Today's Must Read
Growing Top-line Aids Visa (V), Escalating Expenses Hurt
Chevron (CVX) to Boost Permian Position with Anadarko Buy
Monday, April 15, 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 JPMorgan (JPM), Visa (V) and Chevron (CVX). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
JPMorgan’s shares have increased +2.3% in the past six months, significantly outperforming the Zacks Major Regional Banks industry’s decline of -0.9%. The bank has an impressive earnings surprise history, having surpassed expectations in three of the trailing four quarters. Its first-quarter 2019 results were driven by higher rates, improved investment banking performance and decent loan growth.
The Zacks analyst thinks expansion into new markets by opening branches, focus on strengthening credit card business, higher rates and improving loan balance will continue supporting the company’s revenues. Also, its steady capital deployments reflect a strong balance sheet position. However, dismal mortgage banking performance remains a major concern.
Further, the company's significant dependence on capital markets revenues is a cause for worry. These factors are expected to hamper the bank's fee income growth to an extent.
Shares of Visa have outperformed the Zacks Financial Transaction Services industry in the past year, gaining +31% vs. a +25.6% increase. Its results were driven by growth in payments volume, cross-border volume and processed transactions, and a lower tax rate.
The Zacks analyst thinks numerous strategic acquisitions and alliances, technology upgrades and effective marketing have paved the way for long-term growth and consistent increase in revenues. Visa is well poised to gain from growing electronic payment processing and a solid brand name. Its strong capital position enables investments in business.
Nevertheless, high client incentives and operating expenses, and foreign exchange volatility might put pressure on margins. Softness in cross border volumes is another concern.
Chevron’s shares have underperformed the Zacks Integrated Oil industry year to date (+10.1% vs. +11.6%). Chevron retains its Neutral rating following the announcement of its acquisition of Anadarko Petroleum in a $50 billion deal. The Zacks analyst thinks the strategic rationale for the transaction is compelling for Chevron given the access to potentially lucrative Permian Basin acreage, LNG operations in Mozambique, as well as attractive deepwater infrastructure in the GoM.
Additionally, the buyout is expected to improve Chevron’s cash flow profile together with substantial annual cost synergies and attractive returns for shareholders. On the whole, the acquisition results in an energy powerhouse enjoying very strong cash flow.
However, there are worries of a drop in its downstream earnings that have been cutting into overall gains from rising E&P income. The massive capex might also play a spoilsport. Hence, investors are advised to wait for a better entry point before buying shares in Chevron.
Other noteworthy reports we are featuring today include IBM (IBM), TJX Companies (TJX) and General Dynamics (GD).
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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>>>