Today's Must Read
Oracle (ORCL) Gains from Cloud Suite Adoption & Partnerships
ADP Rides on Strategic Buyouts Amid Technological Challenges
Friday, June 21, 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 ExxonMobil (XOM), Oracle (ORCL) and ADP (ADP). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
ExxonMobil’s shares have outperformed the Zacks Integrated International Oil industry (+16.9% vs. +14%) over the past six months. The Zacks analyst thinks ExxonMobil has a leading position in the energy industry owing to its size and diverse asset base, both in terms of business mix and geographical footprint.
With a stable cash position, the company’s balance sheet is one of the best in the industry. This has allowed ExxonMobil to reward stockholders with a 6.2% average annual dividend hike over the past 37 years. Notably, with three fresh offshore oil discoveries in Guyana, ExxonMobil recently completed 13 key discoveries in the Stabroek Block.
However, since in Europe, demand for gas is highly seasonal, the company expects soft European gas volumes to weaken its upstream business through the April-to-June quarter of 2019. ExxonMobil also anticipates that substantial scheduled maintenance activities will adversely impact its downstream & chemical businesses in the second quarter of 2019.
Shares of Oracle have underperformed the Zacks Computer Software industry in the past six months, gaining +33.5% vs. +43.3%. Oracle reported stellar fourth-quarter results. Moreover, both top and bottom line increased on a year over year basis.
The Zacks analyst thinks the company is benefiting from strong adoption of its cloud-based solutions, comprising Fusion ERP and Fusion HCM, among others. Partnerships with the likes of Accenture are helping the company rapidly expand its cloud-base clientele. Also, anticipated strong demand for the next-generation autonomous database supported by machine learning will boost its competitive position against Amazon Web Services (AWS).
However, stiff competition in the cloud market from dominant players is anticipated to limit margin expansion. Further, lower hardware volumes are anticipated to hurt top-line growth consequently keeping margins under pressure. Additionally, integration risks from buyouts remain a concern.
ADP’s shares have gained +21.9% over the past year, outperforming the Zacks Outsourcing industry, which has gained +15% over the same period. The Zacks analyst thinks ADP continues to enjoy a dominant position in the human capital management market through strategic acquisitions. It has a strong business model, high recurring revenues, good margins, robust client retention and low capital expenditure.
The company continues to innovate, improve operations and invest in its ongoing transformation efforts. A solid balance sheet enables it to continue with its shareholder-friendly activities alongside strategic buyouts and investments on product development.
On the flip side, ADP faces significant competition in each of its product lines. Failure to remain technologically updated might reduces the demand for its solutions and services. The company is seeing increase in expenses as it continues to acquire companies and invest in transformation efforts.
Other noteworthy reports we are featuring today include Baxter (BAX), Northrop Grumman (NOC) and EOG Resources (EOG).
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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>>>