings and revenues surpassing expectations.
The Zacks analyst thinks the company enjoys solid demand for its varied defense products leading to organic growth, whereas a notable acquisition strategy adds to inorganic growth. The company is on track to achieve FAA type certification for its G600 aircraft later this year, which is expected to enter service in 2019.
These new jets are likely to be significantly accretive in terms of revenues as well as earnings for the company, once they become available to global customers. Moreover, a comparative analysis of the company’s historical EV/EBITDA ratio reflects a relatively gloomy picture that might be a cause for investors’ concern.
Other noteworthy reports we are featuring today include Harris (HRS), Total System Services (TSS) and C.H. Robinson (CHRW).
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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>>>