Today's Must Read
Royal Dutch Shell (RDS.A) to Gain from Growing LNG Demand
Adoption of Cloud, Security & Analytics Solutions Aids IBM
Wednesday, October 9, 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 Microsoft (MSFT), Royal Dutch Shell (RDS.A) and IBM (IBM). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Microsoft’s shares have outperformed the S&P 500 year to date (33.6% vs. 15.3%). The Zacks analyst believes that Microsoft is benefiting from growing user base of its different applications like Office 365 commercial, Dynamics, Outlook mobile and Teams.
Moreover, Azure’s expanding customer base is a key catalyst. Microsoft’s gaming segment is performing well, primarily driven by a combination of Xbox Live, Game Pass subscriptions and Mixer, which are driving user engagement. Further, acquisitions like PlayFab and GitHub expand Microsoft’s total addressable market and penetration. Additionally, an expanding partner base is notable.
However, projections of a moderating growth rate in commercial cloud gross margin, and OEM Pro and Windows commercial businesses is a headwind. Moreover, competition from the likes of Google, Apple, Sony and Nintendo is intense.
Shares of Royal Dutch Shell have lost 13.2% in the past six months, outperforming the Zacks International Integrated Oil industry’s fall of 16.7%. The Zacks analyst states that company’s cash flow continues to increase, allowing it to cut debt while covering the share buybacks and cash dividend.
As it is, the Anglo-Dutch company's position as a key supplier of liquefied natural gas should drive long-term cash flow growth on attractive opportunities. However, there are worries over a drop in its downstream segment earnings while the company’s poor reserve replacement ratio raises concerns about future production.
Shell's operations in violence-prone regions of Nigeria pose additional risk. Hence, investors are advised to wait for a better entry point.
IBM’s shares have lost 1.5% over the past three months compared with the S&P 500’s decline of 2.9%. The Zacks analyst believes that IBM is benefiting from operating efficiency, cost cutting and lower share count.
Moreover, the company’s improving position in the hosted cloud, security and analytics holds promise. The company is also witnessing growth in industry verticals like health as well as key areas of analytics and security. Solid adoption of Watson Health and broad-based growth in Payer, Provider, Imaging and Life Sciences domains, is also noteworthy.
The RedHat acquisition aimed at improving hybrid cloud platform is likely to enhance IBM's prospects. Notably, the company has a positive record of earnings surprises in recent quarters.
However, softness in cognitive solutions and technology & cloud platforms remains a concern. Competition for the Storage hardware segment is stiff. A highly leveraged balance sheet adds to the woes.
Other noteworthy reports we are featuring today include Exxon Mobil (XOM), Thermo Fisher Scientific (TMO) and American Tower (AMT).
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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>>>