Today's Must Read
Strong Service and Benefit Business Aids UnitedHealth (UNH)
Strong Comparable Sales Run to Fuel Costco's (COST) Top Line
Friday, July 12, 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 Microsoft (MSFT), UnitedHealth (UNH) and Costco (COST). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Microsoft’s shares have gained +31.3% in the past year, outperforming the S&P 500’s’ gain of +5.6% during the same period. The Zacks analyst Microsoft is benefiting from growing user base of its different applications like Office 365 commercial, Dynamics, Outlook mobile and Teams. Moreover, Azure’s expanding customer base is a key catalyst.
Microsoft’s gaming segment is performing well, primarily driven by a combination of Xbox Live, Game Pass subscriptions and Mixer, which are driving user engagement. Further, acquisitions like PlayFab and GitHub expand Microsoft’s total addressable market (TAM) and penetration. Additionally, expanding partner base is notable.
However, projections of moderating growth in commercial cloud gross margin, and OEM Pro and Windows commercial businesses is a headwind. Stiff competition from the likes of Google, Apple, Sony and Nintendo remains a headwind.
Shares of UnitedHealth have gained +13.5% in the past three months, outperforming the Zacks Medical Insurance industry, which has increased +12.3% over the same period. The Zacks analyst thinks UnitedHealth's strong operating performance, favorable business profile and disciplined enterprise risk management are commendable.
The company stands apart in the industry 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 provide the benefits of diversification. Its solid balance sheet and consistent cash flow generation has enabled reinvestment in business which will drive long term growth.
Also, prudent capital management through dividend payments and share buybacks is another positive. However, slowdown of growth in international operations and underperformance in Medicaid business are concerns. An increase in leverage and interest burden raises financial risk.
Costco’s shares have outperformed the Zacks Discount Retail industry over the past year, gaining +27.6% versus the industry's +23.3% increase. The Zacks analyst thinks Costco continues to be a dominant retail wholesalers based on the breadth and quality of merchandise offered. The stock has been gaining from sturdy comps and decent results.
The company posted positive earnings surprise in the third quarter of fiscal 2019 but revenues fell short of expectations. Notably, the top and the bottom line continued to rise year over year. Certainly, Costco seems somewhat unfazed by the tough retail scenario. Growth strategies, increase in membership fees and sturdy e-commerce sales bode well.
The company’s efforts have been driving traffic across online and brick-and-mortar platforms. However, any incremental investments or aggressive pricing strategy may hurt margins. Moreover, rising SG&A expenses and stiff competition also pose concerns.
Other noteworthy reports we are featuring today include Uber (UBER), Public Storage (PSA) and Microchip Technology (MCHP).
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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>>>