Today's Must Read
Strong Diabetes Portfolio Boost Novo (NVO) Amid Competition
Portfolio Expansion Aids American Tower (AMT), High Debt Ails
Tuesday, April 28, 2020
Today's Research Daily provides a real-time update on the ongoing Q1 earnings season in addition to featuring new research reports on 16 major stocks, including Visa (V), Novo Nordisk (NVO) and American Tower (AMT). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Q1 Earnings Season Scorecard
Including this morning's reports from Caterpillar (CAT), 3M (MMM), UPS (UPS) and others, we now have results from 158 S&P 500 members or 31.6% of the index's total membership. Total earnings (aggregate net income) for these 158 companies are down -18.3% from the year-earlier period on +1.8% higher revenues, with 65.8% beating EPS estimates and 60.1% beating revenue estimates.
Excluding the Finance sector drag, Q1 earnings would be down -1.3% on +1.9% higher revenues. For the Finance sector, we now have Q1 results from 50.7% of the sector's total market cap in the S&P 500 index. Total earnings for these Finance companies are down -48.3% on +1.7% higher revenues, with 41.9% beating EPS estimates and 65.1% beating revenue estimates.
Estimates for the current period (2020 Q2) and the following quarters have been steadily coming down, as analysts come to grips with Covid-19's full impact. For Q2, S&P 500 earnings are now expected to be down -33.5% from the same period last year, down from positive earnings growth of +3% in early February.
Earnings for full-year 2020 are now expected to be down -19.2% from the 2019 level, which is down from +7.8% growth expected in early January.
Visa shares have modestly done better than the broader market, but the company's business is expected to experience a slowdown in its cross-border business due to coronavirus outbreak.
Numerous acquisitions and alliances plus technology upgrades and effective marketing have paved the way for long-term growth and consistent increase in revenues. Shift in payments such as mobile, cards and online paved way for long-term growth and led to an increase in payments volume, cross-border volume and processed transactions.
The acquisition of Visa Europe is a long-term growth strategy for the company. Its international business has been expanding and adds diversification benefits. Its strong capital position is another positive. However, high client incentives and expenses weigh on its operating margin.
Shares of Novo Nordisk have been standout performers during the pandemic market, reflecitng strong momentum from a number of the drug giant's core products like Tresiba, Victoza, Ozempic, Xultophy and Saxenda maintains momentum for the company.
Ozempic, a once-weekly GLP-1, continues to gain market share. The label of Ozempic was further expanded by the FDA to include a cardiovascular indication. Rybelsus was recommended for approval for treatment of adults with type II diabetes by the European regulatory authorities and a potential approval will boost sales.
Label expansion of existing drugs will further boost sales for the company. Shares of the company have outperformed the industry in the past year. However, lower realized prices in the Unites States, loss of exclusivity for products in hormone replacement therapy and intensifying competition will adversely impact sales.
American Tower’s shares have gained +7.2% over the past three months against the Zacks REIT and Equity Trust industry’s fall of -15.6%. The Zacks analyst believes that rise in mobile-data usage and higher investment in 4G as well as 5G technologies is spurring demand for its telecom towers.
American Tower is enhancing its macro-tower portfolio and focusing on innovation to capture the underlying opportunities. Therefore, this will likely drive the company’s leasing activity and organic tenant billings growth in the upcoming period. Moreover, the company is expanding its international presence, which opens up new areas of growth.
However, the company has a substantially-leveraged balance sheet. Such high-debt levels might impede cash-flow growth. Moreover, consolidation trends in the telecom sector pose a cause of worry for the company. Furthermore, stiff competition in the tower industry is another concern.
Other noteworthy reports we are featuring today include Amgen (AMGN), Equinix (EQIX) and General Electric (GE).
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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>>>