Tuesday, May 14, 2024

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 Corporation (UNP), Freeport-McMoRan Inc. (FCX) and Block, Inc. (SQ). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.

You can see all of today’s research reports here >>>

Union Pacific shares have outperformed the Zacks Transportation - Rail industry over the past year (+25.9% vs. +13.0%), reflecting a reputation for operating excellence and a track record of returning excess to shareholders through buybacks and an attractive dividend. The company bought back $0.7 billion worth of its won shares and paid dividends worth $3.2 billion in 2023.

Union Pacific's strong free cash flow generating ability supports its shareholder-friendly activities. On the flip side, a decline in volumes due to soft consumer markets and reduced fuel surcharge revenues is a concern. Volumes declined 1% year over year in 2023.

Given the soft freight market scenario, the revenue weakness is likely to persist going forward as well. This will hurt overall volumes. Operating ratio (operating expenses as a percentage of revenues) deteriorated 220 basis points in 2023 from the 2022 reading, mainly due to revenue weakness. Capital expenditures are expected to be $3.4 billion in 2024.

(You can read the full research report on Union Pacific here >>>)

Shares of Freeport-McMoRan have gained +46.1% over the past year against the Zacks Mining - Non Ferrous industry’s gain of +54.7%. The company is conducting exploration activities near existing mines to expand reserves. It is expected to gain from progress in exploration activities that will boost production capacity.

Freeport-McMoRan is executing a number of smelter projects in Indonesia. Freeport’s Lone Star project also provides additional upside. It is well-positioned to benefit from automotive electrification, which is a positive for copper as electric vehicles are copper-intensive. The company's efforts to reduce debt is also encouraging.

However, it faces headwinds from higher labor, energy and services costs. Weak copper volumes may also hurt performance in 2024. Sizable capital spending is likely to impact free cash flow generation.

(You can read the full research report on Freeport-McMoRan here >>>)

Block shares have underperformed the Zacks Technology Services industry over the year-to-date period (-9.8% vs. +13.0%). The company’s strength across Square and Cash App ecosystem contributed well. Strong growth in transaction and subscription revenues drove the results further. Robust performance of the company’s ‘buy now, pay later’ (BNPL) platform remained positive.

Also, growing GPV owing to Square ecosystem momentum was another positive. Improvement in the card-present volumes remained a tailwind. Also, rising card-not-present GPV owing to robust online channels contributed well. Growing momentum in bitcoin space remained another positive.

However, increasing competitive pressure from PayPal and Shopify. Softness in consumer spending trends in food and drink and retail discretionary verticals, are headwinds.

(You can read the full research report on Block here >>>)

Other noteworthy reports we are featuring today include Xcel Energy Inc. (XEL), Illumina, Inc. (ILMN) and Marathon Oil Corporation (MRO).

Director of Research

Sheraz Mian

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>>>