Today's Must Read
Decent Comparable Sales Run to Fuel Costco's (COST) Top Line
Core MedSurg Unit Aids Stryker (SYK), Pricing Pressure Ails
Thursday, February 20, 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 NVIDIA (NVDA), Costco Wholesale (COST) and Stryker (SYK). We have also provided a real-time update on the ongoing Q4 earnings season. The research reports featured here have been hand-picked from the roughly 70 reports published by our analyst team today.
Q4 Earnings Season Scorecard
Including all of this morning's reports, we now have Q4 results from 432 S&P 500 members or 86.4% of the index's total membership. Total earnings for these companies are up +2.1% from the same period last year on +4.6% higher revenues, with 72% beating EPS estimates and 65.5% beating revenue estimates.
This is a better showing than we have seen from these companies in the first three quarters of 2019.
For more details about the Q4 earnings season and evolving expectations for the current period, please check our weekly Earnings Trends report here >>>Q1 Estimates Holding Up Despite Virus Impact
NVIDIA’s shares have outperformed the Zacks General Semiconductor industry over the past year (+102% vs. +47.8%). The Zacks analyst believes that the company is benefiting from strong growth in GeForce desktop and notebook GPUs, which is boosting gaming revenues. Moreover, an increase in Hyperscale demand was a tailwind for the Data Center business.
NVIDIA's fourth-quarter fiscal 2020 results reflected strength in Data Center and Gaming end markets. Further, the solid uptake of AI-based smart cockpit infotainment solutions is a boon. Additionally, strength across desktop workstation products is aiding Professional Visualization revenues.
However, in the near term, management expects a $100-million negative impact of the coronavirus menace on revenues. Moreover, the U.S.-China trade war remains a key concern. Also, lower demand for notebook workstations might be a near-term hindrance.
Shares of Costco have gained +17.1% in the past six months against the Zacks Discount Retail industry's rise of +16.6%. The Zacks analyst believes that that the company’s business model and commitment toward opening membership warehouses will continue to drive traffic.
The company’s growth strategies, better price management, sturdy comps performance and strong membership trends reinforce its position. Moreover, with the wave of digital transformation, Costco is rapidly adopting the omni-channel mantra to provide a seamless shopping experience, whether online or in-stores.
Such concerted efforts have been favoring comps, which remain one of the key factors behind incremental sales. Comps grew 6.6%, while sales improved 8% during month of January. However, any higher investments or aggressive pricing strategy may hurt margins. Moreover, rising SG&A expenses and stiff competition also pose concerns.
Stryker’s shares have gained +11.9% over the past three months against the Zacks Medical Products industry's rise of +5.7%. The Zacks analyst believes that Stryker continues to gain from its core MedSurg unit, which put up a strong show in the fourth quarter. Additionally, strength in flagship Mako platform continues to favor the company.
Stryker exited fourth-quarter 2019 on a strong note, wherein both earnings and revenues beat their respective consensus marks. Moreover, solid performance by the neurotech product lines drove the core Neurotechnology & Spine unit in the quarter under review. Robust international growth also instills investor optimism in the stock.
Expansion in operating margin is a positive while a strong outlook for 2020 is indicative of bright prospects. However, pricing pressure continues to plague Stryker. Stiff competition in the MedTech space remains a headwind.
Other noteworthy reports we are featuring today include Advanced Micro Devices (AMD), Mitsubishi UFJ Financial (MUFG) and CSX Corporation (CSX).
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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>>>