Today's Must Read
Strong Aerospace Business Drives United Technologies (UTX)
E-Commerce, Dividends & Buybacks Aid UPS, High Capex a Woe
Friday, July 26, 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 Facebook (FB), United Technologies (UTX) andUnited Parcel Service (UPS). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Facebook’s shares have gained +53.1% year to date, outperforming the S&P 500’s increase of +18.1% during the same period. Facebook reported strong second-quarter 2019 results, driven by continued user growth across all regions. Asia-Pacific remained its fastest growing region, driven by growth in India, Indonesia and the Philippines.
The company benefited from solid mobile ad revenues, owing to impressive growth in Instagram Stories and Feed, and Facebook News Feed. Interactive The Zacks analyst thinks stories ads on Instagram are likely to lead to better interaction among people, businesses and advertisers.
Moreover, strong sales of Oculus Quest and Rift S drove payment revenues. However, a persistent mix shift toward Stories is anticipated to hurt ARPU. Also, the company’s rising regulatory headwinds, including the antitrust investigations, are a concern.
Shares of Outperform-rated United Technologies have gained +18.5% in the past six months, outperforming the Zacks Diversified Operations industry, which has increased +16.3% over the same period. United Technologies’ second-quarter 2019 earnings and revenues surpassed expectations by 7.8% and 0.9%, respectively.
The Zacks analyst thinks strength in commercial aftermarket and military businesses coupled with high defense spending in the United States is likely to boost revenues of the company’s aerospace business. Also, favorable mix in Otis new equipment orders is likely to be a tailwind for the commercial business.
For 2019, United Technologies has revised its earnings view upward to $7.90-$8.05 per share from the prior guidance of $7.80-$8.00. Notably, the company’s cost cutting and operational excellence initiatives are likely to boost its profitability. Further, the Rockwell Collins buyout is likely to boost sales in 2019.
United Parcel Service’s shares have outperformed the Zacks Transportation - Air Freight and Cargo industry year to date, gaining +21.2% vs. +16.8%. UPS reported better-than-expected earnings and revenues in second-quarter 2019. Both metrics also improved year over. Results were aided by an uptick in demand related to domestic shipments from e-commerce shippers.
The Zacks analyst thinks e-commerce growth is a huge positive for UPS, which expects cross-border e-commerce volume to grow by 28% during the 2019-2021 periods. The company’s efforts to reward its investors through dividends and buybacks are also impressive.
However, UPS' high capital expenditures are worrisome and might hamper bottom-line growth going forward. Trade tensions with China also poses a threat to UPS' growth. The company's high debt-equity ratio is another concern.
Other noteworthy reports we are featuring today include Raytheon (RTN), Amphenol (APH) and Rogers Communications (RCI).
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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>>>