Today's Must Read
Wireless Products & Acquisitions to Drive Broadcom (AVGO)
E-Commerce Growth, Dividends & Buybacks Aid UPS, Costs Ail
Wednesday, December 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 TOTAL (TOT), Broadcom (AVGO) and United Parcel Service (UPS). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
TOTAL’s shares have outperformed the Zacks Integrated International Oil industry year to date (-0.7% vs. -5.2%). The Zacks analyst believes that TOTAL continues to benefit from strong contribution from startups and the expanding upstream portfolio that has above industry-average exposure to the faster-growing hydrocarbon producing regions of the world.
Strategic acquisitions and divestment of assets that are not in sync with its long-term objectives are going to boost performance and further strengthen the company’s cash flow generation capability. Cost-saving initiatives are also aiding it to boost margins.
However, TOTAL's operations in some politically-troubled regions and increasing competition might affect profitability. Due to its global presence, it is exposed to risks associated with pursuing business abroad.
Shares of Broadcom have gained 5.3% in the past three months against the Zacks Electronics - Semiconductors industry’s rise of 9.6%. The Zacks analyst believes that Broadcom is benefiting from strong demand of its wireless solutions and expanding product portfolio, which makes it well-positioned to address the needs of rapidly growing technologies like IoT and 5G.
Further, strong ties with leading OEMs across multiple target markets are expected to help the company to gain key insights into the requirements of customers. Moreover, the company intends to strengthen presence in the infrastructure software vertical particularly.
In this regard, acquisition of CA and Symantec’s Enterprise Security Business remain extremely significant. Nonetheless, the company faces intensifying competition and integration risks due to frequent acquisitions. The company’s leveraged balance sheet and customer concentration are concerns.
United Parcel Service's shares have gained 19.1% over the past six months against the Zacks Transportation - Air Freight and Cargo industry's rise of 10.8%. The Zacks analyst is appreciative of UPS' efforts to reward its shareholders through dividends and buybacks.
In 2018, UPS rewarded its shareholders with $4.2 billion. Sustaining its pro-investor approach, it has returned more than $2.5 billion in the first nine months of 2019. Additionally, UPS increased its quarterly dividend by 5.5% in February to 96 cents per share. Strong free cash flow generation ($3.2 billion in the first nine months) by the company supports the possibility of a dividend hike going forward. E-commerce growth is an added positive for UPS.
Owing to these tailwinds, shares of the company have outperformed its industry in a year. However, UPS' high capital expenditures are worrisome. Additionally, trade-related uncertainty with China impedes its growth potential. The company's high debt-equity ratio is an added headwind.
Other noteworthy reports we are featuring today include Deere (DE), Norfolk Southern (NSC) and HP (HPQ).
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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>>>