Today's Must Read
Consumer Direct Offense Aids NIKE (NKE), Currency Hurts
E-Commerce, Dividends & Buybacks Aid UPS, High Capex a Woe
Monday, March 25, 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 Cisco (CSCO), NIKE (NKE), and United Parcel Service (UPS). 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 >>>
Buy-ranked Cisco's shares have gained +19.7% in the past year, outperforming the Zacks Computer Networking industry's increase of +17.3%. The Zacks analyst thinks Cisco is benefiting from strength witnessed in the company’s security, Infrastructure Platforms and applications segments. Order strength and improving traction of the subscription-based model are other tailwinds.
A strengthening collaboration portfolio, which now includes Webex Teams and Accompany, bodes well. Further, buyout of Duo Security and Luxtera is expected to aid the company in expanding its IT and data center clientele. Moreover, robust adoption of company’s Wave 2 offerings, Meraki solutions, Catalyst 9000 switching platform and HyperFlex data-center solutions hold promise.
Nevertheless, weakness in routing is a headwind. Competition from Arista primarily in campus connect network switches market is likely to hurt Cisco as it holds a dominant position in that domain.
Shares of Nike have gained +24.8% in the past year, outperforming the Zacks Shoes and Retail Apparel industry, which gained +19.6% over the same period, driven by a robust surprise trend, stemming from the execution of Consumer Direct Offense. Nike delivered positive earnings results for over three years now, with third-quarter fiscal 2019 marking the 27th straight quarter of earnings beat. Sales surpassed estimates for the eighth straight quarter.
The Zacks analyst thinks strong progress on Consumer Direct Offense through innovation and focus on digital transformation are the key drivers. Growth at international and NIKE Direct businesses aided results in the fiscal third quarter.
However, the company provided a soft view for the fiscal fourth quarter, owing to unfavorable currency impact. Higher SG&A expenses due to increased investments are likely to remain a drag. Further, higher input costs like cotton, chemicals and labor as well as the shift in supply-chain investments from the fiscal third quarter to the fourth quarter should hurt results.
United Parcel Service’s shares have outperformed the Zacks Transportation - Air Freight and Cargo industry over the past year, gaining +3.5% vs. -10%. The Zacks analyst likes UPS' efforts to reward its shareholders through dividends and buybacks.
Evidently, the company rewarded its shareholders to the tune of $4.2 billion in 2018. Continuing its pro-investor approach, in February 2019, UPS increased its quarterly dividend by 5.5% to 96 cents per share. Robust free cash flow generation by UPS supports the possibility of a dividend hike moving ahead. Moreover, UPS’ growth is hugely supported by the e-commerce development. The company anticipates cross-border e-commerce volume to grow by 28% over the next three years.
However, the company's high capital expenditure is limiting bottom-line growth. Trade-war related uncertainty and high debt pose further challenges.
Other noteworthy reports we are featuring today include Barclays (BCS), General Mills (GIS) and WellCare Health (WCG).
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2018, while the S&P 500 gained +15.8%, five of our screens returned +38.0%, +61.3%, +61.6%, +68.1%, and +98.3%.
This outperformance has not just been a recent phenomenon. From 2000 – 2018, while the S&P averaged +4.8% per year, our top strategies averaged up to +56.2% per year.
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>>>