Today's Must Read
Focus on Pro Customers to Aid Home Depot's (HD) Top Line
Keytruda Powers Merck's (MRK) Long Term Growth Prospects
Monday, July 15, 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 Cisco (CSCO), Home Depot (HD) and Merck (MRK). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Cisco’s shares have gained +33.7% year to date, outperforming the Zacks Computer Networking industry's increase of +32.4%. The Zacks analyst thinks Cisco is benefiting from its expanding footprint in the rapidly growing security market. Strong contributions from security, infrastructure platforms and applications are a positive.
Order strength and improving traction of the subscription-based business model are other tailwinds. Strengthening collaboration portfolio which now includes Webex Teams and Accompany bodes well. Partnerships with Telenor, Apple, IBM, Microsoft and Google Cloud are notable.
The buyout of Duo Security and Luxtera should help the company expand its IT and data center clientele. However, weakness in switching and routing is a headwind. Arista’s intention of manufacturing switches that connect campus networks is likely to hurt Cisco as it holds a dominant position in that market.
Shares of Home Depot have gained +27% year to date, outperforming the Zacks Retail Building Products industry’s +22.8% 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 beats, with positive sales surprise in nine of the last 11 quarters.
Results gained from strength in 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.
Merck’s shares have increased +4.3% year to date, outperforming the Zacks Large Cap Pharmaceuticals industry’s decline of -1.6% during the same period. The Zacks analyst thinks Merck’s new products like Keytruda, Lynparza and Bridion are contributing meaningfully to its 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 recent approvals for new indications. 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) remains a concern. Estimates have gone up ahead of Q2 results. Merck has a positive record of earnings surprises in recent quarters.
Other noteworthy reports we are featuring today include Humana (HUM), Public Service Enterprise Group (PEG) and AstraZeneca (AZN).
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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>>>