Today's Must Read
Revenue Growth, Solid Balance Sheet Aid Mastercard (MA)
Strong Aviation Segment Drives General Electric's (GE) Sales
Friday, March 8, 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 Microsoft (MSFT), Mastercard (MA) and General Electric (GE). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Microsoft’s shares have gained +14.3% in the past year, outperforming the Zacks Computer Software industry’s gain of +12.2% during the same period. The Zacks analyst thinks Microsoft is benefiting from growing user base of its different applications like Office 365 commercial, Dynamics, Outlook mobile and Teams.
Robust execution and better-than-expected demand from customers for hybrid cloud offerings is a positive. Moreover, Azure’s expanding customer base is a key catalyst. Microsoft’s gaming segment is performing well, primarily driven by a combination of Xbox Live, Game Pass subscriptions and Mixer, which are driving user engagement.
Further, acquisitions like PlayFab and GitHub expand Microsoft’s TAM and penetration. However, projections of a moderating growth rate in commercial cloud gross margin, and OEM Pro and Windows commercial businesses is a headwind. Also, competition is stiff and its dominant position in the PC market continues to be challenged.
Shares of Mastercard’s shares have increased 21.4% over the past year, significantly outperforming the Zacks Financial Transaction Services industry’s rally of 11%. The Zacks analyst thinks the company is poised for growth, given its solid market position, ongoing expansion and digital initiatives, plus significant opportunities from the secular shift toward electronic payments.
Its numerous acquisitions have aided revenue growth. However, escalating costs will put pressure on the company’s bottom line. Also, in order to gain customers and new business, Mastercard has been incurring quite high levels of costs under rebates and incentives, which remains a concern. Nevertheless, its strong balance sheet enables business investment, thereby driving growth.
General Electric’s shares have outperformed the Zacks Diversified Operations industry in the past three months (+36.3% vs. +11.8%). The Zacks analyst thinks the company is poised to become more competent on the back of its portfolio-restructuring program. In sync with this, it intends to focus on just three core businesses — Power, Aviation and Renewable Energy — and gradually exit all others.
Moreover, the company has slashed its dividend from 12 cents per share to a penny (for improving its cash position) and plans to reorganize the Power business into two separate units. However, weakening Power business remains a key cause of concern for the company. General Electric expects that internal and external challenges will continue to hurt this business arm.
Also, the company’s margins have been affected due to lower profits secured from its Renewable Energy business. Over the past seven days, the Zacks Consensus Estimate for the company’s earnings has remained unchanged for both 2018 and 2019.
Other noteworthy reports we are featuring today include Glaxo (GSK), Target (TGT) and Brown-Forman (BF.B).
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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>>>