Analyst Reports for McDonald's, Cisco, Philips Morris and General Dynamics

Friday, March 24, 2017

Today's Research Daily features new research reports on 17 major stocks, including Cisco (CSCO), Philip Morris (PM), McDonald's (MCD) and General Dynamics (GD).

Cisco shares have outperformed the Zacks Technology sector year to date, gaining +12.4% vs. +9.2%. In the updated research report issued today, the Zacks analyst covering the stock highlights Cisco’s expanding footprint in the rapidly growing security and data center market. Moreover, partnerships with the likes of Pure Storage, salesforce.com and IBM will help Cisco to gain significant traction in the data center, cloud and Internet of Things (IoT) market in the long haul. The recent acquisition of AppDynamics will also help the company to gain traction in the application and business monitoring space. Intensifying competition from several smaller players, slowing order growth from service providers and challenges in emerging markets are the primary headwinds at this stage. (You can read the full research report on Cisco here >>)

Philip Morris shares have been standout performers this year, outperforming both the S&P 500 index as well as the Zacks Tobacco industry (PM is up +23.5% in the year-to-date period vs. +15.6% for the industry and +4.7% for the S&P 500 index). The stock has historically been a dividend play (current yield an attractive 3.7%), but it's recent performance puts it an altogether category. Driving this momentum has been the company's improved operating outlook and expectations of greater consolidation. The analyst likes the company's strong brand portfolio which is crucial in helping it command a leading market share in the tobacco industry. Additionally, the company's efforts to launch new products to cater to changing consumer tastes are also encouraging. Heatsticks and IQOS product category are gaining popularity after they expanded nationally during the quarter. However, large excise tax increase in Argentina, the surge of illicit trade in Pakistan, and the cigarette volume declines in the Philippines and Thailand continued to pressurize the company. Valuation questions are also reasonable following the stock's impressive run up, particularly in a backdrop of unfavorable currencies (all of PM's revenues come from beyond the U.S.) and the emerging uptrend in interest rates. (You can read the full research report on Philip Morris here >>)

McDonald's shares have gained +10.7% over the last six months easily outperforming many of its  peers which have been struggling to survive the restaurant space’s tough operating environment lately. The Zacks analyst likes the focus on improving guest count, rollout of the second phase of All Day Breakfast and its national value platform–McPick 2. Also, attempts to attract customers in international lead markets bode well as the positive global comps over the past 6 quarters show.  Increased focus on refranchising will cut the company’s capital requirements and facilitate EPS growth and ROE expansion over the long-term. On the flip side, higher labor costs, currency headwinds and concerns about the efficiencies of an ever expanding menu remain issues. (You can read the full research report on McDonald's here >>)

Shares of General Dynamics have gained +46.9% over the last one year, outperforming the Zacks Aerospace - Defense industry, which increased +26.5% over the same period. The Zacks analyst likes the fact that revenues are derived from a broad portfolio of products and services whose long-term outlook has notably improved given the administration's plans for material spending increases. General Dynamics will likely see solid growth momentum post 2017, following the introduction of the G500 in 2018, major revenue recognition from Combat Systems’ huge backlog and the Ohio-class Replacement (ORP) submarine program, which should add substantially to the top line by 2019. On the flip side, any slip up in the Trump administration's commitment to raise defense spending remains a headwind for this company as well as many of its peers. Valuation has become an issue as well following its strong post-election showing, with the stock currently trading at a forward 12-month P/E multiple that's the highest since 2002. (You can read the full research report on General Dynamics here >>)

Other noteworthy reports we are featuring today include Union Pacific (UNP), China Life Insurance (LFC) and Cintas (CTAS).

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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 >>>

Today's Must Read

Cisco (CSCO) Announces Completion of AppDynamics Buyout

Philip Morris (PM) Fights Anti Tobacco Rules with Heat Sticks

McDonald's (MCD) Poised for Growth on Strategic Initiatives

General Dynamics' (GD) Growth Plans Impress Amid Competition

Featured Reports

Epizyme (EPZM) Q4 Loss Narrows, Focus on Tazemetostat

The Zacks analyst thinks Epizyme's efforts on developing its lead candidate, tazemetostat, for a number of indications are positive.

Union Pacific's (UNP) Cost-Cut Efforts Impress Amid Risks

Though encouraged by the company's safety-related measures and efforts to enhance productivity, the covering analyst believes that coal-related headwinds will continue to hurt the stock.

Staples (SPLS) Q4 Earnings Meet, Initiatives on Track

The Zacks analyst believes the company's strategic plans of streamlining operations, curtail costs and optimize store fleet remain on track.

KBR (KBR) Posts Losses in Q4, Government Business Hold Promise

KBR's adjusted loss in Q4 compared unfavorably to the Zacks Consensus Estimate. However, we expect the company's thriving Government Services business to offset macroeconomic woes and support growth.

Stratasys (SSYS) Reports Strong Q4 Results but Guides Weak

Though Stratasys' sustained focus on new products, strategic buyouts and partnerships will drive long-term growth, its tepid 2017 view makes the covering analyst cautious about near-term prospects.

PS Business Parks (PSB) Tops Q4 FFO and Revenues Estimates

The Zacks analyst thinks rise in net operating income aided PS Business Parks' Q4 FFO beat.

UDR Inc. (UDR) Grows on Portfolio Strength, Supply Strains

The covering analyst thinks UDR's superior portfolio in targeted U.S. markets aids it in keeping its growth momentum going.

New Upgrades

Winnebago;s (WGO) Q2 Earnings and Revenue Top Estimates

Winnebago's fiscal second-quarter earnings and revenues beat estimates. Per the Zacks Analyst, the company will benefit from growing new motorhome market traction and the Grand Design acquisition.

Range Resources' (RRC) to Grow Production by 35% in 2017

The covering analyst believes that higher capital budget for 2017 should boost Range Resources' production by 33-35%.

China Life (LFC) Poised for Growth, Rising Costs Bothers

The Zacks analyst believes that although China Life grows consistently on premium revenues, rapidly increasing administrative and other expenses continues to put pressure on its profitability.

New Downgrades

Cintas (CTAS) Beats Q3 Earnings, Remains Susceptible to Risk

Although Cintas recorded strong third-quarter fiscal 2017 results on the back of healthy organic growth, it remains susceptible to volatility in raw material prices and foreign currency fluctuations.

Regulatory Compliance Could Mar WEC Energy's (WEC) Good Run

The Zacks analyst believes despite WEC Energy's ongoing investments in infrastructure projects regulatory compliance costs, weather fluctuations and functional disruptions may affect the good run.

Kirkland's (KIRK) Faces Lower Comps; Costs Pressurize Margins

The covering analyst thinks Kirkland's has been grappling with lower traffic over the past six quarters. Lower store supplies, higher marketing costs and corporate related expenses are denting margins

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Union Pacific Corporation (UNP): Free Stock Analysis Report
 
Philip Morris International Inc (PM): Free Stock Analysis Report
 
McDonald's Corporation (MCD): Free Stock Analysis Report
 
China Life Insurance Company Limited (LFC): Free Stock Analysis Report
 
General Dynamics Corporation (GD): Free Stock Analysis Report
 
Cintas Corporation (CTAS): Free Stock Analysis Report
 
Cisco Systems, Inc. (CSCO): Free Stock Analysis Report
 
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