Today's Must Read
New Drugs to Drive Lilly's (LLY) Revenues in 2020
Dividends & Buybacks Boost UPS, High Capex Remains a Woe
Wednesday, February 5, 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 Netflix (NFLX), Eli Lilly (LLY) and United Parcel Service (UPS). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Netflix’s shares have underperformed the Zacks Broadcast Radio and Television industry over the past year (+4.8% vs. +7.8%). The Zacks analyst believes that 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. Moreover, the launch of low-priced mobile plans in India, Indonesia and Malaysia is expected to expand the subscriber base in the Asia Pacific. 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.
Shares of Eli Lilly have gained +28.8% in the past six months against the Zacks Large Cap Pharmaceuticals industry's rise of +15.1%. The Zacks analyst believes that in 2020, Lilly’s revenue growth is expected to be driven by higher demand for newer drugs including Trulicity, Jardiance, Taltz, Verzenio, Basaglar, Emgality as well as newly launched Baqsimi and Reyvow.
Lilly is making significant pipeline progress with several positive late-stage data readouts scheduled for 2020. Lilly is also regularly adding promising new pipeline assets through business development deals.
However, generic competition for several drugs including the expected generic entry of Forteo, rising pricing pressure in the United States and price cuts in some international markets are some top-line headwinds expected in 2020.
United Parcel Service’s shares have lost -15.2% over the past three months against the Zacks Transportation - Air Freight and Cargo industry's fall of -13.4%. The Zacks analyst believes that UPS' fourth-quarter 2019 performance was boosted by volume growth in the U.S. Domestic segment, its main revenue-generating unit.
Notably, segmental revenues increased 6.6% in 2019. E-commerce growth is a huge positive for UPS. We are also impressed by the company's efforts to reward its shareholders through dividends ($3.3 billion in 2019) and buybacks ($1 billion). However, UPS' high capital expenditures might play spoilsport.
Notably, 2020 capex is expected to be higher than 2019 levels. The same is expected to dent 2020 earnings per share by roughly 33 cents. The company's high debts add to its woes.
Other noteworthy reports we are featuring today include Microsoft (MSFT), Disney (DIS) and NIKE (NKE).
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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>>>