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Q2 Earnings Scorecard and Analyst Reports for CSX, Lam Research & TE Connectivity

Tuesday, August 2, 2022

The Zacks Research Daily presents the best research output of our analyst team. Today's Research Daily features a real-time scorecard of the ongoing Q2 earnings season and new research reports on 16 major stocks, including CSX Corporation (CSX), Lam Research Corporation (LRCX), and TE Connectivity Ltd. (TEL). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
You can see all of today’s research reports here >>>

Q2 Earnings Season Scorecard

Including all of this morning's releases, we now have Q2 results from 321 S&P 500 members or 64.2% of the index's total membership. Total earnings for these companies that have reported are up +7.3% from the same period last year on +15% higher revenues, with 77.3% beating EPS estimates and 65.7% beating revenu estimates.

Results from the Energy and Finance sectors are having big impacts on the 'headline' Q2 earnings growth rate of +7.3%, with the Energy sector boosting it and the Finance sector dragging it down.

Excluding contribution from the Energy sector, Q2 earnings growth for the rest of the index would be down -3.2% from the year-earlier period. On the other hand, the reported earnings growth pace would be up +16.8% from the year-earlier level on an ex-Finance basis.

Looking at Q2 as a whole, combining the actual results from the 321 index members that have reported with estimates for the still-to-come companies, earnings and revenues for the index are on track to increase +5.9% and +12.9%, respectivley.

The Q2 earnings growth pace would be up +13.3% on an ex-Finance basis, down -4.3% on an ex-Energy basis and down -0.7% excluding both the sectors.

Today's Featured Analyst Reports

CSX shares have lagged the Zacks Rail Industry over the past year (+0.4% vs. +4.9%), but they have done significantly better than the broad market's -6.8% decline. The company is benefiting from higher export coal volumes, domestic intermodal shipments and favorable pricing.

With the demand scenario expected to remain strong, despite the current macro uncertainty, management anticipates double-digit growth in operating income and revenues for 2022 from 2021's reported levels. CSX's measures to reward its shareholders are encouraging as well. In February, CSX hiked its dividend 7.5%.

However, supply-chain disturbances are hurting the company’s operations. Weakness in the merchandise segment due to lower automotive volumes is concerning. High costs, primarily due to escalating fuel expenses (up 102% in first-half 2022), pose a threat to CSX’s bottom line. CSX’s high capital expenditures are also worrisome.

(You can read the full research report on CSX here >>>)

Lam Research shares and the broader chip space have made an impresive rebound over the past month, but the stock and the group is still in the red this year. While optimism about the macro backdrop has started improving lately, the market is still worried a potenital inventory overhang for the group. 

However, Lam Research’s recent results were driven by strength across systems and the customer support business. Further, the company witnessed strong momentum in foundry and logic segment owing to the growing traction among etch and deposition technologies. Strong wins for conductor etch and selective etch applications were positives.

Also, solid momentum in both ALD metals and dielectrics deposition solutions contributed well. Encouragingly, advanced packaging technology inflections remain a tailwind. Both etch and deposition technologies are expected to expand the company’s addressable market.

(You can read the full research report on Lam Research here >>>)

TE Connectivity shares have declined -10.9% over the past year against the Zacks Electronics - Miscellaneous Components industry’s decline of -15.4%. The zacks analyst believes that declining sensor, medical and appliance sales negatively impacted the quarterly performance. Further, uncertainties related to coronavirus pandemic continue to remain concerns.

However, the company reported impressive fiscal third-quarter results, wherein earnings and revenues increased year over year. The top-line growth was driven by the well-performing communications and industrial solutions segments. Solid content growth in high-speed cloud applications aided the communications solutions segment.

Strong momentum across renewable applications, and growing capital investment in factory automation applications, are contributing well to the industrial solutions segment. Further, growing proliferation of EVs is creating growth in the company’s automotive sales.

