Today's Must Read
Robust Content Aids Netflix (NFLX) Amid Stiff Competition
Investment in Infrastructure and Renewable Aid NextEra (NEE)
Thursday, January 23, 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 Chevron (CVX), Netflix (NFLX) and NextEra Energy (NEE). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
We have also provided you a real-time update on the ongoing Q4 earnings season, which takes into account this morning's releases.
Q4 Earnings Season Scorecard
Including all of this morning's results, we now have Q4 results from 75 S&P 500 members that combined account for 19.4% of the index's total market capitalization.Total earnings or aggregate net income for these 75 index members are down -1.3% from the same period last year on +3.2% higher revenues, with 69.3% beating EPS estimates and 72% beating revenue estimates.
The earnings and revenue growth is about in-line with what we had seen from this group of companies in the first three quarters of 2019. But a bigger proportion of companies are beating revenue estimates, while EPS beats are tracking below what we had seen for this group of index members in the first three quarters of the year.
Looking at Q4 as a whole, combining the actual results that have come out with estimates for the still-to-come companies, total earnings are expected to be down -3% on +3.7% higher revenues.
Today's Featured Analyst Reports
Chevron’s shares have outperformed the Zacks Integrated Oil industry over the past year (-0.6% vs. -6.7%), with the Zacks analyst crediting the oil super major's best-in-class production-growth profile for the outperformance. These are undoubtedly tough times in the oil patch, but Chevron's impressive history of uninterrupted dividend payments should be long-term investors' minds (currently yields a juicy 4.75%)
America’s No. 2 energy company’s existing project pipeline is among the best in the industry, thanks to planned expansion in the lucrative Permian Basin. Chevron’s substantial Permian holdings of 2.2 million net acres have already realized production growth of 71% in 2018 with Chevron targeting output of 900,000 barrels per day in 2023.
Chevron’s well economics in the play also continues to improve as it has been able to achieve a 40% reduction in its expenses since 2015. Consequently, Chevron is viewed a preferred energy major to own now.
Netflix shares have struggled lately, with the stock lagging the broader market since July 2019, on concerns that the going will increasingly be tougher going forward as a result of increasing competitive pressures, particularly in the home market. The market appeared unimpressed with Tuesday's December-quarter results that showed strong overall subscriber additions but weakness on the home turf.
Netflix’s fourth-quarter 2019 subscriber addition rate declined in the United States, primarily due to price hike and stiff competition. However, in international streaming markets, Netflix’s subscriber growth continued unabated, driven by a solid content portfolio.
However, management expects net additions in the paid subscriber base to decline in first-quarter 2020. Moreover, high streaming content obligation and increased spending are expected to hurt free cash flow generation. Nevertheless, a solid content portfolio and expanding bundle offerings through partnerships with telcos bode well for Netflix.
NextEra Energy’s shares have gained +9.4% over the past three months against the Zacks Electric Power industry's rise of +4.5%. The Zacks analyst believes that NextEra Energy is gaining from ongoing investments, which are in turn aiding it to deliver strong segmental performance.
NextEra’s “30 by 30” plan will help meet its goal to make its generation portfolio cleaner. The $50 to $55 billion investment in different projects over the 2019-2022 period will modernize and strengthen its infrastructure. The company will also gain from positive economic fundamentals in its service territories.
However, its nature of business is subject to complex and comprehensive federal, state and other regulations. That said, if planned nuclear plant outages last longer or there is an unplanned outage, the company’s normal operations and profitability might be hindered.
Other noteworthy reports we are featuring today include International Business Machines (IBM), Cigna (CI) and HCA Healthcare (HCA).
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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>>>