Today's Must Read
Cost Cuts Buoy Union Pacific (UNP) Amid Volume Woes
Pre-Salt Reserves Boosts Petrobras (PBR), Debt Pile Hurts
Tuesday, January 28, 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 Walt Disney Company (DIS), Union Pacific (UNP) and Petrobras (PBR). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Disney’s shares have underperformed the Zacks Media Conglomerates industry over the past year (+22.5% vs. +29.3%). The Zacks analyst believes that Disney will benefit from its solid slate of theatrical releases in fiscal 2020.
The upcoming movies, including Mulan, Free Guy and Black Widow, are anticipated to aid the Studio Entertainment top line. The success of Frozen 2 (global box office collection of more than $1 billion) and Star Wars: The Rise of Skywalker is positive for the company’s first-quarter fiscal 2020 results. Moreover, growing popularity of Disney+ is a key catalyst.
However, the company anticipates higher operating losses in the DTC & International segment due to the ongoing investments. Moreover, increasing operating expenses related to domestic parks and resorts are expected to negatively impact profitability.
Shares of Union Pacific have gained +0.5% in the past six months against the Zacks Rail industry's rise of +3.4%. The Zacks analyst is impressed with Union Pacific's initiatives to reward its shareholders. Since November 2017, the company has raised its quarterly dividend payout five times.
It is also active on the buyback front. Initiatives to control costs in order to drive the bottom line are also impressive. The company’s operating ratio, which improved 210 basis points (bps) year over year to 60.6% in 2019, has been benefiting mainly owing to its cost-cutting initiatives. Operating ratio is anticipated to improve further in the days to come.
However, sluggish overall volumes (down 11% in fourth-quarter 2019) due to freight-related weakness are a major headwind. Its escalated debt levels are concerning too. Also, the massive capex might be a spoilsport.
Petrobras’ shares have lost -11.4% over the past three months against the Zacks Emerging Markets Integrated Oil industry's decline of -5.8%. The Zacks analyst believes that the medium- to long-term outlook of Petrobras looks very positive thanks to its encouraging portfolio of investments, particularly in Brazil’s pre-salt reservoirs.
Petrobras, burdened with huge debt load, has laid strong emphasis on its debt reduction in its recent five-year Business Management Plan (2020-2024) to strengthen its credit rating. However, its involvement in the Operation Carwash scandal has been a major overhang for the company, which has turned it into the world's most-indebted oil company.
Petrobras carries a net debt of more than $75 billion. As such, leverage remains a key area of concern for the firm. Years of mismanagement & corruption have also taken their toll. Hence, the stock warrants a cautious stance.
Other noteworthy reports we are featuring today include PNC Financial Services (PNC), Air Products and Chemicals (APD) and Marriott International (MAR).
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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>>>