Today's Must Read
Robust Content to Aid Netflix (NFLX) Amid Stiff Competition
Decent Comparable Sales Run to Fuel Costco???s (COST) Top Line
Monday, March 11, 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 Procter & Gamble (PG), Netflix (NFLX) and Costco (COST). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Buy-ranked Procter & Gamble’s shares have outperformed the Zacks Soap and Cleaning Materials industry in the past three months, gaining +4.8% vs +2.3%. The Zacks analyst thinks that this can be attributed to strong second-quarter fiscal 2019 results, robust earnings trend and upbeat view for fiscal 2019.
Top and bottom line beat estimates in the fiscal second quarter, marking 15th straight earnings beat and fifth sales beat in the last six quarters. Earnings benefited from the tax reforms, while strong organic growth with higher shipment volumes and favorable price/mix boosted sales.
The company raised the sales guidance for fiscal 2019. It is also gaining from focus on product improvement, packaging and marketing initiatives, and productivity and cost-savings plan. However, it is witnessing strained margins owing to increased commodity and shipping costs, higher brand investments and aggressive pricing from private-label products amid intense competition. Moreover, adverse currency rates are hurting P&G’s results, which is likely to continue in fiscal 2019.
Shares of Netflix have gained +8.8% over the past year, outperforming the Zacks Broadcast Radio and Television industry’s gain of +2.6% during the same period. The Zacks analyst thinks the company is benefiting from an expanding subscriber base primarily driven by its solid content portfolio.
The streaming platform’s growing appeal is helping it to win awards and accolades. Notably, Netflix secured three Oscars for Roma. It also collected an Oscar for Best Documentary (Short Subject). Netflix is reportedly adapting Gabriel Garcia Marquez’s One Hundred Years of Solitude into a Spanish-language TV series.
The portfolio strength is helping Netflix counter competition from the likes of Hulu, HBO, Amazon Prime video and YouTube. However, continuing cash burn and huge debt level are primary concerns. Additionally, intensifying competition in the streaming market due to upcoming services from Disney and Apple is a major headwind.
Buy-ranked Costco’s shares have outperformed the Zacks Discount Retail industry over the past year, gaining +20.3% versus the industry's +18.5% increase. The Zacks analyst thinks Costco continues to be one of the dominant retail wholesalers based on the breadth and quality of merchandise offered.
The stock has been gaining from sturdy comps performance and decent results. The company posted positive earnings surprise in the second quarter of fiscal 2019 but revenues fell short of expectations. Notably, the top and the bottom line continued to register year-over-year improvement. Certainly, Costco seems somewhat unfazed by the tough retail scenario.
Growth strategies, increase in membership fees and sturdy e-commerce sales bode well. E-commerce sales surged 32.3% during the quarter. The company’s growth efforts have been fueling traffic across both online and brick-and-mortar platforms. However, any incremental investments or aggressive pricing strategy may hurt margins. Moreover, rising SG&A expenses and stiff competition also pose concerns.
Other noteworthy reports we are featuring today include Morgan Stanley (MS), ABB Ltd. (ABB) and Canadian Pacific (CP).
Zacks' Top 10 Stocks for 2019
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-holds for the year?
Who wouldn't? Our annual Top 10s have beaten the market with amazing regularity. In 2018, while the market dropped -5.2%, the portfolio scored well into double-digits overall with individual stocks rising as high as +61.5%. And from 2012-2017, while the market boomed +126.3, Zacks' Top 10s reached an even more sensational +181.9%.
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>>>