Today's Must Read
Mobile & Internet Subscriber Gain Benefits Charter (CHTR)
Global Presence Aid Eaton (ETN) Amid End Market Weakness
Thursday, April 2, 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 Eli Lilly (LLY), Charter Communications (CHTR) and Eaton (ETN). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today. We have also linked below the lattest Zacks Earnings Trends report, which gives you a real-time take on the overall corporate earnings landscape.
With the 2020 Q1 earnigs season coming up, the market's focus is expected to shift to the earnigns impact of the ongoing pandemic. To that end, it is important to keep in mind that earnings estimates have been coming down sharply over the last few weeks and all four quarters of 2020 are now expected to show year-over-year declines.
For 2020 Q1, total earnings or aggregate net income for the S&P 500 index are now expected to be down -6.6% from the same period last year. The brunt of estimate cuts has fallen on Q2 and Q3, which are now expected to experience double-digit earnings declines. But given the still unsettled public health aspect of these cuts, it is reasonable to expect estimates to go down further. For more details about the evolving earnings picture, please check out our weekly Earnings Trends report >>>> How Low Will Earnings Estimates Go?
Eli Lilly’s shares have held their own in the ongoing market downturn, outperforming not only the broader market but also the Zacks Large Cap Pharmaceuticals industry over the past six months (+24.8% vs. -1.1). The Zacks analyst believes that in 2020, Lilly’s revenue growth is likely to be driven by higher demand for newer drugs like 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 and coronavirus pandemic impact are some top-line headwinds expected in 2020. Estimates are stable ahead of Q1 results. Lilly has a positive record of earnings surprises in the recent quarters.
Shares of Charter Communications have gained +22% over the past year against the Zacks Cable TV industry’s fall of -11.1%. The Zacks analyst believes that the company is benefiting from growth in Internet, mobile, commercial and video revenues. Increase in Internet speed at no extra cost is also aiding subscriber growth.
Additionally, Charter’s spectrum mobile products are gaining traction and subscriber base is increasing rapidly. Launch of spectrum mobile services to small and medium business customers is a key catalyst. Improving free cash flow is a growth driver.
However, commercial revenues continued to suffer due to migration of customers to Spectrum pricing, and packaging from Legacy TWC and Legacy Bright House. Further, Charter persistently loses video subscribers, primarily due to cord-cutting and intense competition from streaming service providers like Netflix and Amazon.
Eaton’s shares have lost -23.4% over the past three months against the Zacks Electrical Machinery industry’s fall of -31.8%. The Zacks analyst believes that Eaton’s wide market reach, strategic acquisitions, spin-off of less profitable businesses are boosting operations.
The company’s ongoing R&D investments will help it upgrade products, and provide better electrical solutions to customers. Eaton’s divestment of the Lighting and Hydraulics business to focus on core operations is in sync with long-term growth objectives. Strong cash flow generation and product innovation are likely to drive its performance.
However, Eaton’s world-wide operations expose it to negative currency translation, cyber-attacks and security breaches, all of which might impact operations. Choppy end-market conditions have compelled the company to lower organic growth projection and trim earnings expectation.
Other noteworthy reports we are featuring today include Autodesk (ADSK), The Bank of New York Mellon (BK) and Cypress Semiconductor (CY).
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.
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>>>