Today's Must Read
Portfolio Restructuring to Aid 3M (MMM), High Costs Drag
Vertex's (VRTX) Symdeko Impresses, Pipeline Progress Solid
Thursday, February 21, 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 Nike (NKE), 3M (MMM) and Vertex (VRTX). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Buy-ranked Nike’s shares have gained +26.5% in the past year, outperforming the Zacks Shoes and Retail Apparel industry, which gained +19.9% over the same period, driven by a strong earnings trend stemming from the solid execution of Consumer Direct Offense. Nike has delivered positive earnings surprise for over three years now, with second-quarter fiscal 2019 marking 26th straight quarter of earnings beat.
Moreover, sales topped estimates for the seventh straight quarter. The Zacks analyst thinks strong progress on Consumer Direct Offense through innovation and focus on direct-to-customer are the key drivers. Growth at international and Nike Direct businesses alongside momentum in North America also aided fiscal second quarter results.
Continued strength in Nike Digital is driving the top line. However, higher SG&A expenses due to increased demand creation expense and operating overheads are likely to remain a drag. Further, the unfavorable currency environment due to the global trade and geopolitical dynamics is likely to weigh on the company’s sales.
Shares of 3M have lost +5% in the past three months, underperforming the Zacks Diversified Operations industry, which has gained +8.7% over the same period. The Zacks analyst thinks 3M stands to gain from efforts to innovate products, solid demand and portfolio restructuring moves. Its acquisition of the technology business of M*Modal is likely to strengthen the Health Information Systems business in the months ahead.
In the fourth quarter of 2018, the company's earnings and revenues surpassed estimates. However, on a year-over-year basis, net sales declined 0.6% due to the impact of divestiture and forex woes.
For 2019, the company lowered its earnings projection and net sales growth guidance. Foreign currency translation is predicted to adversely influence sales by 1%. In addition, inflation in prices of major inputs and rising competitive pressures pose threats to near-term profitability. Shares also look comparatively overvalued.
(You can read the full research report on 3M here >>>).
Vertex’s shares have outperformed the Zacks Biomedical and Genetics industry in the past year (+19.2% vs. -15.9%). Vertex beat estimates for both earnings and sales in the fourth quarter. The Zacks analyst likes Vertex’s dominance in the CF market. A significant increase in the eligible patient population for its CF drugs is driving sales growth.
Vertex’s third CF medicine, Symdeko, in a very short time, became the primary driver of the significant growth in CF revenues in 2018. Vertex’s CF pipeline is also accelerating rapidly. Studies on Vertex’s triple combination CF regimens are moving fast. The CF triple-pill regimes are crucial for long-term growth as these have the potential to treat up to 90% of CF patients.
Meanwhile, Vertex’s non-CF pipeline, though early stage, looks interesting. However, competitive pressure is rising in the CF market with many other companies developing triple combo CF drugs. Also, Vertex’s dependence on just the CF franchise for growth is a concern.
Other noteworthy reports we are featuring today include PepsiCo (PEP), Genuine Parts (GPC) and Verisk (VRSK).
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2018, while the S&P 500 gained +15.8%, five of our screens returned +38.0%, +61.3%, +61.6%, +68.1%, and +98.3%.
This outperformance has not just been a recent phenomenon. From 2000 – 2018, while the S&P averaged +4.8% per year, our top strategies averaged up to +56.2% per year.
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>>>