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Research Daily

Tuesday, May 7, 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 Berkshire Hathaway (BRK.B), Merck (MRK) and Charter Communications (CHTR). 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 >>>

Berkshire Hathaway’s shares have underperformed the Zacks Insurance - Property and Casualty industry year to date (+4.4% vs. +6.4%). Berkshire Hathaway’s first-quarter operating earnings increased 5% year over year on solid results across all segments. The Zacks analyst thinks the company is poised for growth over the long term on its sturdy insurance business.

The company’s inorganic growth story remains impressive with strategic acquisitions. A strong cash position allows it to make earnings-accretive bolt-on buyouts. Demand for utilities is expected to rise in the future and drive earnings growth. Continued insurance business growth also fuels increase in float. A sturdy capital level provides further impetus.

However, exposure to catastrophe loss remains a concern as its property and casualty insurance business generates maximum return on equity. Also, huge capital expenses due to railroad operations pose concerns. Capital expenditure is estimated to be $10.5 billion in 2019.

(You can read the full research report on Berkshire Hathaway here >>>).

Shares of Buy-ranked Merck have increased +4% year to date, outperforming the Zacks Large Cap Pharmaceuticals industry’s gain of +0.5% during the same period. Merck beat estimates for both earnings and sales in the first quarter. The Zacks analyst thinks Merck’s new products like Keytruda, Lynparza and Bridion are contributing meaningfully to the top line. Keytruda sales are gaining momentum with approval for additional indications, especially in the first-line lung cancer setting.

Keytruda has strong growth prospects based on increased utilization, recent approvals for new indications and potential additional approvals worldwide. Animal health and vaccine products are also performing strongly and remain core growth drivers for Merck.

However, generic competition for several drugs and pricing pressure will continue to be overhangs on the top line. Rising competitive pressure on the diabetes franchise and products like Isentress (HIV), Zepatier (HCV) and Zostavax (vaccine) remains a concern.

(You can read the full research report on Merck here >>>).

Charter Communications’ shares have outperformed the Zacks Cable TV industry year to date (+32% vs. +26.4%).Charter’s first-quarter 2019 earnings and revenues grew year over year. The company’s top line benefited from growth in Internet, video, mobile and commercial revenues. Increase in Internet subscribers coupled with more users moving to higher speed tiers aided Internet revenues.

The Zacks analyst likes the fact that Charter is looking to attract video customers by providing a new OTT video service. The company launched Spectrum TV Essentials in Charter’s footprint for Spectrum Internet users who do not avail Spectrum video services.

However, the company noted that its Internet penetration rate is about 50%, which is low when compared to its potential to deliver faster and cost-efficient services. Moreover, commercial revenue growth came below commercial customer relationship growth due to migration of customers to Spectrum pricing and packaging from Legacy TWC and Legacy Bright House.

(You can read the full research report on Charter Communications here >>>).

Other noteworthy reports we are featuring today include Anthem (ANTM), Southern Company (SO) and Norfolk Southern (NSC).

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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>>>

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