Today's Must Read
UnitedHealth (UNH) Solid Top Line Aids, Membership Dip Hurts
Keytruda is Key to Merck's (MRK) Growth Prospects
Wednesday, June 3, 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 Alibaba Group (BABA), UnitedHealth (UNH) and Merck (MRK). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Alibaba shares have modestly lagged Amazon (AMZN) over the past year (+42.9% vs. +39%), but the Chinese ecommerce giant has otherwise been stellar performer on the back of impressive growth momentum in its home market.
Further, Alibaba’s strengthening cloud business with its expanding customer base continues to drive its performance. Its New Retail strategy is also gaining momentum. This is aiding growth in Tmall Import, Hema fresh food grocery business and Intime Department Stores.
However, higher costs associated with new initiatives remain a major concern. Also, COVID-19 related economic uncertainties and macro headwinds in China are major concerns. In addition, rising competition from e-commerce players poses a risk.
Shares of UnitedHealth have gained +9.6% over the past six months against the Zacks Medical Insurance industry’s rise of +3.2%. The Zacks analyst believes that the company has been benefiting from higher segmental contributions, which helped it counter the fallout from the coronavirus-led crunch.
It stands out from the rest in its industry by virtue of healthcare services, technology and innovations offered by its unit, Optum. Its numerous acquisitions bolstered its inorganic growth profile. Its revenues should continue to grow, driven by a strong market position and an attractive core business.
Its solid balance sheet and consistent cash flow generation encourage investment in business. By retaining its 2020 earnings guidance, the company restores investor confidence. However, the company is witnessing a slowdown in its international operations. Commercial membership may also suffer due to increased joblessness.
Merck’s shares have lost -2.6% over the past three months against the Zacks Large Cap Pharmaceuticals industry’s rise of +1.2%. The Zacks analyst believes that Merck’s products like Keytruda, Lynparza and Bridion are driving sales.
Keytruda sales are gaining from continued uptake in lung cancer and increasing usage in other cancer indications. 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, Merck expects COVID-related business disruptions to impact sales in its Pharmaceuticals as well as Animal Health units in 2020 with maximum impact in the second quarter. Meanwhile, generic competition for several drugs and rising competitive pressure, mainly on the diabetes franchise, will continue to be overhangs on the top line.
Other noteworthy reports we are featuring today include PetroChina (PTR), Anheuser-Busch InBev (BUD) and 3M (MMM).
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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>>>