Today's Must Read
PayPal (PYPL) Benefits From Rising Total Payment Volume
Robust Americas & China Performance to Drive Starbucks (SBUX)
Tuesday, April 2, 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 ExxonMobil (XOM), PayPal (PYPL) and Starbucks (SBUX). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
ExxonMobil’s shares have underperformed the Zacks Integrated International Oil industry (+19.1% vs. +11.3%) in the past three months. ExxonMobil has a leading position in the energy industry owing to its size and diverse asset base, both in terms of business mix and geographical footprint.
With a stable cash position, the company’s balance sheet is one of the best in the industry. The Zacks analyst thinks that this has allowed ExxonMobil to reward stockholders with a 6.3% average annual dividend hike over the past 35 years.
The company owns some of the most prolific upstream assets globally along with the largest global refining operations. Notably, with two fresh offshore oil discoveries in Guyana, ExxonMobil recently completed 12 key discoveries in the Stabroek Block. Also, the company recently made massive natural gas discovery in Glaucus-1 well, located off the coast of Cyprus.
However, persistent weakness in chemicals margins and decline in seasonal demand for gasoline are major headwinds for ExxonMobil. The company’s exit from a joint venture in Russia is also cause for concern.
Shares of Buy-ranked PayPal have outperformed the Zacks Internet Software industry in the past year (+41.5% vs. +27.1%). The Zacks analyst thinks PayPal’s portfolio strength remains its key growth driver. Venmo’s improving monetization efforts and its increasing adoption rate across various platforms are aiding the company’s user base.
Further, strong momentum of the company in international markets, especially in India and Japan remains a major positive. Also, accelerating transaction revenues are driving the top-line growth. Additionally, rising active customer accounts, owing to contributions by acquisitions of Hyperwallet and iZettle continues to act as a tailwind. Also, strategic partnerships are expected to continue aiding business growth of PayPal.
However, weak eBay performance and challenging macroeconomic environment in China and the UK induced the issuance of lower-than-expected revenue guidance for Q1. This remains a concern.
Buy-ranked Starbucks’ shares are up +33.3% over the past six months, outperforming the Zacks Food & Restaurants industry, which is up +17.4% over the same period. The Zacks analyst thinks robust Americas and China comparable store sales bode well.
Starbucks' business in China is rapidly growing due to innovative store designs, local product innovations and the success of MSR program. Also, the company’s operating fundamentals such as solid global footprint, successful innovations, best-in-class loyalty program and digital offerings are encouraging.
Again, digital initiatives like mobile order/pay and delivery services can further stimulate robust sales trends. Starbucks' partnership with Nestle SA will also drive growth. However, operating margin contraction over the past few quarters has been a major concern.
Being a retail restaurant, Starbucks is dependent on consumer discretionary spending environment. Estimates for current quarter and year have been stable over the past 30 days.
Other noteworthy reports we are featuring today include Southwest Airlines (LUV), McCormick (MKC) and Interactive Brokers (IBKR).
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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>>>