Today's Must Read
Acquisitions to Support Morgan Stanley (MS), Expenses a Woe
Growing Volumes Aid CME Group (CME), Rising Expenses Worrying
Tuesday, February 19, 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 United Parcel Service (UPS), Morgan Stanley (MS) and CME Group (CME). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
United Parcel Service’s shares have outperformed the Zacks Transportation - Air Freight and Cargo industry over the past year, gaining +5.9% vs. -7.5%. The Zacks analyst likes UPS' efforts to reward shareholders through dividends and buybacks. In 2018, the company rewarded shareholders to the tune of $4.2 billion through the aforementioned shareholder-friendly measures.
Continuing its pro-investor approach, in February 2019, UPS increased its quarterly dividend by 5.5% to 96 cents per share. Robust free cash flow generation by UPS supports the possibility of a dividend hike going forward as well. E-commerce growth is an added positive at UPS and it aided the company's fourth-quarter 2018 results similar to the past few quarters.
The company anticipates cross-border e-commerce volume to grow by 28% over the next three years. However, the company's high capital expenditures are limiting bottom-line growth. Trade-war related tensions and high debts pose further challenges to the company.
Shares of Morgan Stanley have lost -2.5% over the past three months, underperforming the Zacks Investment Banking industry, which has gained +2.1% over the same period. The company possesses an impressive earnings surprise history, having beaten expectations in three of the trailing four quarters.
The Zacks analyst thinks its efforts to strengthen wealth management business (organically and through acquisitions), focus on corporate lending, steady loan growth, higher interest rates and normalized levels of trading activities will likely aid revenues. Also, the company’s steady capital deployment activities reflect a strong balance sheet position.
However, a slowdown in debt originations will hinder underwriting fee income growth. Further, mounting operating expenses is a major near-term concern for the company.
CME Group’s shares have underperformed the Zacks Securities and Exchanges industry over the past year, losing -8.7% versus -5.7%. CME Group’s fourth-quarter earnings per share beat estimates and improved year over year. The quarter witnessed increased volatility and higher customer demand for diverse risk management products, which drove strong trading volumes of more than 20 million contracts per day.
The Zacks analyst thinks the company remains well-poised for growth on a strong market position with varied derivative product lines. Efforts to expand and cross sell its core exchange-traded business via new product initiatives and a global reach are positives. It intends to focus more on over-the-counter clearing services on interest rate swaps as well as foreign exchange.
Also, the buyout of Nex Group will help CME Group generate $200 million in run-rate cost synergies, annually, by 2021-end. Also, the company targets 1x debt-to-EBITDA by 2020 end. However, escalating expenses are putting pressure on margins.
Other noteworthy reports we are featuring today include Fiserv (FISV), Williams Companies (WMB) and Enbridge (ENB).
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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>>>