Today's Must Read
Organic Growth Aids Abbott (ABT), Dull Rhythm Management Ails
Divestments to Aid Illinois Tool (ITW), Organic Sales Drag
Wednesday, May 8, 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 Verizon (VZ), Abbott (ABT) and Illinois Tool Works (ITW). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Verizon’s shares have gained +22.1% in the past year, outperforming the Zacks Wireless National industry’s increase of +10.2% during the same period. Verizon started 2019 on a promising note with solid performance in the first quarter, primarily backed by the wireless business.
The company recorded modest top-line growth and remains well poised to benefit from the impending 5G boom. The Zacks analyst thinks focus on online content delivery, mobile video and online advertising are likely to stoke further growth. Management also raised its earlier guidance on underlying strength of its business model.
However, Verizon continues to struggle in a competitive and saturated U.S. wireless market, where spectrum crunch has become a major issue. The wireline division is struggling with persistent losses in access lines owing to competitive pressure from VoIP service providers and aggressive triple-play offerings by cable firms. Verizon is also spending heavily on promotion and lucrative discounts to woo customers, which is also weighing on margins.
Shares of Abbott have gained +29.5% over the past year, outperforming the Zacks Medical Products industry, which has increased +5.9% over the same period. Abbott exited first quarter 2019 with better-than-expected earnings and revenues figures.
The Zacks analyst likes the strong and consistent performance by the company’s EPD and Medical Devices segments on an organic basis. The company has been hogging the limelight within Diabetic Care on growth with FreeStyle Libre. Within Structural Heart, worldwide strong uptake of MitraClip has improved further following the FDA approval of its upgraded version.
This apart, synergies from Alere consolidation in the form of revenues from Rapid Diagnostics have been driving growth. Abbott's emerging market performance has been promising. On the flip side, sluggish Rhythm Management arm in the United States continues to dent growth. Increasing currency headwinds to some extent dented Abbott’s international performance in the last-reported quarter.
Illinois Tool Works’ shares have outperformed the Zacks Industrial Machinery industry over the past six months, gaining +14.4% over the period versus the industry’s +10.3% increase. The Zacks analyst thinks Illinois Tool will gain from a diversified business structure, policy of rewarding shareholders handsomely, enterprise initiatives and skilled management team.
In first-quarter 2019, the company's earnings surpassed estimates but declined year over year due to weak sales, higher taxes, forex woes and restructuring costs. For 2019, it anticipates earnings per share to increase 4-8% year over year. Enterprise Strategy is anticipated to boost margins by 100 basis points (bps). Share buybacks are likely to amount to $1.5 billion.
However, organic sales are predicted to increase 0.5-2.5%, down from previously mentioned 1-3%. Also, high tax rate and unfavorable foreign exchange (that will lower earnings by 6 cents in the second quarter) remain concerns. Earnings estimates for 2019 have declined in the past 30 days.
Other noteworthy reports we are featuring today include Moody's (MCO), Equinix (EQIX) and Baker Hughes (BHGE).
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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>>>