Today's Must Read
New Drugs Drive Merck's (MRK) Sales as Competition Soars
Solid Life Sciences Business, Buyouts to Drive Danaher (DHR)
Wednesday, February 13, 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 ExxonMobil (XOM), Merck (MRK) and Danaher (DHR). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
ExxonMobil’s shares have underperformed the Zacks Integrated International Oil industry (-2.6% vs. -0.1%) over the past three months. ExxonMobil has a leading position in the energy industry owing to its size and diverse asset base, both in terms of business mix and geographical footprint.
With a stable cash position, the company’s balance sheet is one of the best in the industry. The Zacks analyst thinks this has allowed ExxonMobil to reward stockholders with a 6.3% average annual dividend hike over the past 35 years. The company owns some of the most prolific upstream assets globally along with the largest global refining operations. Notably, with two fresh offshore oil discoveries in Guyana, ExxonMobil recently completed 12 key discoveries in the Stabroek Block, driving the firm’s future production.
However, persistent weakness in chemicals margins and decline in seasonal demand for gasoline are major headwinds for ExxonMobil. The company’s exit from a joint venture in Russia is also concerning.
Shares of Merck have gained +43% in the past year, significantly outperforming the Zacks Large Cap Pharmaceuticals industry, which has increased +6.4% over the same period. Merck beat estimates for earnings and sales in Q4. The Zacks analyst thinks 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 first-line lung cancer setting. Keytruda has strong growth prospects based on increased utilization, recent approvals for new indications and potential additional approvals worldwide. Animal health and vaccine products are also performing strongly and remain core growth drivers for Merck.
The company 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 products like Isentress (HIV), Zepatier (HCV) and Zostavax (vaccine) remain a concern.
Danaher’s shares have gained +10.5% over the past six months, outperforming the Zacks Diversified Operations industry, which has declined -4.2% over the same period. Danaher's fourth-quarter 2018 earnings and revenues both surpassed expectations by 0.8%. The Zacks analyst thinks strong demand for innovative products will continue to drive its revenues in the quarters ahead.
Also, robust top-line performance and effective Danaher Business System ("DBS") implementation will likely bolster profitability. Moreover, the company anticipates that the acquisition of Integrated DNA Technologies and divestiture of its dental business will boost its competency. However, the company's shares currently look overvalued compared with the industry.
Rising cost of sales remains a major cause of concern. Further, extensive governmental regulations on import laws, export control, economic sanctions laws and unfavorable movements in foreign currencies might continue to restrict Danaher's growth.
Other noteworthy reports we are featuring today include Motorola (MSI), Novartis (NVS) and Expedia (EXPE).
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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>>>