Today's Must Read
Enterprise's (EPD) Gulf Coast Ethane Units to Drive Growth
Focus on Trading Revenues Aids Schwab (SCHW), Costs a Woe
Thursday, April 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 McDonald’s (MCD), Enterprise Products Partners (EPD) and Charles Schwab (SCHW). 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 >>>
McDonald's shares have gained +17.1% in the past year, underperforming the Zacks Restaurants industry which has gained +19.4% over the same period. The Zacks analyst thinks high labor costs and currency headwinds remain major concerns.
Moreover, revenues have been under pressure for quite some time due to strategic refranchising initiatives. Even its heightened focus on refranchising might cut the capital requirements and facilitate EPS growth. McDonald’s margins have been under pressure from worldwide wage increases.
However, McDonald’s impressive earnings surprise history, various sales and digital initiatives, as well as positive comparable sales, bode well. In fact, global comps at McDonald’s have been positive over the trailing 14 quarters.
Furthermore, increased focus on delivery and accelerated deployment of Experience of the Future restaurants in the United States should boost its performance. These apart, efforts to drive growth in International Lead & High Growth Markets bode well.
Shares of Buy-ranked Enterprise Products have gained +6.9% over the past three months, outperforming the Zacks Oil Production Pipeline MLP industry's increase of +5.4%. The Zacks analyst likes Enterprise Products’ extensive network of pipelines that is spread across nearly 50,000 miles.
Importantly, the pipeline network, which is connected to every major U.S. shale play, provides services to producers and users of commodities by transporting gas, liquids, and refined products. At present, Enterprise’s $5.1-billion pipeline of fee-oriented midstream projects positions it to enjoy above-average growth in distributable cash flow over the next two years, in turn expanding its distribution coverage ratio.
Most importantly, its ethane export facilities in the Gulf Coast, which link domestic producers to the overseas market, should drive further growth as the use of ethane is rapidly increasing to manufacture plastic instead of naphtha. As such, the partnership holds tremendous upside potential.
Schwab shares have outperformed the Zacks Investment Brokers industry over the past year, declining -14.5% vs. -19.4%. The Zacks analyst likes Schwab’s impressive earnings surprise history, having surpassed expectations in each of the trailing four quarters. Estimates have been stable lately ahead of the company's first quarter 2019 earnings release.
The company remains well positioned to gain from the higher interest rates and its initiatives to strengthen trading income. Also, the company’s efforts to improve operating efficiency will go a long way to support profitability. Its efficient capital deployment activities reflect a strong balance sheet position.
However, continuously rising operating expenses are likely to hurt bottom-line growth to an extent. Moreover, the company’s significant dependence on fee-based revenues remains a major concern as it might hamper financials.
Other noteworthy reports we are featuring today include Novartis (NVS), BB&T Corp (BBT) and Humana (HUM).
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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>>>