Friday, March 31, 2023
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 SAP SE (SAP), Elevance Health, Inc. (ELV) and Diageo plc (DEO). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Shares of SAP have outperformed the Zacks Computer – Software industry over the past year (+13.9% vs. -6.1%), reflecting momentum in its cloud business (especially the new Rise with SAP solution) across all regions.
Momentum in SAP’s business technology platform particularly the S/4HANA solutions augurs well. The company’s restructuring plan is expected to better align its operating models and go-to-market approach with its accelerated cloud transformation. Frequent product launches like SAP Build and strategic collaborations bodes well.
However, the company’s performance is affected due to continued softness in software licenses and support business segment coupled with supply chain constraints, global macroeconomic weakness and geopolitical instability. Also, increasing research & development and sales & marketing expenses coupled with stiff competition in the cloud space are concerns.
Shares of Elevance Health have declined -8.1% over the past year against the Zacks Medical Services industry’s decline of -29.7%.
While margins pressures and a relatively debt-heavy balance sheet are causes for concern, Elevance Health is benefiting from improving top line on the back of premium rate increases and higher memberships. Acquisitions, collaborations and product expansions have enabled the company to strengthen its business portfolio.
Its well-performing Medicare and Medicaid businesses, coupled with several contract wins, are expected to drive its membership going ahead. Growing premiums, stemming from rate increases are aiding the company’s results. Elevance Health utilizes excess capital to boost shareholder value.
Shares of Diageo have gained +6.8% over the past six months against the Zacks Beverages – Alcohol industry’s gain of +10.3%. The company’s robust sales growth, organic operating margin expansion, productivity savings and favorable currency impact aided first-half fiscal 2023 results. Effective marketing and exceptional commercial execution further aided the results.
Price/mix gained from a positive mix due to the robust growth in super-premium-plus brands, particularly scotch, tequila and Chinese white spirits. DEO’s margin trends were favorable in the first half, thanks to the its premiumization efforts, recovery in markets, pricing actions and supply productivity savings, which mostly offset the cost inflation.
The company retained its optimistic view for the medium to long term. However, inflationary pressures from higher glass, ocean freight and other transportation costs, and currency headwinds are concerning.
Other noteworthy reports we are featuring today include Schlumberger Limited (SLB), Petróleo Brasileiro S.A. – Petrobras (PBR) and Charter Communications, Inc. (CHTR).
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
Schlumberger (SLB) to Gain on Rising Oilfield Service Demand
Per the Zacks analyst, Schlumberger is well-poised to capitalize on the rising oilfield service demand, as high oil prices have heightened drilling activities. Yet, its huge debt load is concerning.
Pre-Salt Reserves Boosts Petrobras (PBR), Debt Pile Hurts
Petrobras’ stakes in Brazil’s attractive pre-salt oil reservoirs should boost its earnings outlook. However, the Zacks analyst is concerned over the company’s huge debt load of $41.5 billion.
Mobile & Internet Subscriber Gain Benefits Charter (CHTR)
Per the Zacks analyst, higher subscriber strength in residential and commercial internet services along with broadening Spectrum Mobile user base is driving Charter’s top line.
U.S. Budget to Aid TransDigm (TDG) Amid Supply Chain Issue
Per the Zacks analyst, expansionary budgetary policy adopted by the U.S. administration should benefit TransDigm. Yet consistent supply chain challenges might hurt the stock.
Favorable GRC Lift Edison International (EIX), Wildfire Woe
Per the Zacks analyst, favorable outcomes from regulatory authorities on GRC (General rate Case) tend to boost Edison International growth. However wildfire risk in its service territories looms large
Product Vitality Aids Acuity Brands (AYI) Despite High Cost
Per the Zacks analyst, Acuity Brands benefits from product vitality, strategic business model and higher pricing. However, high costs and supply chain challenges hurt.
FDA Nod to Reata’s (RETA) Rare Disease Drug Fuels Growth
The Zacks Analyst is encouraged by the FDA’s recent approval to Reata Pharmaceuticals’ Skyclarys for the treatment of Friedreich’s ataxia. The drug is the first to be approved in this indication.
Restructuring Efforts Aid Ameriprise’s (AMP) Revenue Growth
Per the Zacks analyst, Ameriprise is well poised for top-line growth given its strategic restructuring efforts and a well-diversified portfolio. Its capital deployment activities also seem impressive.
Hologic (HOLX) Surgical Volume Grows, Product Launches Aid
The Zacks analyst is impressed with Hologic’s Surgical business growth on procedural volumes return as well as acceleration from new business lines. New assays within molecular diagnostics aid growth.
Urban Outfitters’ (URBN) FP Movement & Nuuly Brand Bodes Well
Per the Zacks analyst, Urban Outfitters’ strategic growth initiative, FP Movement is encouraging and has been boosting the brand’s revenues. Management is optimistic about the prospects of Nuuly.
Cost Woes & High Debt Hurt Air Transport Services (ATSG)
The Zacks analyst is pessimistic by ATSG’s escalating expenses on fuel due to the current oil price surge. Also, a high debt-to- equity ratio is worrisome.
Higher Input Costs, Weak Demand Ail Huntsman (HUN)
Per the Zacks analyst, higher raw material costs will weigh on margins in the company’s Polyurethanes unit. Weaker demand in Europe and China will also hurt sales volumes.
High Input Costs Ail International Flavors’ (IFF) Margins
The Zacks analyst is concerned that high costs for raw material, labor and shipping as well as supply chain issues will likely hurt International Flavor’ results in the near term.
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