Today's Must Read
BP plc (BP) Banks on Upstream Projects Amid Oil Spill Woes
Freight Revenues Aid Canadian National (CNI) Amid Cost Woes
Thursday, August 1, 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 Apple (AAPL), BP plc (BP) and Canadian National (CNI). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Apple’s shares have outperformed the broader S&P 500 index on a year-to-date basis (+35% vs. +17.4%). Apple’s third-quarter fiscal 2019 results benefited from continued momentum in the Services segment and improved iPhone sales in China as well as other BRIC nations. Non-iPhone devices performed well, driven by strong demand for iPad and Macbook.
Wearables’ top-line growth was impressive, aided by strong demand for Apple Watch and AirPods. The Zacks analyst thinks the company has a strong slate of upcoming app releases, including its streaming service Apple TV+, which is a key catalyst.
Nevertheless, weakness in iPhone demand along with the uncertainties over the timeframe of the resolution of the U.S.-China trade war do not bode well for the company. Further, antitrust investigations, App Store-related lawsuits and Spotify’s complaint increase legal woes.
Shares of BP have outperformed the Zacks International Integrated Oil industry over the past year (-9.3% vs. -10.3%). The Zacks analyst thinks BP has been gaining from a strong portfolio of upstream projects. Since 2016, BP has placed 22 key upstream developments online, which will help the British energy giant boost production by 900 thousand barrels of oil equivalent per day (MBOE/D) by 2021.
Notably, production from these projects and higher refining marker margin primarily contributed to the company’s better-than-expected earnings in second-quarter 2019. Moreover, the company has a strong commitment to returning cash to shareholders. However, the 2010 oil spill incident in the BP-operated Macondo Prospect is still affecting the firm.
Although BP has cleared the huge litigation expenses related to the spill, it had to divest some of its best operating properties. Also, the integrated energy firm’s balance sheet is more levered than the industry it belongs to.
(You can read the full research report on BP here >>>).
Canadian National’s shares have gained +6.4% over the past year, underperforming the Zacks Rail industry which gained +11.4% over the same period. Canadian National reported better than expected earnings in the second quarter of 2019. Moreover, the bottom line showed a double-digit improvement on a year-over-year basis. The top line also improved year over year.
The TransX buyout and higher freight rates are major factors which aided results. Freight revenues accounting for majority of the top line increased 10% year over year. The Zacks analyst thinks that with this strong freight demand anticipated to continue, the company's adjusted earnings per share projection for 2019 is encouraging. However, lower volumes at Canadian National's forest products segment is a concern.
In fact, the company believes that B.C. mill closures and production curtailments might dampen the segment’s volumes through the rest of 2019. The company's high operating expenses and debt levels add to its woes and may affect results going forward.
Other noteworthy reports we are featuring today include Allstate Corp. (ALL), Advanced Micro Devices (AMD) and Sirius XM (SIRI).
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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>>>