Today's Must Read
Low Cigarette Volumes Hit Altria (MO), Smokeless Unit Aids
Core MedSurg Segment Aids Stryker (SYK) Amid Competition
Tuesday, June 11, 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 Intel (INTC), Altria (MO) and Stryker (SYK). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Intel’s shares have outperformed the Zacks General Semiconductor industry in the past year, losing -14.7% vs. a decline of -21.1%. The Zacks analyst thinks Intel is benefiting from rising demand for its higher performance products, both in data center and client domains. Strength in Xeon ASPs is a key catalyst.
Moreover, synergies from Mobileye acquisition and growing clout in ADAS market favor Intel’s growth prospects. Intel's strategy of expanding TAM beyond CPU to adjacent product lines like silicon photonics, fabric, network ASICs, and 3D XPoint memory is yielding results.
However, declining trend in PC shipments is detrimental to business prospects of Intel, which continues to depend substantially on PC sales. Also, weakness in demand from China and softness in NAND flash pricing trends, remain major concerns. Intensifying competition and pricing pressure from AMD remains a headwind.
Shares of Altria have lost -8.1% over the past three months, outperforming the Zacks Tobacco industry, which has declined -9.3% over the same period. The Zacks analyst stresses that the company is grappling with declining cigarette shipment volumes.
Stern FDA regulations, along with increased health consciousness are taking a toll on cigarette sales. During first-quarter 2019, domestic cigarette shipment volumes fell 14.3% year over year. Going forward, management expects cigarette industry volume to decline by 4-5%. Nevertheless, growing popularity of Smokeless products offers some respite. During the first quarter, revenues in the category improved nearly 2.9%.
To further bolster this unit, the company has made investments in JUUL and Cronos. Pricing also continues to drive the company’s revenues. It has also undertaken cost-reduction initiatives and plans to deliver annualized cost savings of nearly $575 million by the end of 2019.
Stryker’s shares have gained +20.7% in the past year, outperforming the Zacks Medical Products industry, which has increased +4.8% over the same period. The Zacks analyst thinks the company continues to gain from its core MedSurg unit which put up a strong show in the reported quarter.
Additionally, strength in flagship Mako platform continues to favor the company. Moreover, its K2M acquisition drove the core Neurotechnology & Spine unit in the quarter under review. Solid international growth also buoys optimism. Expansion in operating margins is a positive while strong outlook for 2019 is indicative of bright prospects.
Stryker exited the first quarter of 2019 on a solid note, with earnings surpassing the consensus mark and revenues increasing on a year-over-year basis. However, contraction in gross margin is a concern. Pricing pressure also continues to plague Stryker. Stiff competition in the MedTech space remains a headwind.
Other noteworthy reports we are featuring today include Sherwin-Williams (SHW), Prudential (PRU) and Verisk (VRSK).
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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>>>