Top Analyst Reports For Berkshire Hathaway, PepsiCo & Broadcom
Zacks Investment Research | Mar 16, 2018 03:46AM ET
Friday, March 16, 2018
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 Berkshire Hathaway (BRK.B), PepsiCo (PEP) and Broadcom (NASDAQ:AVGO). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
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Buy-rated Berkshire Hathaway’s shares have gained +20.2% in the last year, outperforming the Zacks Property and Casualty Insurance industry which increased +16.6% during the same period. Berkshire’s fourth-quarter 2017 earnings of $32.6 billion increased more than fivefold year over year, benefiting from the enactment of the 2017 Tax Act.
The Zacks analyst thinks its inorganic story remains impressive with strategic acquisitions. A strong cash position allows it to make earnings-accretive bolt-on acquisitions. Demand for utilities is expected to rise in the future and drive earnings growth. Continued insurance business growth also fuels increase in float. A sturdy capital level further adds impetus to the company.
However, the insurance business generates maximum return on equity but its exposure to catastrophe loss remains a concern. Huge capital expenses due to railroad operations are also headwinds. The stock has seen the Zacks Consensus Estimate for 2018 and 2019 earnings moving north in the last 60 days.
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Shares of PepsiCo have gained +0.6% in the last year, underperforming the Zacks Soft Beverages industry, which has increased +17.4% over the same period. PepsiCo’s fourth-quarter 2017 earnings and revenues beat expectations. Notably, this is the seventh consecutive quarter of positive earnings surprise. Improvement in the snack business helped offset continued weakness at its beverage business amid rapidly shifting consumer landscape.
Core earnings grew 7% but revenues remained unchanged year over year. Organic revenue growth improved to 2.3% from 1.7% in the prior quarter, led by the emerging and developing markets, which saw revenue increase by 7%. Notably, Frito-Lay North America organic revenues grew 5%.
On the flip side, NAB division reported dismal results with revenues and operating profit decreasing 6% and 29%, respectively. Again, overall gross margin contracted 50 bps owing to weakness in the NAB segment. Shifting consumer preferences toward healthier options is a potent headwind.
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Broadcom’s shares have handily beaten the Zacks Electronics - Semiconductors industry over the past year, gaining +21.1% vs. +14%. Broadcom reported impressive first-quarter results. The Zacks analyst thinks the company is benefiting from strong demand of its wireless solutions and expanding product portfolio, which makes it well-positioned to address the needs of rapidly growing technologies like IoT and 5G. The company also has strong ties with leading OEMs across multiple target markets that will help it to gain key insights into the requirements of customers.
Moreover, the upcoming launch of the next generation WiFi products is expected to be a growth driver for the segment. However, customer concentration, intensifying competition, integration risks due to frequent acquisitions and leverage balance sheet are key headwinds.
Further, President Trump recently released an order asking Qualcomm (NASDAQ:QCOM) to immediately and permanently abandon its proposed takeover by Broadcom on grounds of national security concerns. This doesn't bode well for the company.
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Other noteworthy reports we are featuring today include Sirius XM (SIRI), Air Products (APD) and Dr Pepper (DPS).
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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
Today's Must Read/h6
Featured Reports/h6
Per the Zacks analyst, innovation and productivity improvements are driving the upside for Dr Pepper while intense competition raises caution.
Per Zacks analyst, Campbell Soup's cost savings plan is on track with program-to-date savings of $365 million.
Per the Zacks analyst, Teladoc is witnessing steady growth with increasing membership due to rapidly growing demand for telehealth services.
The Zacks analyst believes American Water Works will gain from acquisitions that added 39,514 customers in 2017. The $8.0 to $8.6B investment for 2018-2020 period will further boost its performance.
Per the Zacks analyst, intense price competition and steady rise in operating costs weigh heavily on Stericycle's margins.
Per the Zacks analyst, Macy's sustained focus on omnichannel strategy, price optimization and inventory management will help drive results.
Per the Zacks analyst, solid portfolio of new products across segments, secular drivers in the aviation market and share gains in the marine market are driving Garmin's growth.
Per the Zacks analyst, innovation and productivity improvements are driving the upside for Dr Pepper while intense competition raises caution.
Per Zacks analyst, Campbell Soup's cost savings plan is on track with program-to-date savings of $365 million.
Per the Zacks analyst, Teladoc is witnessing steady growth with increasing membership due to rapidly growing demand for telehealth services.
The Zacks analyst believes American Water Works will gain from acquisitions that added 39,514 customers in 2017. The $8.0 to $8.6B investment for 2018-2020 period will further boost its performance.
Per the Zacks analyst, intense price competition and steady rise in operating costs weigh heavily on Stericycle's margins.
Per the Zacks analyst, Macy's sustained focus on omnichannel strategy, price optimization and inventory management will help drive results.
Per the Zacks analyst, solid portfolio of new products across segments, secular drivers in the aviation market and share gains in the marine market are driving Garmin's growth.
New Upgrades/h6
The Zacks analyst is appreciative of the company's net subscriber growth. Efforts to reward shareholders through dividends and buybacks also raise optimism in the stock.
Per the Zacks analyst, Kellogg's cost savings from its Project K and zero-based budgeting (ZBB) plans have been supporting renovation, innovation, brand support and margins.
Per the Zacks analyst, the launch of new generic drugs should boost revenues, while Rytary sales keep gaining traction. The company's merger with Amneal should create synergies and diversify pipeline.
The Zacks analyst is appreciative of the company's net subscriber growth. Efforts to reward shareholders through dividends and buybacks also raise optimism in the stock.
Per the Zacks analyst, Kellogg's cost savings from its Project K and zero-based budgeting (ZBB) plans have been supporting renovation, innovation, brand support and margins.
Per the Zacks analyst, the launch of new generic drugs should boost revenues, while Rytary sales keep gaining traction. The company's merger with Amneal should create synergies and diversify pipeline.
New Downgrades/h6
According to the Zacks analyst, charges related to the new U.S. tax act will hurt the company's earnings in fiscal 2018. Maintenance outage costs are also affecting its margins.
Per the Zacks analyst, Hewlett Packard's margins will continue to be negatively impacted by competitive pricing as well as heightened commodity pricing in the near term.
Per the Zacks analyst, elevated costs of certain key raw materials including caustic soda will weigh on Century Aluminum's margins. High prices for power at its Mt. Holly smelter is another concern.
According to the Zacks analyst, charges related to the new U.S. tax act will hurt the company's earnings in fiscal 2018. Maintenance outage costs are also affecting its margins.
Per the Zacks analyst, Hewlett Packard's margins will continue to be negatively impacted by competitive pricing as well as heightened commodity pricing in the near term.
Per the Zacks analyst, elevated costs of certain key raw materials including caustic soda will weigh on Century Aluminum's margins. High prices for power at its Mt. Holly smelter is another concern.
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