Today's Must Read
P&G's (PG) Productivity & Cost Savings Plan to Drive Profits
Strong Optum, Solid Balance Sheet Aids UnitedHealth (UNH)
Monday, June 3, 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 Amazon (AMZN), Procter & Gamble (PG) and UnitedHealth (UNH). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Amazon’s shares have outperformed the broader market in the past year (the stock is up +9.5% vs. the -0.9% decline for the S&P 500 as a whole). The Zacks analyst thinks Amazon continues to ride on its aggressive retail strategies, distribution strength and robust Prime program.
Rapid adoption of Prime driven by customer benefits and strengthening grocery services is aiding its top line. Expanding content portfolio of Prime remains a tailwind. Strengthening AWS services portfolio, rising number of availability zones and growing adoption are aiding Amazon’s dominance in the cloud space.
Furthermore, improving Alexa skills and growing advertisement business remain major positives. However, intensifying competition in the cloud computing market from the likes of Microsoft Azure and Google cloud is a significant headwind. Heavy investment in fulfillment centers remains a concern.
Shares of Outperform-rated Procter & Gamble outperformed the Zacks Soap and Cleaning Materials industry in the past year, gaining +43.8% vs. +23.8%. The Zacks analyst thinks that this can be attributed to the company’s impressive earnings history. It delivered its 16th straight earnings beat in third-quarter fiscal 2019 as well as its sixth sales beat of the last seven quarters.
While earnings gained from ongoing productivity efforts, strong organic growth with higher shipment volumes and favorable price/mix aided sales growth. Management raised the sales guidance for fiscal 2019 and reaffirmed its earnings view. The company’s focus on product improvement, packaging and marketing initiatives, and productivity and cost-savings plan bode well.
However, Procter & Gamble has been witnessing strained margins owing to increased commodity and shipping costs, higher brand investments amid intense competition. Adverse currency rates are hurting the company’s results, which may persist in fiscal 2019.
Outperform-rated UnitedHealth’s shares have lost -11.1% in the past six months, outperforming the Zacks Medical Insurance industry, which has declined -12.5% over the same period. The Zacks analyst likes its strong operating performance, favorable business profile and disciplined enterprise risk management. It stands apart from its industry peers by virtue of healthcare services, technology and innovations offered by its unit, Optum.
Numerous acquisitions made by the company have broadened its business profile and provided the benefits of diversification. Its solid balance sheet and consistent cash flow generation have enabled higher investment in business which will drive long term growth. Prudent capital management through dividend payments and share buybacks is another positive.
However, a slowdown of growth in international operations and underperformance in Medicaid business are key concerns. An increase in leverage and interest burden raises financial risk.
Other noteworthy reports we are featuring today include Toyota (TM), Autodesk (ADSK) and Veeva (VEEV).
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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>>>