Today's Must Read
Starbucks' (SBUX) Strong Global Footprint to Drive Growth
Midstream Business Aids Phillips 66 (PSX), Refining Hurts
Wednesday, October 2, 2019
The Zacks Research Daily presents the best research output of our analyst team. Today's Research Daily features new research reports on 12 major stocks, including AbbVie (ABBV), Starbucks (SBUX) and Phillips 66 (PSX). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
AbbVie’s shares have outperformed the Zacks Large-Cap Pharmaceuticals industry in the past three months (2% vs. -3.7%). The Zacks analyst believes that AbbVie’s key drug, Humira, is performing well on strong demand despite competition.
Imbruvica has multibillion-dollar potential. AbbVie has been successful in expanding approvals for its cancer drugs, Imbruvica and Venclexta. Moreover, the company has an impressive late-stage pipeline comprising products with multibillion-dollar potential, expected to be launched in the near term. Meanwhile, the acquisition of Allergan, if successful, should diversify AbbVie’s revenue base and accelerate its non-Humira business.
However, AbbVie’s shares have underperformed the industry so far this year. 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 this year.
Shares of Starbucks have gained 37.3% year to date, outperforming the Zacks Food & Restaurants industry’s rise of 26.1%. The Zacks analyst believes that this momentum will continue as the company reported solid third-quarter fiscal 2019 earnings and also raised its full-year view.
Notably, earnings surpassed estimates in each of the trailing five quarters. Robust Americas and CAP comps bode well. The company now anticipates global comps growth of nearly 4%. Non-GAAP EPS is expected to be $2.80-$2.82, up from $2.75-$2.79 guided previously. Meanwhile, Starbucks' business is rapidly growing in China, courtesy of innovative store designs and the success of the MSR program.
Also, operating fundamentals such as solid global footprint, successful innovation, best-in-class loyalty program and digital offerings are encouraging. However, operating margin contraction over the past few quarters has been a concern.
Phillips 66’s shares have gained 8.3% in the past six months, outperforming the Zacks Oil Refining and Marketing industry’s rise of 1.9%. The Zacks analyst believes that Phillips 66 is well positioned to gain from rising demand for midstream assets in the United States, where takeaway capacity constraint is a potent problem.
Precisely, with its oil and gas pipeline network spreading across 21,000 miles, the company is an industry leader in the midstream business. Moreover, Phillips 66 is committed toward returning cash to stockholders through dividend payments and share repurchases. Notably, since inception, the firm has returned more than $24 billion to shareholders.
However, a declining crude utilization rate has hurt refining operations. Also, uncertainties in the global market, owing to more than a year-long trade dispute between the United States and China, are likely to hurt demand for petrochemicals and refined petroleum products, affecting the firm’s chemical and refining businesses.
Other noteworthy reports we are featuring today include Anheuser-Busch InBev (BUD), Electronic Arts (EA) and Square (SQ).
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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>>>