Wednesday, May 22, 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 Novo Nordisk A/S (NVO), QUALCOMM Incorporated (QCOM) and Caterpillar Inc. (CAT), as well as two micro-cap stocks CSP Inc. (CSPI) and Epsilon Energy Ltd. (EPSN).  The Zacks microcap research is unique as our research content on these small and under-the-radar companies is the only research of its type in the country.

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 >>>

Shares of Novo Nordisk have outperformed the Zacks Large Cap Pharmaceuticals industry over the past year (+59.9% vs. +26.1%) on the back of strong demand for the company’s diabetes drugs Ozempic and Rybelsus and obesity drug Wegovy. Label expansions of the same in cardiovascular and other indications will likely boost sales.

NVO has been tackling the supply constraints of Wegovy by increasing its manufacturing capabilities. The drug is now indicated in the United States to also reduce heart risks, which is a huge boost. The company is also gearing up to buy Cardior to help diversify its portfolio beyond diabetes treatments and obesity drugs.

However, intense rivalry in the obesity sector threatens Novo Nordisk’s market share. Patent expiry and pricing pressure across the diabetes market also remain a woe.

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

Shares of QUALCOMM have outperformed the Zacks Wireless Equipment industry over the past year (+97.5% vs. +51.6%). The company is benefiting from healthy traction in Android handsets and automotive businesses. Development of Snapdragon Dev Kit for Windows in collaboration with Microsoft will boost commercial prospects in the AI PC market.

QUALCOMM is increasingly focusing on the seamless transition from a wireless communications firm for the mobile industry to a connected processor company for the intelligent edge. This augurs well for the long-term growth. The Snapdragon X Series Platforms integrated with Qualcomm AI Hub are witnessing significant market traction among leading global PC manufacturers.

However, inventory corrections are impeding sales in the IoT business. Increasing competition in the mobile phone chipset market is likely to strain margin. Rising geopolitical instability and high debt obligation remain concerns.

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

Caterpillar’s shares have modestly outperformed the Zacks Manufacturing - Construction and Mining industry over the past year (+70.6% vs. +66.2%). The company’s earnings have increased year over year for thirteen straight quarters aided by cost-saving measures, strong demand and pricing actions. These factors mitigated the impact of the industry-wide supply-chain snarls and cost pressures.

The Construction Industries segment will gain from the increased construction activities in the United States and globally. The mining sector will be bolstered by commodity demand driven by the energy transition trend, which, in turn, will support the Resource Industries segment.

The Energy & Transportation segment is well-positioned for growth, backed by strong demand across all applications. Its dividend yield and payout ratio are higher than its peers. A solid liquidity position and investments in expanding services and digital initiatives will help Caterpillar deliver exceptional returns.

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

Shares of CSP have outperformed the Zacks Computer - Integrated Systems industry over the year-to-date period (+54.4% vs. +5.2%). This microcap company with market capitalization of $147.4 million showed strong fiscal second-quarter 2024 results, with net income soaring to $1.6 million from $0.3 million, driven by efficient cost management and 23% growth in high-margin services.

Gross margins improved 900 bps year over year to 47%, aided by higher-margin AZT sales and higher-margin service revenues. Financially, CSPI is stable, with $27.1 million in cash and low debt. The company’s innovation in AI and cloud services enhances its competitive edge. Its deep-rooted presence since 1968 and alignment with rising global IT spending positions it well for sustained growth, leveraging opportunities in AI, cloud computing and cybersecurity.

Also, CSPI is expanding its AZT PROTECT offering from Fortune 500 to mid-market companies, recently securing a significant contract with a global pharmaceutical firm, indicating robust market demand.

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

Shares of Epsilon Energy have gained +7.9% over the past year against the Zacks Oil and Gas - Integrated - United States industry’s gain of +18.8%. This microcap company with market capitalization of $118.6 million faces revenue risks from curtailed production and delayed well start-ups in Pennsylvania, deferring 4.5 million cubic feet per day of natural gas due to low prices, impacting short-term revenues and asset utilization.

High capital expenditure, notably $21.4 million in the first quarter of 2024 for Permian and Pennsylvania developments, stretch liquidity, with cash dropping from $13.4 million as of Dec 31 to $2.3 million as of Mar 31. Hedging may not fully protect against prolonged low oil and natural gas prices, limiting upside potential and exposing the company to market volatility.

Regulatory shifts and market dynamics could further constrain operations. Additionally, challenges in reserve replacement and dependency on core assets like the NE PA Marcellus heighten operational risks, which are critical for Epsilon’s revenues.

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

Other noteworthy reports we are featuring today include GSK plc (GSK), Altria Group, Inc. (MO) and TransDigm Group Incorporated (TDG).

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>>>