Today's Must Read
Phillip Morris' (PM) Top Line to Benefit From Focus on RRPs
Dividends, Buybacks & e-commerce Buoy UPS Amid Cost Woes
Thursday, May 23, 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 Home Depot (HD), Philip Morris (PM) and United Parcel Service (UPS). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Home Depot’s shares have lost -1.4% over past three months, outperforming the Zacks Retail Building Products industry’s -2.7% decline. The company reported soft comps in first-quarter fiscal 2019, which lagged analysts’ expectations. The Zacks analyst thinks tough year-over-year comparisons owing to hurricane-related sales hurt comps.
The company’s top-line performance in the fiscal first quarter was also hurt by adverse weather in February and continued deflation in lumber prices. Further, stiff competition from other leading players remains an added concern. Nevertheless, Home Depot retained its five-year long trend of earnings beat in the fiscal first quarter, with positive sales surprise in nine of the last 11 quarters.
Results gained from strength in both Pro and DIY categories. The company’s efforts to provide an interconnected shopping experience to customers with localized and innovative products, and improved productivity also aided its quarterly performance.
Shares of Philip Morris have gained +5.2% in the past year, outperforming the Zacks Tobacco industry's decline of -8.2%. The Zacks analyst thinks the company is benefiting from advancement in RRPs arena, which was fueled further when the FDA allowed the company to sell IQOS heating devices.
Further, strong growth in heated tobacco units aided the company’s top line in the first quarter of 2019. Efficient pricing boosted performance in the first quarter, which is expected to be a key catalyst in the forthcoming periods.
However, headwinds in the cigarette category are a concern. Markedly, revenues in the combustible unit declined year over year in the first quarter, while shipment volumes were flat. Stringent policies and fading consumer interests are weighing on cigarette sales. Further, management expects sales volumes in the unit to continue declining in 2019.
United Parcel Service’s shares have outperformed the Zacks Transportation - Air Freight and Cargo industry over the past year, losing -16.4% vs. -24.1%. The Zacks analyst likes UPS' efforts to reward its shareholders through dividends and buybacks. Evidently, the company rewarded $4.2 billion to its shareholders in 2018.
Continuing its shareholder-friendly approach, in February 2019, UPS increased its quarterly dividend by 5.5% to 96 cents per share. In the first quarter of 2019, the company paid approximately $867 million as dividends to its shareholders, up 5.5%. Additionally, it bought back 2.4 million shares for $250 million.
UPS’ growth is hugely supported by the e-commerce development. The company anticipates cross-border e-commerce volume to grow by 28% over the next three years. However, the company's high capital expenditures are limiting bottom-line growth. Trade-war related uncertainty and high debts pose further challenges.
Other noteworthy reports we are featuring today include V.F. Corp (VFC), Regeneron (REGN) and Shopify (SHOP).
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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>>>