Today's Must Read
Chevron (CVX) to Gain from Massive Permian Acreage
IBM Benefits From Cloud, Security & Analytics Adoption
Thursday, February 6, 2020
The Zacks Research Daily presents the best research output of our analyst team. In addition to giving you a real-time update on the ongoing 2019 Q4 earnings season and evolving impact of the virus outbreak on estimates for the current period, we present here new research reports on 16 major stocks, including Exxon Mobil (XOM), Chevron (CVX) and International Business Machines (IBM). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Q4 Earnings Season Scorecard (as of February 6th, 2020)
Including all of this morning's reports, we now have Q4 earnings reports from 305 S&P 500 members or 61% of the index's total membership. Total earnings for these 305 index members are up +0.5% from the same period last year on +4.1% higher revenues, with 71.8% beating EPS estimates and 67.5% beating revenue estimates.
This is better performance than we have seen from this same group of companies in the recent past, even though earnings growth remains anemic and a lower proportion of companies are beating EPS estimates.
Looking at Q4 as a whole, combining the actual results that have come out with estimates for the still-to-come reports, total earnings are now expected to be up +0.5% on +4.2% higher revenues.
2020 Q1 Estimates Coming Down
Estimates for the current period (2020 Q1) have started coming down in a notable way over the last few days, with the Coronavirus impact a big driver for the estimate cuts. S&P 500 earnings in 2020 Q1 are now expected to be up +1.7%, sharply down from +3.4% last week.
Given the evolving nature of this headwind, it is reasonable to expect that 2020 Q1 estimates will come down further in the coming days.
For a complete look at the Q4 earnings season and expectations for the current and coming quarters, please check out our weekly Earnings Trends report here >>> Q4 Earnings Season Scorecard
Exxon Mobil shares have lagged the peer group lately, but the Zacks analyst likes the company for its bellwether status in the energy space and optimal integrated capital structure that has helped it come up with industry-leading returns.
The company owns some of the most prolific upstream assets globally, with a number of major projects slated to come online over the next few years. Notably, ExxonMobil has made 16 oil discoveries in offshore Guyana and estimates 750,000 barrels of oil production per day from the region by 2025.
However, the company’s downstream and chemical businesses significantly underperformed in 2019, resulting in lower-than-expected earnings. The units are unlikely to recover in the coming quarters owing to scheduled maintenance activities. As such, the stock warrants a cautious stance.
Like all energy stocks, Chevron shares have struggled lately, but they have nevertheless done better than the peer group as whole. Driving this outperformance is Chevron's status as one of the best-placed global integrated oil companies to achieve sustainable production ramp-up.
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 realized production growth of 154 MBOE/d in 2019 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.
IBM’s shares have gained +13.5% over the past three months against the S&P 500's rise of +8.1%. The Zacks analyst believes that IBM’s improving position in the hosted cloud, security and analytics aided revenue performance.
Moreover, RedHat acquisition has helped IBM to enhance containerized software capabilities. Robust adoption of security solutions, including Resilient and QRadar, bodes well. Growing clout of Watson Health and growth in Payer, Provider, Imaging and Life Sciences domains are noteworthy.
Further, gains from z15 and high demand for data privacy and resiliency solutions across hybrid cloud are positives. However, stiff competition in the cloud computing market and high debt level pose concerns. Also, IBM’s time-consuming business model transition to cloud is a headwind.
Other noteworthy reports we are featuring today include Gilead Sciences (GILD), Illinois Tool Works (ITW) and Edwards Lifesciences (EW).
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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>>>