Today's Must Read
Operational Efficiency Aid BHP Group (BHP), Low Prices Ail
Buyouts Diversify Moody's (MCO) Revenues Amid Rising Costs
Thursday, January 16, 2020
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 Johnson & Johnson (JNJ), BHP Group (BHP) and Moody's (MCO). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
We have also included the real-time scorecard on the ongoing Q4 earnings season. Including all of this morning's reports, we now have Q4 results from 35 S&P 500 members. Total earnings for these 35 index members are down -4.2% from the same period last year on +4.1% higher revenues, with 74.3% beating EPS estimates and an equal proportion beating revenue estimates.
For the Finance sector, we now have results from 37.1% of the sector's total market cap in the S&P 500 index. Total earnings for these Finance companies are down -0.3% from the same period last year on +6% higher revenues, with 66.7% beating EPS estimates and 83.3% beating revenue estimates. This is a modestly better growth pace relative to what we saw from this group of Finance companies in the preceding quarter, but fewer companies are beating EPS estimates.
For a more detailed look at the Q4 earnings season and expectations for the coming quarters, please check out our weekly Trends report >>>Banks Provide Mixed Start to Q4 Earnings Season
Johnson & Johnson’s shares have modestly underperformed the Zacks Large Cap Pharmaceuticals industry over the past year (+14.1% vs. +14.8%), likely reflecting a combination of litigation overhang and generic/biosimilar headwinds in the Pharma unit.
However, the unit is performing above-market levels, supported by contribution from new drugs like Tremfya and successful label expansion of cancer drugs like Imbruvica and Darzalex and immunology drug, Stelara. J&J is also making rapid progress with its pipeline/line extensions. However, headwinds like biosimilar/generic competition and pricing pressure remain.
Moreover, J&J faces numerous lawsuits, which allege personal injuries to patients caused by the use of its products. These are overhangs on the stock. Estimates have risen slightly ahead of Q4 results. J&J has a positive record of earnings surprises in the recent quarters.
Shares of BHP have gained +16.2% in the past three months against the Zacks Mining - Miscellaneous industry's rise of +19.1%. The Zacks analyst believes that trade volatility and slowdown in global growth have made investors apprehensive and affected commodity markets, which will weigh on BHP Group’s results.
BHP Group anticipates unit costs to be higher in fiscal 2020 thanks to natural field decline at conventional petroleum, falling copper grades, lower by-product credits and higher deferred stripping costs at Escondida.
With iron ore supply from Australia expected to hit record highs, iron ore prices will be under pressure. However, metal prices will recover eventually driven by demand-supply imbalance.
Thus, BHP Group is poised to gain from its investment plans in petroleum, copper, iron ore and potash. Further, the company’s efforts to make operations efficient by adopting smarter technology across its value chain will also drive results. Strong cash flow and lower debt also bode well.
Moody's shares have gained +25.8% over the past six months against the Zacks Financial Services industry's decline of -4.6%. The Zacks analyst believes that the company remains well-positioned on the back of its dominant position in the credit rating industry.
Also, the company has an impressive earnings surprise history, having surpassed the Zacks Consensus Estimate in three of the trailing four quarters. Moreover, the earnings estimates have been going up ahead of its fourth quarter 2019 results.
Also, its diverse revenue base, strategic inorganic initiatives and strong balance sheet position bode well for future. However, volatility in macro environment and slowdown in global bond issuance volumes along with mounting expenses mainly owing to investments in franchise are expected to hurt profitability. Also, the divestiture of the Analytics Knowledge Services business is expected to be dilutive to 2019 GAAP earnings.
Other noteworthy reports we are featuring today include NVIDIA (NVDA), Vale S.A. (VALE) and Delta Air Lines (DAL).
Free: Zacks’ Single Best Stock Set to Double
Today you are invited to download our latest Special Report that reveals 5 stocks with the most potential to gain +100% or more in 2020. From those 5, Zacks Director of Research, Sheraz Mian hand-picks one to have the most explosive upside of all.
This pioneering tech ticker had soared to all-time highs and then subsided to a price that is irresistible. Now a pending acquisition could super-charge the company’s drive past competitors in the development of true Artificial Intelligence. The earlier you get in to this stock, the greater your potential gain.
Director of Research
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>>>