Top Research Reports For Wal-Mart, 3M & Union Pacific
Zacks Investment Research | Jan 15, 2018 01:53AM ET
Monday, January 15, 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 Wal-Mart (WMT), 3M (MMM) and Union Pacific (UNP). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
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Buy-rated Wal-Mart’s shares have been strong performers lately, with the stock up +32.1% over the last six months, outperforming the S&P 500's +13.3% gain in the same time period. Wal-Mart Stores (NYSE:WMT), recently announced plans to drop the “hyphen” and “stores” from its name to officially emerge as an omnichannel retailer.
The company has been riding on its robust past record, which derives strength from constant e-commerce initiatives, like buyouts, alliances, surging grocery business and improved delivery systems. Thanks to these trends, along with solid traffic, Walmart’s third-quarter fiscal 2018 marked its ninth and 13th straight quarter of positive earnings surprise and comps growth, respectively.
Also, the company’s international business remains a growth driver. However, costs associated with technological and e-commerce investments; mix impact from growing e-commerce operations and a compelling pricing strategy have been hurting Walmart’s gross margin for a while now. Stiff competition and volatile consumer spending also pose threats.
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Shares of Buy-rated 3M have gained +11.8% over the past three months, outperforming the Zacks Diversified Operations industry, which has gained +1.9% over the same period. The Zacks analyst likes 3M's global footprint, diversified product portfolio and ability to penetrate different markets.
Moreover, 3M is continuing with its portfolio restructuring efforts by divesting assets that no longer fit in its strategy and continues to make investments in other lucrative markets. Portfolio management, investment in innovation and business transformation are the three key levers on which 3M intends to focus. 3M also intends to continue investing in capital expenditures and R&D to support organic growth as it aims a prudent capital structure strategy and increased capital deployment.
Furthermore, 3M is standardizing its business processes through a new, global ERP system and expects to save $500 to $700 million annually by 2020. However, high pension expenses continue to be a drag on the company’s bottom line.
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Buy-rated Union Pacific’s shares have outperformed the Zacks Rail industry as well as fellow railroad operator Norfolk Southern Corporation (NYSE:NSC) over the last six months. While Union Pacific has gained 29.5%, the industry it belongs to and Norfolk Southern have rallied 15.5% and 25%, respectively, in the same time period.
The Zacks analyst expects volume growth to aid Union Pacific's results in the fourth quarter of 2017. Key segments like intermodal and chemicals should drive growth. Detailed results should be out on Jan 25. The company's efforts to reward shareholders through share buybacks and dividend payouts are also impressive. Its efforts to cut costs to drive its bottom line are encouraging too.
The positive sentiment surrounding the stock can be made out from the fact that the Zacks Consensus Estimate for fourth-quarter earnings has been revised 0.7% upward over the last 60 days. However, declining automotive volumes and high debt levels are concerns.
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Other noteworthy reports we are featuring today include Humana (HUM), Southern (SO) and Western Duke Energy (DUK).
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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
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Featured Reports
The Zacks analyst likes the company's performance with respect to total revenue per available seat miles (TRASM). Increased labor costs, however, are hurting the bottom-line.
Per the Zacks analyst, investments in digital platform have aided revenue growth and product diversification.
The Zacks analyst believes that the acquisition of Whitnell and the deal to acquire Bank Mutual as well as higher interest rates and loan growth will further support Associated's bottom line.
The Zacks analyst believes rising land, labor and construction costs pose a threat to the company's gross margins.
Per the Zacks analyst, hefty investments that Duke Energy made in its infrastructure upgrade will support its long-term earnings growth.
Per the Zacks analyst, Advanced Micro's release of Radeon RX Vega family of GPUs and alliance with companies like Baidu will drive the top and bottom line.
The Zacks analyst believes that Hilton's capital-light business model will continue to drive market share, units and free cash flow.
New Upgrades
The Zacks analyst believes that growing demand for government health plans has significantly boosted Humana's Medicare business which has, in turn, bolstered the company's revenue base.
The Zacks analyst believes that Newfield's strong focus on crude shale plays in the Anadarko basin will drive oil production.
The Zacks analyst likes the efforts to develop new delivery mechanisms for Remodulin and expanded indications for other PAH drugs like Orenitram and Tyvaso amid increasing competition.
New Downgrades
The Zacks analyst believes that Southern Company (NYSE:SO) shares will decline on continued timing and cost overrun issues over two large construction projects - Vogtle and Kemper.
Per the Zacks analyst, escalating costs related to product launches and re-building infrastructure is expected to keep Wright Medical's margins under pressure, in the quarters to come.
Per the Zacks analyst, sustained weakness in Allegheny's Flat-Rolled Products (FRP) unit may continue to weigh on its bottom line in Q4.
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