(You can read the full research report on TE Connectivity here >>>)

Other noteworthy reports we are featuring today include Republic Services, Inc. (RSG), Telefónica, S.A. (TEF), and VeriSign, Inc. (VRSN).

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

CSX Strong on Dividends and Buybacks, Hurt by Fuel Costs

Lam Research (LRCX) Benefits From Foundry & Logic Strength

Strength in Industrial Segment Aids TE Connectivity (TEL)

Featured Reports

Operating Skills Up Republic Services (RSG), Liquidity Dips
The Zacks analyst is positive about Republic Services, focus on increasing its operational efficiency by shifting to CNG collection vehicles. Weak cash position remains a woe.

Telefonica (TEF) To Benefit From Strong Product Portfolio
Per the Zacks analyst, Telefonica's performance benefitted from strong revenue growth across all business segments. However, pandemic-related supply-chain issues remain concerns.

Robust Demand for Domain Names Benefits VeriSign (VRSN)
Per the Zacks analyst, VeriSign performance is benefitting from growth in .com and .net domain name registrations. However, high debt load and stiff competition remain concerns.

Strategic Efforts Aid Hartford Financial (HIG), Cat Loss Ails
Per the Zacks analyst, a number of strategic initiatives such as vending of non-core businesses to focus on its U.S. operations bode well. However, exposure to catastrophic events remains a concern.

Loan Growth to Drive Huntington (HBAN), Rising Costs a Woe
The Zacks Analyst believes that improving economy has helped Huntington witness growth in loan and deposits. However, rising expenses on account of acquisitions will hinder bottom-line growth.

Higher Prices Aid CNH Industrial (CNHI) Amid Soaring Costs
Better price realization across its segments has benefitted CNH Industrial's top line growth. However, per the Zacks Analyst, soaring cost inflation hurt margins.

Strong Demand for Products Aids The Cooper Companies (COO)
Per the Zacks analyst, The Cooper Companies witnessed strong demand for its products across several segments during the first quarter. The trend is likely to continue boosting the company's prospect.

New Upgrades

BioMarin's (BMRN) Key Drugs Aid Growth, Pipeline Shows Promise
While BioMarin's key drugs like Vimizim and Naglazyme have been driving sales, the Zacks Analyst is encouraged by the company's progress on its gene-therapy pipeline.

Pilgrim's Pride (PPC) Gains From Robust U.S. Operations
Per the Zacks analyst, Pilgrim's Pride is gaining from higher sales in the U.S. Operations for a while. During second-quarter 2022 sales in the region surged almost 29% year over year.

Hardwire Plan & Rebranding Aid Harley-Davidson (HOG)
Per the Zacks analyst, Harley-Davidson gains from its strategic Hardwire plan offering intensive product innovation. Rebranding efforts to drive brand value and bolster core segments also augur well.

New Downgrades

Higher Labor & Fuel Costs Continue to Hurt Cactus (WHD)
Per the Zacks analyst, inflationary pressure leading to increased labor & fuel costs will continue to hurt Cactus' oil and gas field service margins.

Rising Mortgage Rates & Input Costs to Hurt Toll Brothers (TOL)
Per the Zacks analyst, rising mortgage rates and home prices may lead to lower demand for homes, thereby impacting Toll Brothers profitability.

Skechers (SKX) Battles Supply-Chain Issues & Operating Costs
Per the Zacks analyst, Skechers is witnessing macroeconomic headwinds, supply-chain issues and COVID-related restrictions in China. Also, higher operating cost has been a concern for a while now.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
CSX Corporation (CSX) : Free Stock Analysis Report
Telefonica SA (TEF) : Free Stock Analysis Report
VeriSign, Inc. (VRSN) : Free Stock Analysis Report
Lam Research Corporation (LRCX) : Free Stock Analysis Report
Republic Services, Inc. (RSG) : Free Stock Analysis Report
TE Connectivity Ltd. (TEL) : Free Stock Analysis Report
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