Today's Must Read
J&J (JNJ) Facing Generic Woes in 2019, Recovery Likely in 2020
Solid Automotive Business Aids NVIDIA (NVDA), Datacenter Ails
Monday, August 19, 2019
The Zacks Research Daily presents the best research output of our analyst team. Today's Research Daily features updated research reports on 12 major stocks, including Berkshire Hathaway (BRK.B), Johnson & Johnson (JNJ) and NVIDIA (NVDA). These research reports have been hand-picked from roughly 70 reports published by our analyst team today.
Berkshire Hathaway’s shares have underperformed the Zacks Insurance - Property and Casualty industry in the past year (-4.2% vs. -2.9%). Berkshire Hathaway’s earnings per share of $2.50 decreased 10.9% year over year, due to weak insurance business results. However, the quarter witnessed better revenues and pre-tax income.
The Zacks analyst thinks the company’s inorganic growth story remains impressive with strategic acquisitions. A strong cash position supports earnings-accretive bolt-on buyouts. Demand for utilities is expected to drive earnings growth. Continued insurance business growth also fuels increase in float. Its non-insurance businesses are delivering improved results.
A sturdy capital level provides further impetus. However, its exposure to catastrophe loss remains a concern as its property and casualty insurance business generates maximum return on equity. Huge capital expenses due to railroad operations are a cause for concern.
Shares of Johnson & Johnson have outperformed the Zacks Large Cap Pharmaceuticals industry so far this year (+1.8% vs. -2.4%). The Zacks analyst thinks J&J is witnessing significant generic/biosimilar headwinds in the Pharma unit in 2019. However, J&J’s sales and earnings growth is expected to accelerate in 202,0 supported by contribution from new drugs like Tremfya and successful label expansion of cancer drugs like Imbruvica and Darzalex and immunology drug, Stelara.
J&J is also making rapid progress with its pipeline and line extensions. It has already gained FDA approval for two new drugs in 2019, Balversa and Spravato. Meanwhile, share buybacks and restructuring initiatives should provide bottom-line support.
Headwinds like biosimilar/generic competition and pricing pressure remain. The talc and opioid litigations are overhangs on the stock.
NVIDIA’s shares have underperformed the Zacks General Semiconductor industry over the past year (down -35.6% vs. -8.4%). NVIDIA delivered solid second-quarter fiscal 2020 wherein both earnings and revenues topped estimates and improved sequentially as well.
The Zacks analyst thinks better-than-expected results can be attributed to strength in the automotive, gaming plus OEM and IP end-markets. Also, increasing deal wins for autonomous vehicle development and the solid uptake of AI-based smart cockpit infotainment solutions are a tailwind. Moreover, the rising traction of GeForce laptops and RTX GPUs in the market is a positive.
Further, the company’s recent acquisition of Mellanox is likely to be its main driver as it will fortify its datacenter footprint and lend a competitive edge. However, the current pause in spending by hyperscale customers persists as an overhang on its data center business. Growing competition from AMD also poses a threat to the company.
Other noteworthy reports we are featuring today include Charter Communications (CHTR), Booking Holdings (BKNG) and Fidelity (FIS).
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Note: Our Director of Research 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>>>