Monday, October 21, 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 Visa Inc. (V), Netflix, Inc. (NFLX) and Merck & Co., Inc. (MRK), as well as a micro-cap stock Hovnanian Enterprises, Inc. (HOV).  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 Visa have gained +10.9% over the year-to-date period against the Zacks Financial Transaction Services industry’s gain of +16.1%. The company’s strategic acquisitions and alliances are fostering long-term growth and consistently driving its revenues. Visa, fueled by persistent increases in payments, cross-border volumes and sustained investments in technology, is witnessing significant profit growth. 

The ongoing shift to digital payments is advantageous for Visa, with strong domestic volumes supporting its overall performance. A robust cash position enables the company to enhance shareholder value. However, elevated operating expenses pose margin challenges. 

The Zacks analyst expect adjusted operating expenses to jump more than 10% in fiscal 2024. It is witnessing a volatile cash volume from the Asia Pacific and CEMEA regions. Consumer spending growth is also drying up. Moreover, rising client incentives will affect its adjusted revenues. As such, the stock warrants a cautious stance.

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

Netflix’s shares have outperformed the Zacks Broadcast Radio and Television industry over the year-to-date period (+74.1% vs. +32.8%). The company’s third-quarter 2024 results benefited from its growing subscriber base, thanks to a robust localized and foreign-language content portfolio and healthy engagement levels with about two hours of viewing per member per day, indicating strong member retention. 

The planned launch of an in-house ad tech platform in 2025 signals Netflix's commitment to maximizing this new revenue stream, with ad revenues expected to roughly double year-over-year in 2025. Netflix has raised its guidance for the full year 2024, projecting revenue growth at the high end of its previous 14-15% range.

However, stiff competition in the streaming space from the likes of Apple, Amazon Prime Video and Disney+ is a headwind. NFLX’s leveraged balance sheet and a higher streaming obligation are concerns.

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

Shares of Merck have gained +0.1% over the year-to-date period against the Zacks Large Cap Pharmaceuticals industry’s gain of +22.7%. The company’s products like Keytruda and Gardasil have been driving sales. With continued label expansion into new indications, particularly earlier-stage launches, Keytruda is expected to see continued growth. Animal health and vaccine products are core growth drivers. 

Merck boasts a strong cancer pipeline, including Keytruda. However, generic competition for several drugs and rising competitive pressure, mainly on the diabetes franchise, will continue to be overhangs on the top line. 

There are concerns about Merck’s ability to grow its non-oncology business ahead of Keytruda’s loss of exclusivity later in the decade. Estimates have declined slightly ahead of Q3 results. Merck has a positive record of earnings surprises in recent quarters.

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

Hovnanian’s shares have outperformed the Zacks Building Products - Home Builders industry over the past year (+175.6% vs. +89.3%). This microcap company with market capitalization of $1.25 billion has shown strong financial performance in fiscal third-quarter 2024, with an 11% revenue increase to $722.7 million, driven by higher home deliveries and sales prices. 

The company saw a 38% rise in income before taxes and a 30.8% rise in net income, supported by improved EBITDA of $127.9 million. Key growth drivers include a 24% increase in community count and a 34% rise in lots controlled, setting the stage for future revenue gains. Favorable mortgage rate declines and strong buyer demand, evidenced by a 23% increase in contracts and surging web traffic, support the company’s outlook. 

Hovnanian’s strategic focus on high-margin markets and diversified geographic and product mix enhances its resilience and profitability. With upward revisions to 2024 revenue and EBITDA guidance, HOV remains well-poised for continued growth in a strong housing market.

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

Other noteworthy reports we are featuring today include Abbott Laboratories (ABT), Blackstone Inc. (BX) and Palo Alto Networks, Inc. (PANW).

Mark Vickery
Senior Editor

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>>>