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Research Daily

Tuesday, April 14, 2020

The Zacks Research Daily presents the best research output of our analyst team. Today's Research Daily features a real-time scorecard for the Q1 earnings season, which got underway today, and new research reports on 16 major stocks, including Apple (AAPL), Amazon (AMZN) and AstraZeneca (AZN). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.

You can see all of today’s research reports here >>>

Q1 Earnings Scorecard

JPMorgan (JPM) and Wells Fargo (WFC) kicked off the Q1 earnings season for the big banks, with market participants getting spooked by management's comments about credit quality and increasing defaults as households and businesses deal with the ongoing economic downturn. 

On the earnings front, JPMorgan's Q1 earnings were -68.8% below the year-earlier level on -3% lower revenues,with the banking leader booking a large reserve in anticipation of coming defaults. The market is justifiably concerned that if the best run and best positioned banking institution is in this state, then the picture is a lot more dire for many of the less capable operators that will be reporting in the next few days. 

Looking at 2020 Q1 as a whole, total S&P 500 earnings are now expected to be down -11.8% on +1.2% higher revenues, with the Finance sector now expected to suffer an -18.1% earnings decline

Estimates have been steadily coming down for 2020 Q2 and for the full year 2020. The index's June quarter bottom up earnnings are now expected to be down -19.7%, which is down from +3% in early February. For full-year 2020, S&P 500 earnings are now expected to be down -10.5%, which is down from +7.9% at the start of January. 

Apple’s shares have outperformed the S&P 500 over the past six months (+20.9% vs. -8%), with the Zacks analyst crediting steady momentum in the Services segment for this outperformance. This momentum is showing up in strong App Store sales and the robust adoption of Apple Music and Apple Pay.

The company recently launched new iPad and MacBook. Solid adoption of Apple Watch and AirPod are expected to drive its top line. However, it doesn’t expect to achieve its second-quarter revenue guidance due to supply chain disruption amid the coronavirus outbreak, which is expected to hurt iPhone sales.

This, in turn, will likely dent investor confidence in the near term. Moreover, the company’s intensifying legal woes due to antitrust investigations and App Store-related lawsuits raise a concern.

(You can read the full research report on Apple here >>>)

Shares of Amazon have gained +22.3% over the past year against the S&P 500’s fall of -5.4%, with the company emerging as a key provider of essential services in an otherwise tough backdrop in the retail space. 

Solid adoption of Prime driven by customer benefits, strengthening grocery services and expanding content portfolio is a tailwind. Further, expanding distribution strength and workforce which are helping in addressing the overflowing online orders during the coronavirus pandemic are major positives. Additionally, strengthening AWS services and its growing adoption rate are aiding Amazon’s dominance in the cloud space.

Furthermore, improving Alexa skills and features are other positives. However, rising transportation cost related to its free one-day shipping service is an overhang. Further, delivery delays due to coronavirus led rising orders are concerns. Also, intensifying cloud competition poses risk.

(You can read the full research report on Amazon here >>>)

AstraZeneca’s shares have lost -5.3% over the past three months against the Zacks Large Cap Pharmaceuticals industry’s fall of -9.3%. The Zacks analyst believes that AstraZeneca’s core products like Nexium, Crestor and Seroquel are facing generic competition, which is hurting sales.

Its diabetes franchise also faces stiff competition while pricing pressure is hurting sales in the respiratory unit. Also, the coronavirus outbreak may hurt its profits in 2020. Nonetheless, AstraZeneca’s newer drugs, mainly cancer medicines, Lynparza, Tagrisso and Imfinzi, should keep driving revenues in 2020. Its pipeline is strong with abundance of pipeline catalysts lined up for 2020.

Several launches are underway across each of the therapeutic areas, Oncology, CV metabolism and Respiratory. The company has a mixed record of earnings surprises in the recent quarters. Estimates have declined slightly ahead of Q1 earnings release.

(You can read the full research report on AstraZeneca here >>>)

Other noteworthy reports we are featuring today include Tesla (TSLA), Petrobras (PBR) and Barrick Gold (GOLD).

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Sheraz Mian

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>>>

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