Today's Must Read
Adoption of Cloud & Office 365 Strength Aid Microsoft (MSFT)
Restructuring Moves to Aid GE, Power Segment Hurts
Thursday, May 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 Apple (AAPL), Microsoft (MSFT) and General Electric (GE). 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 >>>
Apple’s shares have gained +33.4% year to date and have outperformed the broader market with the S&P 500 increasing +15.8% over the same period. Apple’s second-quarter 2019 results were hurt by continued weakness in iPhone demand, particularly in China and emerging economies.
The Zacks analyst thinks the company continues to lose share in the smartphone market due to stiff competition from Chinese handset makers. Although Apple’s Services segment and newer products like Apple Watch hold promise, they are yet to deliver results strong enough to negate the decline in iPhone shipments.
However, iPhone demand is expected to improve in China, driven by lower VAT, and the company’s financing and trade-in programs. Moreover, price reductions are also expected to boost iPhone demand in certain emerging countries. Meanwhile, the Services segment is expected to grow strongly on solid App Store sales and increasing adoption of Apple Music and Apple Pay.
Shares of Buy-Ranked Microsoft have gained +36% in the past year, outperforming the Zacks Computer Software industry’s gain of +29.6% during the same period. Microsoft reported stellar third-quarter results. Robust execution and better-than-expected demand from customers for hybrid cloud offerings drove the quarterly results.
The Zacks analyst thinks Microsoft is benefiting from growing user base of its different applications like Office 365 commercial, Dynamics, Outlook mobile and Teams. Further, acquisitions like PlayFab and GitHub expand Microsoft’s TAM and penetration.
However, projections of a moderating growth rate in commercial cloud gross margin, and OEM Pro and Windows commercial businesses is a headwind. Also, competition is stiff and its dominant position in the PC market continues to be challenged.
General Electric’s shares have outperformed the Zacks Diversified Operations industry year to date (+33.5% vs. +23.9%). The Zacks analyst thinks the company is poised to become more competent on the back of the portfolio-restructuring program. In sync with this, it intends to focus on three core businesses — Power, Aviation and Renewable Energy — and gradually exit all others.
Also, reduced quarterly dividend rate and reorganization in the Power business are likely to benefit results going forward. In the first quarter of 2019, the company's earnings surpassed expectations but declined year over year due to weakness in revenues and margins.
In the quarters ahead, a weakening Power business remains a key cause of concern for the company. General Electric expects internal and external challenges to continue hurting this business arm. Also, headwinds related to unfavorable movements in foreign currencies are a concern.
Other noteworthy reports we are featuring today include Ecolab (ECL), Travelers Companies (TRV) and Celgene (CELG).
Zacks' Top 10 Stocks for 2019
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-holds for the year?
Who wouldn't? Our annual Top 10s have beaten the market with amazing regularity. In 2018, while the market dropped -5.2%, the portfolio scored well into double-digits overall with individual stocks rising as high as +61.5%. And from 2012-2017, while the market boomed +126.3, Zacks' Top 10s reached an even more sensational +181.9%.
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>>>