Tuesday, October 13, 2020
The Zacks Research Daily presents the best research output of our analyst team. Today's Research Daily provides an update on the Q3 earnigns season in addition to featuring new research reports on 16 major stocks, including Apple (AAPL), PepsiCo (PEP) and McDonald's (MCD). 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 >>>
Q3 Earnings Season Scorecard
Including this morning's results from JPMorgan (JPM), Citigroup (C) and others, we now have Q3 results from 29 S&P 500 members. Total earnings for these 29 index members are down -13.5% from the same period last year on -1.3% lower revenues, with 89.7% beating EPS estimates and 82.8% beating revenue estimates.
While this is early going in the Q3 reporting cycle, we are off to a good start, with an above average proportion of companies beating estimates.
For the Finance sector, we now have Q3 results from 13.9% of the sector's market cap in the S&P 500 index, with the earnings and revenue growth rates at -4.9% and +10.4%, respectively. The takeaway at this stage is that banks are booking much smaller reserves for loan losses, which is helping the overall growth pace.
Looking at Q3 as a whole, combining the results that have come out with estimates for the still-to-come companies, total Q3 earnings are expected to be down -20.4% from the same period last year on -2.6% lower revenues.
Apple shares have outperformed the S&P 500 index in the year-to-date period (+67.8% vs. +9.8%), with the October 13th launch of the new lineup of 5G iPhones expected to maintain this momentum. Beyond the new devices, the Zacks analyst points to continued momentum in the Services segment, driven by a robust performance of App Store, Apple Music, video, and cloud services.
Moreover, Apple devices have gained traction among enterprises, particularly healthcare providers. The company expects fiscal fourth-quarter iPhone sales to benefit from strong demand for iPhone SE. Further, Apple stated that sale of new iPhones will begin a few weeks later against the usual late September.
It also expects iPad and Mac to post strong year-over-year growth but lower economic activity will hurt AppleCare and advertising businesses. Moreover, increasing scrutiny and legal woes over App Store is a headwind. The company didn’t provide any guidance due to the pandemic-triggered uncertainty.
(You can read the full research report on Apple here >>>)
Shares of PepsiCo have gained +4% over the past year against the Zacks Soft Drinks Beverages industry’s fall of -2.4%. The Zacks analyst believes that resilience in the snacks/food business worked well for the company amid the coronavirus pandemic.
Its top and bottom line surpassed estimates for the seventh straight quarter in the third quarter, and improved year over year. The snacks/food business benefited from increased at-home consumption trends, while the beverage business returned to growth in the third quarter.
The company also gained from its strong portfolio of brands, a responsive supply chain and flexible go-to-market systems, which helped maintain continued supplies. However, it witnessed soft margins on incremental COVID-19 related costs. Also, adverse currency rates remain a headwind.
(You can read the full research report on PepsiCo here >>>)
McDonald's shares have gained +22.6% over the past six months against the Zacks Restaurants industry’s rise of +27.1%. The Zacks analyst believes that the company is benefiting from an increase in drive-thru sales. McDonald’s increased focus on delivery and accelerated deployment of EOTF restaurants in the United States is commendable.
Additionally, the company is making every effort to drive growth in international markets as well. Of late, earning estimates for 2020 have increased. The company witnessed continued improvement in results throughout the second quarter. As of Jun 30, 2020, most of the company’s restaurants are open globally.
However, dismal comps and high debt are hurting the company. The company’s comps declined for the second straight quarter after reporting positive comps in the preceding 19 quarters. Moreover, the company is witnessing dismal traffic due to the pandemic.
(You can read the full research report on McDonald's here >>>)
Other noteworthy reports we are featuring today include Alphabet (GOOGL), Novo Nordisk (NVO) and Broadcom (AVGO).
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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>>>
Today's Must Read
Apple (AAPL) to Gain From Solid Portfolio, Services Strength
PepsiCo (PEP) Snacking Business Remains Robust Amid Pandemic
Digitalization to Aid McDonald's (MCD), Dismal Comps a Worry
Alphabet (GOOGL) Benefits From Cloud & Search Initiatives
Per the Zacks analyst, Alphabet's cloud arm is riding on expanding data centers and regions. Further, improving search results driven by major search updates and elimination of bad ads are positives.
Novo Nordisk (NVO) Boasts Strong Pipeline Amidst Competition
Per the Zacks analyst, Novo Nordisk has a strong presence in the Diabetes Care market and boasts of a strong pipeline. However, competition remains a concern.
Broadcom (AVGO) Banks on Acquisitions, Portfolio Strength
Per the Zacks analyst, Broadcom's strong top-line growth is driven by its expanding product portfolio and innovative pipeline.
Shell (RDS.A) Aided by LNG Demand, Reserve Replacement Ails
The Zacks analyst believes that Shell's position as a major supplier of LNG should benefit its long-term cash flow growth but is worried over its reserve replacement ratio of just 76%.
Opportunistic Buyouts Aid Morgan Stanley (MS) Amid Low Rates
Per the Zacks analyst, inorganic expansion initiatives with an aim to focus on fewer capital-markets dependent operations will support Morgan Stanley's financials.
MedSurg Aids Boston Scientific (BSX) amid the Pandemic
The Zacks analyst expects Boston Scientific's MedSurg arm to recover faster than the rest of its business segments.
Investment Aids American Electric (AEP), Rate Dependency Hurts
Per the Zacks Analyst, it plans to invest $26.6 billion over the 2021-2024 period in regulated operations to boost earnings.
Sensata (ST) Rides on Portfolio Strength & Subscriber Base
Per the Zacks analyst, a robust product portfolio and effective capital deployment strategies, backed by an accretive subscriber base, is likely to drive Sensata's near-term financial performance.
Dillard's (DDS) Inventory Management Efforts Aid Growth
Per the Zacks analyst, Dillard's adopted aggressive measures to lower excess inventory driven by the reduced demand in the second-quarter fiscal 2020. This aided results in the fiscal second quarter.
Focus on Wealth Management Channel Aid Waddell & Reed (WDR)
Per the Zacks analyst, Waddell & Reed's continued focus on strengthening the Wealth Management channel will likely lead to enhanced asset inflows, which will, in turn, boost assets under management.
Catastrophe Loss, Increasing Expenses Hurt Alleghany (Y)
Per the Zacks analysts, Alleghany's exposure to catastrophe loss induces volatility in underwriting profit while high expenses weigh on margin expansion.
Perrigo (PRGO) Faces Pricing Pressure, Stiff Competition
Per the Zacks analyst, Perrigo's revenues continue to be unfavourably impacted by pricing and other macro-economic pressures. Stiff competition remains a threat as well.
Weak Business, Huge Levels of Debt A Burden For Bausch (BHC)
Per the Zacks analyst, Bausch's business has been affected by the ongoing pandemic due to lesser doctor visits and postponement of medical procedures.
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PepsiCo, Inc. (PEP) : Free Stock Analysis Report
Novo Nordisk AS (NVO) : Free Stock Analysis Report
McDonalds Corporation (MCD) : Free Stock Analysis Report
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Broadcom Inc. (AVGO) : Free Stock Analysis Report
Apple Inc. (AAPL) : Free Stock Analysis Report
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