Today's Must Read
Pricing Aids Phillip Morris (PM) Amid Low Cigarette Volumes
Steady Demand Buoys American Tower (AMT), Debt Woes Linger
Wednesday, February 12, 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 Merck (MRK), Philip Morris International (PM) and American Tower (AMT). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Merck’s shares have underperformed the Zacks Large-Cap Pharmaceuticals industry over the past year (+7.9% vs. +13.3%). The Zacks analyst believes that drugs like Keytruda, Lynparza and Bridion have been driving sales. Keytruda sales are gaining from continued uptake in lung cancer and increasing usage in other cancer indications.
Keytruda has strong growth prospects based on increased utilization, recent approvals for new indications and potential additional approvals worldwide. Animal health and vaccine products remain core growth drivers.
The potential separation into two companies makes strategic sense as the remaining Merck should be able to achieve higher profits than the combined company. However, generic competition for several drugs and rising competitive pressure, mainly on the diabetes franchise will continue to be overhangs on the top line.
Shares of Philip Morris have gained +6.5% in the past six months against the Zacks Tobacco industry's rise of +7.8%. The Zacks analyst believes that the company continues to battle receding cigarette volumes due to stringent regulations and rising health consciousness.
Notably, strong pricing aided the company’s revenues and adjusted operating income in the fourth quarter of 2019. Results were also aided by cost-efficiencies and gains from RRPs, which, in turn, is benefiting from broad-based IQOS growth.
During the quarter, the top line grew and topped the consensus mark. Management expects pricing to be a driver in 2020, and remains focused on its RRP investments. Cigarette volumes are likely to drop in 2020, wherein international industry volumes are also expected to decline due to hurdles in Indonesia among other factors.
American Tower’s shares have gained +20.9% over the past three months against the Zacks REIT and Equity Trust industry's rise of +8.6%. The Zacks analyst believes that the trend in estimate revisions of 2020 funds from operations (FFO) per share indicates a favorable outlook for the company.
Notably, the company is enhancing its macro-tower portfolio and focusing on innovation to capture the underlying opportunities. Further, rise in mobile-data usage and higher investments in 4G, as well as 5G technology is spurring demand for its telecom towers.
This will likely drive the company’s leasing activity and organic tenant billings growth in the upcoming period. In addition, its attempt to increase shareholder value through dividend hikes boost investors’ confidence in the stock. Yet, the company has a substantially-leveraged balance sheet. Such high-debt levels might impede cash-flow growth.
Other noteworthy reports we are featuring today include T-Mobile US (TMUS), Allergan (AGN) and Advanced Micro Devices (AMD).
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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>>>