Today's Must Read
AT&T (T) Rides on Streaming Services, 5G & Debt Reduction
Philip Morris (PM) Troubled by COVID-19 Woes, Pricing Aids
Friday, June 26, 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 Alphabet (GOOGL), AT&T (T) and Philip Morris International (PM). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Alphabet shares have outperformed the Zacks Internet Services industry over the past year (+33.9% vs. +12.2%) despite the pressure on advertizing revenues as a result of the economic downturn. The Zacks analyst attributres the stock's momentum to the company's strengthening cloud unit, which has emerged as one of the top players in the space along with Amazon (AMZN) and Microsoft (MSFT).
Further, major updates in its search segment are enhancing the search results, which is a major positive. Moreover, Google’s robust mobile search is gaining solid momentum. Additionally, strong focus on innovation of AI techniques and the home automation space should aid business growth in the long term.
Further, its deepening focus on wearables category remains a tailwind. However, the company’s growing litigation issues and increasing expenses might hurt profitability.
Shares of AT&T have lost -24.3% over the past six months against the Zacks Wireless National industry’s fall of -12%, reflecting the company's debt-heavy balance sheet during a period of economic uncertainty. The Zacks analyst believes that AT&T is well placed to benefit from streaming services like AT&T TV and HBO Max.
The company is committed to a three-year financial framework with sustained investments and debt-reduction efforts. AT&T intends to deploy a standards-based, nationwide mobile 5G network in 2020 to spur growth. The company expects to gain a competitive edge through edge computing services that offer the flexibility to better manage data traffic.
However, AT&T is witnessing a steady decline in linear TV subscribers and legacy services. Its wireline division is also facing loss in access lines due to competitive pressure from VoIP service providers. As it tries to woo customers with discounts, freebies and cash credits, margins tend to fall. The company canceled its stock buyback program due to the severity of the virus outbreak and withdrew guidance.
Philip Morris’ shares have gained +2.2% over the past three months against the Zacks Tobacco industry’s rise of +8.9%. The Zacks analyst believes that its second-quarter show is likely to be hurt by lower duty-free sales and delay in minimum price enforcement in Indonesia stemming from coronavirus-led restrictions, among others.
The stock further declined when management said that it expects coronavirus to be detrimental to 2020 performance, during its first-quarter 2020 earnings release. The company withdrew its 2020 earnings view and offered guidance for the second quarter, which is expected to bear the largest quarterly impact of COVID-19 this year.
Nonetheless, the company doesn’t expect facing any out of stock situation in core operating income markets. Also, its first-quarter earnings and sales grew year over year, reflecting continued momentum in the smoke-free portfolio and a solid combustible tobacco pricing.
Other noteworthy reports we are featuring today include T-Mobile US (TMUS), Texas Instruments (TXN) and United Parcel Service (UPS).
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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>>>