Top Analyst Reports For Merck, Occidental Petroleum & Capital One Financial
Zacks Investment Research | Jun 07, 2018 02:47AM ET
Thursday, June 7, 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 Merck (NYSE:MRK), Occidental Petroleum (OXY) and Capital One Financial (COF). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
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Buy-ranked Merck’s shares have outperformed the Zacks Large Cap Pharmaceuticals industry year to date, gaining +10% versus a loss of -4.0%. The Zacks analyst thinks Merck’s new products like Keytruda, Lynparza and Bridion should continue to contribute meaningfully to the top line in 2018.
Keytruda sales are gaining strong momentum with approval for additional indications especially in the first-line lung cancer setting as it is the only anti-PD-1 approved in this setting. Its Animal Health unit is also strong and remains a core growth driver for Merck.
Meanwhile, Merck will continue to focus on cost-cutting initiatives to drive the bottom line. 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 on products like Isentress (HIV), Zepatier (HCV) and Zostavax (vaccine) will remain headwinds in 2018.
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Shares of Strong Buy-ranked Occidental Petroleum have outperformed the Zacks Domestic Integrated Oil industry in the last year, gaining +47.5% vs. +43.5%. As oil prices continue to improve, Occidental Petroleum gains from more oil production in the Permian Resources and concentrating on high-margin production region.
The Zacks analyst thinks ongoing capital investment will further strengthen the existing operations of the company. The company generates stable cash flow and its Chemical plant will further improve this metric. However, Occidental Petroleum, like other oil and natural gas companies, faces the risks of cost overruns and development interruptions due to delays in drilling and other approvals.
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Capital One Financial’s shares have outperformed the Zacks Consumer Loans industry in the last six months, gaining +0.7% vs. -1.1%. Further, the company has an impressive earnings surprise history, having earnings expectations in three of the trailing four quarters.
The Zacks analyst thinks that its solid liquidity position, strength in credit card and online banking businesses, higher interest rates and solid loan balance will aid growth. Also, benefits from the lower tax rates and restructuring initiatives will support its financials.
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However, mounting operating expenses are likely to keep the company’s bottom line under pressure. Expenses are expected to remain high driven by the company’s business restructuring efforts. Also, deteriorating asset quality remains a major near-term concern.
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Other noteworthy reports we are featuring today include Kimberly-Clark (KMB), Anadarko Petroleum (NYSE:APC) and Allstate (ALL).
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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
Featured Reports
Per Zacks analyst strong oil production from Anadarko's premium shale properties in Delaware and DJ basins will boost its performance.
Per the Zacks analyst, the performance of the company's Property-Liability segment remains strong owing to pricing discipline and strong claims management that has contributed to topline growth.
The Zacks analyst believes that Chesapeake's strong oil output growth in 2018 amid favorable prices will boost its margin, but high debt burden is a cause of concern.
The Zacks analyst is worried about adverse product mix and rising logistics costs putting pressure on gross margin.
While Albemarle faces headwinds from higher expected tax rate in 2018, it should gain from expansion actions in its lithium unit and strong growth in the lithium market, per the Zacks analyst.
Per the Zacks analyst, Guidewire's elaborate partnership programs and strategic collaborations are major growth drivers.
Per the Zacks analyst, Dave & Buster's continued pursuit to drive revenues through new store growth in both new and existing markets bodes well.
New Upgrades
Per the Zacks analyst, St. Joe's focus on its leasing, as well as resort and leisure segment will likely provide cushion from revenue volatility in other segments.
The Zacks analyst likes Republic Services' decision to shift to compressed natural gas collection vehicles to boost operational efficiency. However, weak landfill pricing and competition hurt.
Per the Zacks analyst Eversource Energy's investment to produce more electricity from green sources and start of water operations through acquisition will boost its performance.
New Downgrades
Per the Zacks analyst, Novo Nordisk is facing a risk from generics/biosimilars as patents for key products have expired or nearing expiration. The company is also facing pricing pressure for few drugs.
Per the Zacks analyst, Kimberly-Clark's first quarter profit was largely hurt by higher pulp and other raw material costs. This led to a raised input cost inflation view of $400-$550 million for 2018.
Per the Zacks analyst, Principal Financial's escalating expenses, mainly due to operating costs, will continue to restrict operating margin expansion.
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