Today's Must Read
Loan Growth and Streamlining Support Wells Fargo (WFC)
Liquidity, High Iron Prices Aid BHP Group (BHP), Costs Hurt
Wednesday, June 10, 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 Apple (AAPL), Wells Fargo (WFC) and BHP Group (BHP). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Apple’s shares have outperformed the S&P 500 over the past year (+76.6% vs. +11.1%). The Zacks analyst believes that the company is benefiting from a continued momentum in the Services segment, driven by strong App Store sales and the robust adoption of Apple Music and Apple Pay.
Non-iPhone devices, particularly Apple Watch and AirPod, are other notable drivers in the long haul. However, iPhone sales are expected to remain bleak in the near term due to the negative impact of the coronavirus. In fact, the company expects iPhone and Wearables business revenues for the fiscal second quarter to be worse on a year-over-year basis than the fiscal first quarter.
On the contrary, iPad and Mac revenues are expected to improve but lower economic activity will hurt AppleCare and advertising businesses. The company didn’t provide any guidance due to the pandemic-triggered uncertainty.
Shares of Wells Fargo have lost -38.6% over the past six months against the Zacks Major Regional Banks industry’s fall of -22%. The Zacks analyst believes that the company's investment in the businesses to enhance compliance and risk-management capability seem encouraging.
However, the company's earnings surprise history remains unimpressive, having surpassed the Zacks Consensus Estimate in only one of the trailing four quarters. Wells Fargo's revenues remain under pressure due to lower interest rates and volatile fee income. Also, rising costs in providing benefits to clients amid coronavirus concerns might curb bottom-line growth. Legal hassles also remain a concern.
Moreover, streamlining activities along with rising loans and deposits balance remain tailwinds. Also, debt level postion remains manageable. Recently, at a virtual conference, the company provided a grim outlook for the current quarter.
BHP Group’s shares have gained +47.4% over the past three months against the Zacks SMining - Miscellaneous industry’s rise of +37.7%. The Zacks analyst believes that the company will benefit from the recent surge in iron and copper prices. The consensus estimate for earnings for the current fiscal has undergone positive revisions lately.
BHP Group’s copper and iron ore production increased year over year in the nine month period ended Mar 31, 2020, while petroleum, metallurgical coal, energy coal and nickel production declined. The company affirmed petroleum, iron ore and metallurgical coal production and cost guidance for fiscal 2020 despite the pandemic.
Its strong cash flow and focus on lowering debt will help it sail through these turbulent times. The company has six major projects under development in petroleum, copper, iron ore and potash, which will drive growth in the long run. However, slowdown in global growth on account of the pandemic remains a headwind in the near term.
Other noteworthy reports we are featuring today include Amazon.com (AMZN), Royal Dutch Shell (RDS.A) and Marriott International (MAR).
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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>>>