Today's Must Read
Starbucks' (SBUX) Strong Global Footprint to Drive Growth
Solium Deal Aids Morgan Stanley (MS), Debt Originations a Woe
Thursday, May 30, 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), Starbucks (SBUX) and Morgan Stanley (MS). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Neutral-rated JPMorgan’s shares have lost -2.2% in the past six months, outperforming the Zacks Major Regional Banks industry’s decline of -6.6%. The bank has an impressive earnings surprise history, having surpassed the Zacks Consensus Estimate in three of the trailing four quarters.
The Zacks analyst thinks higher rates, improving loan balance, expansion into new markets via new branch openings and focus on strengthening credit card business will support the company’s revenues. Expanding its reach into lucrative U.S. healthcare payments market with a deal to acquire InstaMed will go a long way in supporting profitability.
However, dismal mortgage banking performance, mainly due to lower origination volume and increase in competition, is expected to continue hampering fee income growth. The company's excessive dependence on capital markets revenues is a cause for concern and is expected to hamper revenue growth.
Shares of Neutral-rated Starbucks are up +12.8% over the past six months, outperforming the Zacks Food & Restaurants industry, which is up +7.3% over the same period. The Zacks analyst thinks the momentum is likely to continue as the company reported solid second-quarter fiscal 2019 earnings and raised its full-year view.
Notably, earnings surpassed expectations in all of the trailing four quarters. Robust Americas and CAP comps also bode well. Meanwhile, Starbucks' business is rapidly growing in China, courtesy of innovative store designs, local product innovations and the success of MSR program. Operating fundamentals such as solid global footprint, successful innovations, best-in-class loyalty program and digital offerings are major positives.
Again, digital initiatives like mobile order/pay and delivery services can stimulate robust sales further. However, the operating margin contraction over the past few quarters has been a major concern.
Neutral-rated Morgan Stanley’s shares have lost -5.4% over the past six months, outperforming the Zacks Investment Banking industry, which has declined -7.2% over the same period. The company possesses an impressive earnings surprise history. Its earnings have surpassed expectations in three of the trailing four quarters.
The Zacks analyst thinks the acquisition of Solium Capital is in sync with the company’s efforts to strengthen its wealth management business. Moreover, focus on the corporate lending unit, steady loan growth, higher interest rates and normalized levels of trading activities will likely aid revenue growth going forward.
Its steady capital deployment activities indicate a strong liquidity position. However, a slowdown in debt originations will likely hinder underwriting fee income growth and hurt the company’s investment banking performance. Elevated operating expenses are likely to hurt profits.
Other noteworthy reports we are featuring today include HP (HPQ), Twitter (TWTR) and IBM (IBM).
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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>>>