Today's Must Read
Emerging Markets Growth to Propel PepsiCo's (PEP) Revenues
Biogen (BIIB) Diversifies Beyond MS, Competition Lurks
Friday, October 4, 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 Verizon Communications (VZ), PepsiCo (PEP) and Biogen (BIIB). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Verizon’s shares have outperformed the Zacks Wireless National industry over the past year (7.4% vs. 5.3%). The Zacks analyst believes that Verizon has embarked on a new operating structure with Verizon 2.0 that aims to align the business model with evolving customer needs.
Focus on online content delivery, mobile video and online advertising will likely drive future growth. Verizon aims to cut costs through employee reduction and divestments as it ramps up investment in its next-generation 5G network, which is expected to be the next growth driver. The company has also upped the ante against rivals by launching the 5G Ultra Wideband network in select locations of the country.
However, it continues to struggle in a competitive U.S. wireless market. The company's wireline division is struggling with losses in access lines due to competitive pressure from VoIP service providers. Verizon is spending heavily on promotion and lucrative discounts to woo customers and this leads to margin contraction..
Shares of PepsiCo have gained 13.4% in the past six months, outperforming the Zacks Soft Drinks Beverages industry’s rise of 8% over the same period. The Zacks analyst believes that company’s productivity savings goal of at least $1 billion annually through 2023 bodes well.
The company’s earnings and sales beat in third-quarter 2019 was driven by strength in all segments and robust pricing. This marked its ninth sales beat in the last 11 quarters, with positive earnings surprise in 14 of the last 15 quarters. Moreover, PepsiCo now expects organic revenues for 2019 to meet or exceed 4% growth stated previously.
However, the unfavorable impact of ongoing investments to strengthen business, a higher tax rate, and the absence of asset sale and refranchising gains that occurred in 2018 are likely to hurt PepsiCo’s earnings in 2019. Adverse currency rates are also likely to hurt the company’s results in 2019.
Biogen’s shares have lost 5% in the past three months compared with the Zacks Biomedical and Genetics industry’s decline of 9.1%. The Zacks analyst likes Biogen’s efforts to diversify beyond MS to other areas like Alzheimer’s, Parkinson's and stroke. Meanwhile, Spinraza has multi-billion dollar potential.
Biogen regularly in-licenses assets to build its pipeline with several candidates that have transformative potential. Several data readouts are expected in 2019/2020 with multiple potential launches in the early 2020s. However, Biogen is heavily reliant on sales of its drugs for MS, which is a highly competitive disease space. Potential competition to Spinraza from competitors’ gene therapy programs for SMA is a concern.
Though Biogen’s CNS pipeline is attractive, it is a high-risk area. The stock has underperformed the industry this year. Estimates have remained stable ahead of Q2 earnings. Biogen has a positive record of earnings surprises in the recent quarters.
Other noteworthy reports we are featuring today include Stryker (SYK), The Bank of New York - Mellon (BK) and Cerner (CERN).
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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>>>