Today's Must Read
New Drugs Drive Merck's (MRK) Sales as Competition Soars
Robust Snacking Category to Drive PepsiCo's (PEP) Sales
Monday, September 2, 2019
The Zacks Research Daily presents the best research output of our analyst team. Today's Research Daily features updated research reports on 16 major stocks, including Amazon (AMZN), Merck (MRK) and PepsiCo (PEP). These research reports have been hand-picked from roughly 70 reports published by our analyst team today.
Amazon’s shares have outperformed the broader market year to date (the stock is up +18.3% vs. the +15.3% increase for the S&P 500 as a whole). The Zacks analyst thinks Amazon is riding on aggressive retail strategies, distribution strength and the robust Prime program. Rapid adoption of Prime driven by customer benefits and strengthening grocery services is aiding the top line. Further, expanding content portfolio is encouraging Prime membership. Further, strengthening AWS services and improving adoption rate are helping Amazon dominate the cloud space. Furthermore, improving Alexa skills and features remain major positives. Rising number of Alexa compatible devices is a tailwind. However, rising transportation cost related to its free one-day shipping service remains an overhang and is likely to increase further. Amazon also expects foreign exchange headwinds to persistently impact the top line.
Shares of Merck have increased +13.1% year to date, outperforming the Zacks Large Cap Pharmaceuticals industry’s decline of -1.4% during the same period. Merck beat estimates for earnings and sales in the second quarter. The Zacks analyst thinks Merck’s new products like Keytruda, Lynparza and Bridion are driving sales. 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 increased utilization, recent approvals for new indications and potential additional approvals worldwide. 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 on products like Isentress and Zepatier remains a concern.
PepsiCo’s shares have outperformed the Zacks Soft Drinks Beverages industry in the last six months (+17.7% vs. +11.3%). The Zacks analyst thinks this is largely attributable to its robust surprise trend. The company reported earnings and sales beat in second-quarter 2019, driven by strength in all segments. This marked its eighth sales beat in the last 10 quarters, with positive earnings surprise in 13 of the last 14 quarters. The company’s productivity savings goal of at least $1 billion annually through 2023 bodes well. Moreover, it is gaining from strength in snacking business, which has largely offset the softness in the beverage category. However, unfavorable impacts of ongoing investments to strengthen business, higher tax rate, and the absence of asset sale and refranchising gains that occurred in 2018 are likely to weigh on PepsiCo’s earnings in 2019. Further, adverse currency rates are likely to hurt the company’s sales and earnings in 2019.
Other noteworthy reports we featured today include American Airlines (AAL), Dollar Tree (DLTR) and Monster Beverage (MNST).
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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>>>