Today's Must Read
Loan Growth Supports Wells Fargo (WFC), Legal Issues Linger
Chevron (CVX) to Gain from Stellar Permian Operation
Monday, December 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 Microsoft (MSFT), Wells Fargo (WFC) and Chevron (CVX). 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 (52.1% vs. 25.2%). 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 (TAM) and penetration.
Additionally, latest contract wins from the Department of Defense remain notable. However, projections of a moderating growth rate in commercial cloud gross margin, and OEM Pro and Windows commercial businesses is a headwind. Moreover, stiff competition from the likes of Google, Apple and Sony present issues.
Shares of Wells Fargo have gained +10.3% in the past three months against the Zacks Major Regional Banks industry’s rise of +13%. The Zacks analyst believes that strategic acquisitions along with rising loans and deposit balances are impressive. Also, recent Fed's move on interest rate is likely to aid net interest margin (NIM).
The company’s earnings surprise history remains impressive, having surpassed the Zacks Consensus Estimate in three of the trailing four quarters. Though its investment in the businesses to enhance compliance and risk-management capability seems impressive, Wells Fargo has been slapped with several sanctions, which continues on the CFPB's dissatisfaction with the bank’s progress on fixing risk-management issues.
Also, rising costs curb bottom-line expansion. Recently, Wells Fargo appointed Charles W. Scharf as its second CEO post-public and political outrage concerning the sales scam in 2016.
Chevron's shares have lost -2.8% over the past six months against the Zacks Integrated Oil industry's decline of -7.6%. The Zacks analyst believes that the company’s existing project pipeline is among the best in the industry, targeting volume growth of around 4-7% in 2019 thanks to planned expansion in the Permian Basin.
hevron’s well economics in the Permian also continues to improve as the company has been able to achieve a 40% reduction in its development and production costs since 2015. However, the continued drop in Chevron's downstream segment earnings (partly attributable to a fall in domestic refined products sales margins) is a concern.
Moreover, the supermajor’s massive $10-$11 billion impairment charge is expected to increase its gearing. Hence, investors are advised to wait for a better entry
Other noteworthy reports we are featuring today include American Express (AXP), Novo Nordisk (NVO) and QUALCOMM (QCOM).
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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>>>