Today's Must Read
Cost Cuts Boost Union Pacific (UNP) Amid Freight Weakness
Cost-Reduction Efforts Support CSX's Growth Prospects
Wednesday, September 18, 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 AbbVie (ABBV), Union Pacific (UNP) and CSX (CSX). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
AbbVie’s shares have underperformed the Zacks Large-Cap Pharmaceuticals industry over the past three months (-7.8% vs. -5.5%). The Zacks analyst thinks that AbbVie’s key drug, Humira, is performing well based on strong demand trends despite new competition. Imbruvica has multibillion-dollar potential.
AbbVie has been successful in expanding approvals for its cancer drugs, Imbruvica and Venclexta. Moreover, AbbVie has an impressive late-stage pipeline, comprising several products with multibillion-dollar potential that are expected to be launched in the near term. The acquisition of Allergan, if successful, should diversify AbbVie’s revenue base and accelerate its non-Humira business.
Sales erosion due to direct biosimilar competition to Humira in international markets is a big headwind in 2019. Also, costs to support expected new product/line extension launches should hurt profits in 2019.
Shares of Union Pacific have gained 3.9% in the past six months, outperforming the Zacks Rail industry’s rise of 3.5%. The Zacks analyst is impressed with Union Pacific's initiatives to reward its shareholders. Since November 2017, the company has raised its quarterly dividend payout five times.
It is also active on the buyback front. Initiatives to control costs in a bid to drive the bottom line are also impressive. The company’s operating ratio has been improving mainly due to its cost-cut plans. The metric is expected to improve further going forward. However, sluggish freight volumes (down 3% in first-half 2019) represent a major headwind.
Anticipating the dull scenario to persist, Union Pacific trimmed its volume growth outlook for the second half of the year. Its high debt levels are an added concern. In addition, the massive capex might play spoilsport.
CSX’s shares have gained 14.6% year to date, underperforming the Zacks Rail industry’s rise of 21.2% over the same period. The Zacks analyst believes that this was primarily due to sluggish intermodal revenues.
Dismal performance of the intermodal segment is affecting the company's growth prospects. Segmental revenues declined in the first half of 2019 due to lower volumes. In fact, this coupled with factors like weak domestic coal demand and sluggish crude-by-rail volumes forced the company to trim its current-year top-line forecast.
However, we are impressed by the company's efforts to control costs. CSX's operating ratio has improved in the first half of the year, courtesy of its cost-reduction efforts. The company's initiatives to reward its shareholders are encouraging as well. During the first half of 2019, the company returned $2 billion to shareholders through a combination of dividends and share buybacks.
Other noteworthy reports we are featuring today include PetroChina (PTR), Danaher (DHR) and ONEOK (OKE).
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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>>>