Today's Must Read
Steady Demand Buoys American Tower (AMT), Debt Woes Linger
Southern (SO) Buoyed by Federal Loan Guarantee for Vogtle
Wednesday, March 27, 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 Facebook (FB), American Tower (AMT) and Southern Company (SO). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Buy-ranked Facebook’s shares have gained +27.7% year to date, outperforming the S&P 500’s increase of +12.6% during the same period. The Zacks analyst thinks Facebook will benefit from mobile ad revenues driven by robust performance of Instagram Stories and an expanding user base in 2019.
Further, the company’s plan to introduce commerce in Instagram is estimated to be a major growth driver. The growing appeal of the company’s Workplace platform, which has now more than two million paid users, is another key catalyst.
Additionally, its plan to integrate messaging apps – WhatsApp, Instagram, and Messenger – will boost user experience by making the services more secure through end-to-end encryption. The company’s initiatives to curb the "fake news" menace and data breaches are other positives. However, continued mix shift toward Stories is expected to hurt ARPU. Increasing regulatory headwinds is also a concern.
Shares of American Tower have outperformed the Zacks REIT and Equity Trust industry in the past three months (+23.2% vs. +16.3%). In fourth-quarter 2018, the company posted better-than-expected results backed by revenue growth. The Zacks analyst thinks increased use of mobile data is fueling demand for space on the company’s telecom towers.
This enabled American Tower to experience splendid leasing activity and organic tenant billings growth in the recently-reported quarter. With higher investments in 4G and the upcoming 5G technology, wireless carriers will raise the density of their networks. Hence, the company is strengthening its portfolio and focusing on innovation to capture underlying opportunities.
Further, efforts to increase shareholder value through dividend hike and stock repurchases bode well. Yet, it has a substantially leveraged balance sheet. Also, the accelerated Indian carrier consolidation-driven churn and high customer concentration remain risks.
Buy-ranked Southern Company's shares have outperformed the Zacks Electric Power industry over the past six months, gaining +19.7% vs +13.2%. Following the U.S. federal government's approval of $3.7 billion in loan guarantees for the Vogtle nuclear plant in Georgia, Southern Company retains its Buy rating.
The Zacks analyst thinks that it will provide substantial support and encouragement in the completion of the troubled nuclear project and will also help to reduce financing costs. Southern Company is one of the largest and best-managed electric utilities in the U.S., dominating the power business across the southeastern region.
With good rate base growth and constructive regulation, it is expected to generate steady earnings and dividend growth in the coming years through long-term power contracts. Additionally, the utility's $12 billion AGL buy has significantly increased its customer base and diversified its offerings. Sporting a low beta – translating into less volatility – and a reasonable valuation, Southern Company is seen as an attractive investment.
Other noteworthy reports we are featuring today include Intuitive Discover Financial (DFS), Synchrony Financial (SYF) and Cintas (CTAS).
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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>>>