Today's Must Read
Keytruda Key to Merck's (MRK) Long Term Growth Prospects
Retail USA Growth Aids Walgreens (WBA) Amid Reimbursement Woes
Friday, June 28, 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 Chevron (CVX), Merck (MRK) and Walgreens Boots (WBA). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Outperform-rated Chevron’s shares have outperformed the Zacks Integrated Oil industry year to date (+13.2% vs. +7.9%). The Zacks analyst thinks Chevron is poised for further capital appreciation, riding on its healthy earnings growth prospects.
America’s No. 2 energy company’s financial results have greatly improved over the past few quarters, primarily aided by surging production and free cash flow turnaround. In fact, Chevron's free cash flow and upstream production for 2018 hit a record. The company’s existing oil and gas development project pipeline is among the best in the industry, targeting a CAGR of 3-4% through 2023 thanks to the planned expansion in the Permian Basin.
Moreover, growing free cash flow should enable Chevron to deliver stable and rising dividends in the foreseeable future. Consequently, Chevron is viewed as a preferred supermajor to own now.
Shares of Outperform-rated Merck have increased +9.7% year to date, outperforming the Zacks Large Cap Pharmaceuticals industry’s gain of +2% during the same period. The Zacks analyst thinks Merck’s new products like Keytruda, Lynparza and Bridion are contributing meaningfully to the top line.
Keytruda sales are gaining momentum with approval for additional indications, especially in the first-line lung cancer setting. Keytruda has strong growth prospects based on increased utilization, recent approvals for new indications and potential additional approvals worldwide. Animal health and vaccine products are also performing strongly and remain core growth drivers for Merck.
However, generic competition for several drugs and pricing pressure will continue to be overhangs on the top line. Rising competitive pressure on the diabetes franchise and products like Isentress (HIV), Zepatier (HCV) and Zostavax (vaccine) remain concerns.
Walgreens Boots’s shares have underperformed the Zacks Drug Stores industry over the past three months, losing -13.8% vs. -6.4%. Walgreens Boots’ third-quarter fiscal 2019 adjusted earnings and revenues outpaced their respective expectations.
The Zacks analyst thinks the Retail Pharmacy USA division is witnessing comparable prescription growth and benefitting from a strong retail prescription market. The Pharmaceutical Wholesale division too continues to register strong growth.
On the flip side, Walgreens Boots believes that pharmacy trends, which are hurting the overall market, are likely to continue to do so over the coming months. Walgreens Boots reported poor margins in the third quarter largely due to turbulence in the UK consumer markets, low generic deflation, brand inflation and increased reimbursement pressure.
Other noteworthy reports we are featuring today include FedEx (FDX), Allstate (ALL) and Loews (L).
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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>>>