Today's Must Read
Starbucks' (SBUX) Strong Global Footprint to Drive Growth
T-Mobile (TMUS) Buoyed by Customer Additions Amid Competition
Monday, June 17, 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), Starbucks (SBUX) and T-Mobile (TMUS). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Home Depot’s shares have gained +21% over the past six months, outperforming the Zacks Retail Building Products industry’s +16.7% increase. The Zacks analyst thinks that this is attributable to a robust surprise trend that continued in first-quarter fiscal 2019. With this, it retained its five-year long trend of earnings beat, 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.
However, the company reported soft comps in the fiscal first quarter, which lagged analysts’ expectations. Tough year-over-year comparisons owing to hurricane-related sales hurt comps. The company’s top-line performance in the first quarter was also hurt by adverse weather in February and deflation in lumber prices.
Shares of Starbucks are up +29.8% over the past six months, outperforming the Zacks Food & Restaurants industry, which is up +20.4% 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 also raised its full-year view. Notably, earnings surpassed estimates in all of the trailing four quarters. Robust Americas and CAP comps too bode well.
Meanwhile, Starbucks' business is rapidly growing in China, courtesy of innovative store designs, local product innovations and the success of MSR program. Also, operating fundamentals such as solid global footprint, successful innovations, best-in-class loyalty program and digital offerings are encouraging.
Again, digital initiatives like mobile order/pay and delivery services can further stimulate robust sales trends. However, operating margin contraction over the past few quarters has been a major concern.
T-Mobile’s shares have outperformed the Zacks National Wireless industry over the past year, gaining +24.1% vs. +10.8%. T-Mobile received shareholder approval for its combination with Sprint. The Zacks analyst thinks this is a step forward in creating the New T-Mobile through which the wireless carrier intends to bring robust competition in the 5G era.
The New T-Mobile will have about 127 million customers and a strong closing balance sheet. T-Mobile has also collaborated with Ericsson and Nokia to accelerate the deployment of a nationwide 5G network. Its network expansion strategy continues to be superior to its rivals. However, a highly competitive and saturated U.S. wireless market remains a major headwind.
Intensifying competition is likely to limit its ability to attract and retain customers and may adversely affect operating results. T-Mobile launched several low-priced service plans which has enhanced its revenues but has failed to improve the bottom line significantly.
Other noteworthy reports we are featuring today include Enterprise Products Partners (EPD), Aflac (AFL) and Ventas (VTR).
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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>>>