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Research Daily

Wednesday, October 16, 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 Southern Company (SO), Applied Materials (AMAT) and Vertex Pharmaceuticals (VRTX). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.

You can see all of today’s research reports here >>>

Southern’s shares have outperformed the Zacks Electric Power industry year to date (38.2% vs. 18.3%). The Zacks analyst believes that leveraging the demographics of its operating territories, as in healthy population and job growth, the firm has gradually increased its customer base.

With good rate base growth and constructive regulation, Southern Company is expected to generate steady earnings and dividend growth in the coming years. However, elevated leverage of the firm, along with continued timing and cost overrun issues over its Vogtle project, are the major overhangs.

While the electric utility holding company’s debt-to-capital ratio of 56% restricts financial flexibility, its $25-billion Vogtle nuclear plant has already exceeded budget and is years behind schedule. As such, Southern Company warrants a cautious stance from its investors.

(You can read the full research report on Southern here >>>)

Shares of Applied Materials have gained 20.6% in the past six months compared with the Zacks Semiconductor Equipment - Wafer Fabrication industry’s rise of 27.6%. The Zacks analyst thinks that Applied Materials is benefiting from rising need for specialty nodes in IoT, communications, automotive, power and image sensor applications. This is leading to increased customer spending in foundry and logic.

Further, the company is witnessing solid momentum across the United States and Taiwan which is a major positive. Additionally, strengthening momentum in conductor etch is aiding Applied Materials in gaining traction in DRAM and NAND. The company remains optimistic about the price elasticity of NAND, which is expected to bolster NAND customer spending in the near term.

However, market uncertainties remain headwinds. Softness in semiconductor and display markets on account of a slowdown in memory and display customers’ spending is a major concern.

(You can read the full research report on Applied Materials here >>>)

Vertex’s shares have lost 0.6% over the past three months compared with the Zacks Biomedical and Genetics industry’s decline of 4.7%. The Zacks analyst believes that Vertex’s third cystic fibrosis (CF) medicine, Symdeko, in a very short time, has become the main driver of its CF revenues.

Vertex rapidly advanced its triple combination CF regimen through late-stage development and regulatory filings. The regimen is crucial for long-term growth as it has the potential to treat up to 90% of CF patients. Meanwhile, Vertex’s non-CF pipeline, though early stage, looks interesting with several pipeline readouts expected in 2020-21.

However, competitive pressure is rising in the CF market with many other companies developing triple combo CF drugs. Also, Vertex’s dependence on just the CF franchise for growth is a concern. Shares have outperformed the industry this year so far. Estimates have gone up slightly ahead of Q3 earnings. Vertex has a positive record of earnings surprises in the recent quarters.

(You can read the full research report on Vertex here >>>)

Other noteworthy reports we are featuring today include BHP Group (BHP), NVIDIA (NVDA) and Edwards Lifesciences (EW).

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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>>>

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