Today's Must Read
Global Industrial Segment Aids Ecolab (ECL) Amid Forex Woes
Order Growth Aids General Dynamics (GD), Poor Cash Flow Ails
Wednesday, July 31, 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 Comcast (CMCSA), Ecolab (ECL) and General Dynamics (GD). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Comcast’s shares have underperformed the Zacks Cable Television industry in the past three months, gaining +1.5% vs. +2.9%. Comcast’s second-quarter 2019 results were driven by Cable’s solid performance. The segment benefited from expanding residential high-speed Internet customer base and business services user base.
Moreover, increase in wireless user base, and expansion in the security and automation services customer base drove results. Further, Theme Parks revenues grew significantly in the reported quarter. Although Sky’s top line declined, subscriber base expanded.
Meanwhile, Comcast continues to lose video subscribers due to cord-cutting. However, its focus to add subscribers aided profitability. This also prompted the company to increase Cable EBITDA margin guidance for 2019. Nevertheless, a high debt level remains a headwind.
Shares of Ecolab have gained +39.6% year-to-date, outperforming the Zacks Specialty Chemicals industry which has increased +22.4% over the same period. Ecolab ended the second quarter on a tepid note.
The Zacks analyst thinks the company continues to gain from its core Global Industrial and Global Institutional units. Strength in Pest Control and Colloidal technologies in the quarter drove its Other unit. Management is optimistic about the spin-off of its Upstream Energy business as a stand-alone publicly-traded company and acquisitions, which are likely to prove beneficial in the quarters to come.
Ecolab’s cost-efficiency initiative is expected to result in approximately $200 million of SG&A savings by 2021. Expansion in operating margin is encouraging as well. However, softness in the Global Energy arm raises concerns.
Quarterly EPS was impacted by unfavorable currency movement. In fact, management expects adverse foreign exchange impact to mar EPS in the quarters to come. A highly competitive market adds to its woes.
General Dynamics’s shares have gained +7.2% in the past three months, outperforming the Zacks Aerospace & Defense industry's increase of +2.7%. General Dynamics ended second-quarter 2019 on a solid note, with both earnings and revenues having surpassed their respective expectations.
The Zacks analyst thinks the company boasts a strong position in the U.S. defense space and overseas, and continues to witness strong order growth, securing pivotal contracts from the U.S. government and overseas clients. Deliveries of G600 can be expected from the third quarter. However, rising interest expenses can be a potential headwind for the company’s bottom-line growth going ahead.
Moreover, delayed payments related to one of its large international vehicle programs in Canada are hurting its cash flow reserves. A comparative analysis of its historical EV/EBITDA ratio depicts a gloomy picture.
Other noteworthy reports we are featuring today include American Electric Power (AEP), Illinois Tool Works (ITW) and O'Reilly Automotive (ORLY).
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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>>>