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Top Analyst Reports for Wells Fargo, UnitedHealth & Merck

Mark Vickery
Zacks Earnings Trends Highlights: JPMorgan, Citigroup, Goldman Sachs and Wells Fargo

Wednesday, April 17, 2019

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 Wells Fargo (WFC), UnitedHealth (UNH) and Merck (MRK). 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 >>>

Wells Fargo’s shares have underperformed the Zacks Major Regional Banks industry in the past six months, (-10.3% vs. -0.8%). Its earnings surprise history is decent, having beaten expectations in two of the trailing four quarters.

The first-quarter 2019 results reflect lower expenses and elevated net interest income, partly offset by decline in loans and deposits. However, fee income and provisions disappointed. The Zacks analyst likes Wells Fargo’s ongoing investment in its businesses to enhance compliance and risk management capability, build a better bank and strengthen core infrastructure.

However, the financial major was slapped with several sanctions, including a cap on its assets by the Federal Reserve which will continue, as recently the U.S. Consumer Financial Protection Bureau director expressed her dissatisfaction with the bank’s progress toward fixing its risk management issues, following the company’s involvement in several legal issues. Falling mortgage banking income is another concern.

(You can read the full research report on Wells Fargo here >>>).

Shares of Buy-ranked UnitedHealth have lost -11.3% year to date, underperforming the Zacks Medical Insurance industry, which has declined -5.6% over the same period. UnitedHealth Group’s first-quarter earnings surpassed expectations by 3.6% and were up 22.7% year over year. Higher revenues at both segments — UnitedHealthcare and Optum — plus membership growth led to this outperformance.

The Zacks analyst likes the company's solid balance sheet, strong operating performance, favorable business profile and disciplined enterprise risk management. The company also benefits from the services, technology and innovations offered by its Optum segment. However, slowdown of growth in international operations, underperformance in Medicaid business, and increase in leverage and interest burden are major headwinds.

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

Buy-ranked Merck’s shares have increased +1.5% year to date, outperforming the Zacks Large Cap Pharmaceuticals industry’s gain of +0.3% during the same period. The Zacks analyst thinks Merck’s new products like Keytruda, Lynparza, and Bridion are contributing meaningfully to the top line.

Keytruda sales are gaining momentum with approval for additional indications, especially in the first-line lung cancer setting. Keytruda has strong growth prospects based on increased utilization, recent approvals for new indications and potential additional approvals worldwide. Animal health and vaccine products are also performing strongly and remain core growth drivers for Merck.

However, generic competition for several drugs and pricing pressure will continue to be overhangs on the top line. Rising competitive pressure on the diabetes franchise and products like Isentress (HIV), Zepatier (HCV) and Zostavax (vaccine) remains a concern. Estimates have gone up slightly ahead of Q1 results. Merck has a positive record of earnings surprises in the recent quarters.

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

Other noteworthy reports we are featuring today include Schwab (SCHW), PNC Financial (PNC) and Raytheon (RTN).

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Mark Vickery
Senior Editor

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

Interest Income Aids Wells Fargo (WFC), Legal Issues Linger


Strong Service and Benefits Businesses Aid UnitedHealth (UNH)


New Drugs Drive Merck's (MRK) Sales as Competition Soars


Featured Reports

Trading Focus, Higher Rates Aid Schwab (SCHW), Costs a Woe

The Zacks analyst believes that Schwab's efforts to improve trading revenues and higher interest rates will continue to support revenues. However, mounting expenses remains a major near-term concern.

Attractive Business Mixes Aid PNC, Increasing Costs a Woe

Per the Zacks analyst, execution of strategic initiatives and attractive business profile helps PNC improve its topline. However, rising costs due to investment in technology remains a headwind.

Robust Demand for Digital Services Benefits Infosys (INFY)

Per the Zacks analyst, Infosys is benefiting from large deal wins and strong demand for cloud, IoT, cyber plus data and analytics related services.

High Card Sales Aid Discover Financial (DFS), Expenses Hurt

Per the Zacks analyst, increasing card sales volume, backed by alliances and partnerships has driven performance. However, rising expenses remain a concern for the company.

Fastenal (FAST) Gains From Vending Business, Margins Weak

Fastenal's focus to boost industrial vending business and existing Onsite locations will drive growth, per the Zacks analyst. However, product inflation & unfavorable product mix are hurting margins.

Loan Growth Aid First Republic (FRC), Increasing Costs a Woe

Per the Zacks analyst, First Republic benefits from rise in loan balances driven by increased loan origination volumes.

Omni-Channel to Drive Michaels' (MIK) Sales, Margins Hurt

Per the Zacks analyst, Michaels' focus on integrating e-commerce and in-store operations to enhance the omni-channel experience bode well.

New Upgrades

Foreign Military Contracts, Rising Demand Aids Raytheon (RTN)

Per the Zacks analyst, Raytheon enjoys solid order inflows from overseas courtesy of its combat-proven defense products. Further, rising demand from Gulf and Asia-Pacific is also a key revenue driver.

Continental (CLR) Banks on Bakken Shale, FCF to Rise

The Zacks analyst believes Continental Resources' operations in the prolific Bakken Shale region will drive future growth and enable it to generate strong free cash flow.

Strong Organic Growth, Buyouts Aid Element Solutions (ESI)

Per the Zacks analyst, Element Solutions is witnessing strong growth in organic sales, which should support its margins. Moreover, the company should gain from its strategic acquisitions in 2019.

New Downgrades

Republic Services (RSG) Grapples With Weak Landfill Pricing

The Zacks analyst believes that weak landfill pricing due to high cost of landfills and leachate can limit Republic Services' ability to increase prices, thereby weighing on its margins and earnings.

TELUS (TU) Beset by Soft Demand & High Network Upgrade Costs

Per the Zacks analyst, TELUS' operating margins remain strained as customers tend to switch to lower-priced carriers despite continued investments to improve network infrastructure.

Weak Margins Irk Hologic (HOLX), Sluggish Volume Scenario Ails

The Zacks analyst is worried about Hologic's rising expenses from Faxitron and Focal integration which are putting pressure on margins. Also, challenging volume scenario in testing labs is a threat.


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Wells Fargo & Company (WFC) : Free Stock Analysis Report
 
UnitedHealth Group Incorporated (UNH) : Free Stock Analysis Report
 
The Charles Schwab Corporation (SCHW) : Free Stock Analysis Report
 
Raytheon Company (RTN) : Free Stock Analysis Report
 
The PNC Financial Services Group, Inc (PNC) : Free Stock Analysis Report
 
Merck & Co., Inc. (MRK) : Free Stock Analysis Report
 
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