Top Analyst Reports For Merck, Novartis & Mondelez
Zacks Investment Research | Mar 03, 2020 03:00AM ET
Tuesday, March 3, 2020
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 Merck (MRK), Novartis (NVS) and Mondelez (NASDAQ:MDLZ) International (MDLZ). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
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Merck’s shares have underperformed the Zacks Large Cap Pharmaceuticals industry over the past six months (-5.4% vs. +6%). The Zacks analyst believes that Merck’s products like Keytruda, Lynparza and Bridion are driving sales. Keytruda sales are gaining from continued uptake in lung cancer and increasing usage in other cancer indications.
Keytruda has strong growth prospects based on increased utilization, recent approvals for new indications and potential additional approvals worldwide. Animal health and vaccine products remain core growth drivers.
The potential separation into two companies makes strategic sense as the remaining Merck should be able to achieve higher profits than the combined company. However, generic competition for several drugs and rising competitive pressure, mainly on the diabetes franchise will continue to be overhangs on the top line.
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Shares of Novartis have lost -2.6% over the past year against the Zacks Large Cap Pharmaceuticals industry’s rise of +1.9%. The Zacks analyst believes that solid performance of key drugs like Cosentyx and Entresto, and contribution from gene therapy, Zolgensma, have boosted performance in recent times and offset the impact of generic competition for legacy drugs.
Novartis has a strong oncology portfolio and a formidable generics business. New launches like Piqray, Mayzent and Beovu should further boost sales. The biosimilar portfolio also gains traction with new key approvals. Novartis’ decision to restructure its business is a positive and should boost the pharma segment. The deep pipeline is encouraging as well.
However, price erosion in the United States has adversely impacted the generic business. Moreover, pipeline setbacks and generic competition for additional drugs are concerning.
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Mondelez’s shares have gained +4.3% over the past three months against the Zacks Food Preparation industry’s fall of -5.6%. The Zacks analyst believes that the company’s focus on brand building through innovation and acquisitions has been yielding results.
Evidently, the buyout of minority stakes in Perfect Snacks along with investments in Hu Master and Uplift Foods, indicates the company's efforts to boost healthy offerings. Also, Mondelez is bolstering presence in the emerging regions.
Notably, management expects organic net revenues to grow more than 3% for 2020. However, adjusted gross margin declined 10 bps due to plant transition hurdles in Brazil, inflation in Argentina and weak powdered beverages in the quarter. Also, it grapples with adverse currency movements.
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Other noteworthy reports we are featuring today include ServiceNow (NOW), Deere (DE) and General Dynamics (GD).
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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, ServiceNow benefits from rising adoption of its workflows from companies undergoing digital transformation. Also, strategic alliances with the likes of Microsoft (NASDAQ:MSFT) are a tailwind.
Per the Zacks analyst, rising U.S farm income will drive demand for Deere's agricultural equipment while the coronavirus outbreak will impact road building sales in China and disrupt its supply chain.
Per the Zacks Analyst, a strong rise in demand for the company's varied defense products leads to organic growth.
Huge inventory of premium drilling wells in the Eagle Ford shale will contribute to EOG Resources' oil production. But, escalating lease and well operating costs are a concern, per the Zacks analyst.
Per the Zacks analyst, new business wins, a strong balance sheet position, synergies from strategic buyouts and global footprint are expected to continue supporting State Street's profitability.
Hormel Foods' Refrigerated Foods unit remained strong in the first quarter despite facing input cost inflation. Per the Zacks analyst, this unit is set to keep gaining on solid pricing and innovation.
Per the Zacks Analyst, it plans to invest $16 billion over 2020 - 2024 period in regulated operations to boost earnings.
Per the Zacks analyst, ServiceNow benefits from rising adoption of its workflows from companies undergoing digital transformation. Also, strategic alliances with the likes of Microsoft (NASDAQ:MSFT) are a tailwind.
Per the Zacks analyst, rising U.S farm income will drive demand for Deere's agricultural equipment while the coronavirus outbreak will impact road building sales in China and disrupt its supply chain.
Per the Zacks Analyst, a strong rise in demand for the company's varied defense products leads to organic growth.
Huge inventory of premium drilling wells in the Eagle Ford shale will contribute to EOG Resources' oil production. But, escalating lease and well operating costs are a concern, per the Zacks analyst.
Per the Zacks analyst, new business wins, a strong balance sheet position, synergies from strategic buyouts and global footprint are expected to continue supporting State Street's profitability.
Hormel Foods' Refrigerated Foods unit remained strong in the first quarter despite facing input cost inflation. Per the Zacks analyst, this unit is set to keep gaining on solid pricing and innovation.
Per the Zacks Analyst, it plans to invest $16 billion over 2020 - 2024 period in regulated operations to boost earnings.
New Upgrades/h6
Per the Zacks analyst, Macy's price optimization, cost containment and omnichannel strategy will help lift performance. The company's focus on private label brands will help improve profit margins.
Per the Zacks analyst, Cogent is poised to benefit from higher On-Net revenues and network investments, backed by accretive customer connections and cost-effective operations.
Per the Zacks analyst, solid partnerships with product manufacturers and strong sales execution can drive robust margin improvement in Patterson Companies' core Animal Health unit.
Per the Zacks analyst, Macy's price optimization, cost containment and omnichannel strategy will help lift performance. The company's focus on private label brands will help improve profit margins.
Per the Zacks analyst, Cogent is poised to benefit from higher On-Net revenues and network investments, backed by accretive customer connections and cost-effective operations.
Per the Zacks analyst, solid partnerships with product manufacturers and strong sales execution can drive robust margin improvement in Patterson Companies' core Animal Health unit.
New Downgrades/h6
Per the Zacks analyst, Flex's substantial China exposure amid coronavirus crisis is likely to weigh on near-term financial performance. Also, the company's leveraged balance sheet is a major concern.
Per the Zacks analyst, Steven Madden has been witnessing higher operating expenses and cost of sales for a while now. This has been weighing on the company's gross and operating margins.
Per the Zacks analyst, GoPro is likely to be hit by cannibalization of action cameras, lower pricing power and production delay with cheaper alternatives from low-priced competitors entering the fray.
Per the Zacks analyst, Flex's substantial China exposure amid coronavirus crisis is likely to weigh on near-term financial performance. Also, the company's leveraged balance sheet is a major concern.
Per the Zacks analyst, Steven Madden has been witnessing higher operating expenses and cost of sales for a while now. This has been weighing on the company's gross and operating margins.
Per the Zacks analyst, GoPro is likely to be hit by cannibalization of action cameras, lower pricing power and production delay with cheaper alternatives from low-priced competitors entering the fray.
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