Today's Must Read
Amgen (AMGN) Counts on New Drugs Amid Rising Biosimilar Woes
High Operating Costs Hurt United Technologies (UTX)
Tuesday, March 26, 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 Apple (AAPL), Amgen (AMGN) and United Technologies (UTX). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Apple’s shares have gained +9.2% in the past year and have outperformed the broader market with the S&P 500 increasing +5.5% over the same period. The Zacks analyst thinks Apple is likely to be hurt by weak demand for the iPhone, particularly in China and emerging economies.
The company has failed to penetrate rapidly growing but price sensitive markets of Asia, particularly India. It continues to lose share in the smartphone market due to increasing competition from Chinese handset makers. Nevertheless, the Services segment is expected to grow strongly, driven by solid App Store sales, and increasing adoption of Apple Music and Apple Pay.
Apple's endeavors to open up its ecosystem, through partnerships with the likes of Samsung and Amazon, are likely to aid the Services segment. The latest announcement of subscription-based video streaming, news and gaming services is a catalyst. The new credit card, supported by Goldman Sachs and Mastercard, will benefit from Apple Pay’s growing adoption.
Shares of Amgen have declined -4.2% year to date, underperforming the Zacks Biomedical and Genetics industry's increase of +8.1%. The Zacks analyst thinks that while Amgen’s newer drugs — Prolia, Xgeva, Blincyto, Kyprolis — will drive sales, its legacy products face biosimilar and brand competition which will create pressure on the top line in 2019.
Meanwhile, uptake of key drug, Repatha has been slow due to payer restrictions. The recent price cut will hurt sales going forward. However, Amgen is progressing well with its pipeline and the approval of Aimovig was a huge boost. In the past five years, Amgen has launched nine products, including two in new therapeutic areas.
Amgen boasts a strong biosimilars pipeline, which could be an important long-term growth driver for the company. Amgen’s restructuring plan is making it leaner and more cost efficient. Lower taxes and share buybacks should provide some support to the bottom line.
United Technologies’ shares have lost -10.2% in the past six months, underperforming the Zacks Diversified Operations industry, which has declined -4.6% over the same period. The Zacks analyst thinks strength in commercial and military aftermarket businesses and impressive contribution from last year’s acquisition Rockwell Collins’ sales will likely boost United Technologies' near-term revenues.
Also, improved top line and cost-cutting measures are expected to enhance profitability, going forward. Backed by these positives, the company has given bullish full-year 2019 revenue guidance. The company intends to become more competent on the back of meaningful business acquisitions.
Notably, the Rockwell Collins buyout is likely to boost sales in 2019. Rising costs of sales remain a threat to the company's gross margin. If unchecked, higher costs and operating expenses will prove detrimental to United Technologies' margins and profitability. Moreover, increases in debt level can increase its financial obligations.
Other noteworthy reports we are featuring today include Travelers Companies (TRV), Red Hat (RHT) and Xilinx (XLNX).
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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>>>