Thursday, May 5, 2022
Zacks Research Daily features top research results from our team of analysts. Today’s Research Daily features new research reports on 16 major stocks, including Oracle Corporation (ORCL), Union Pacific Corporation (UNP) and Ford Motor Company (F). These research reports have been handpicked from the approximately 70 reports published today by our team of analysts.
You can see all today’s research reports here >>>
Oracle stocks did better than the broader Zacks Tech sector over the year period (-15.5% vs. -18.9%), but they lagged the S&P 500 Index (- 15.5% versus -9.8%), a change of opinion function on the sector in a context of rising interest rates. The Zacks analyst believes higher spending on product enhancements, particularly to the cloud platform, amid growing cloud competition, is likely to limit margin expansion.
On the other hand, Oracle is benefiting from the continued momentum of its cloud business, driven by strong adoption of Oracle Cloud Infrastructure services and Autonomous Database offerings. The massive adoption of cloud-based applications, including NetSuite Enterprise Resource Planning (ERP), Fusion ERP and Fusion Human Capital Management (HCM), bodes well.
Strong demand for Oracle Dedicated Region Cloud@Customer is expected to drive revenue. Partnerships with Accenture and Microsoft help Oracle win new customers. The company’s stock buybacks and dividend policy are outstanding.
Shares of Union Pacific have outperformed the Zacks Transportation – Rail industry over the past year (+4.4% vs. +0.7%). The Zacks analyst believes Union Pacific’s efforts to reward its shareholders, even in the current uncertain scenario, are commendable. The company has increased its dividend twice in 2021. The rail operator is also active on the buyout front.
UNP returned $3.5 billion to shareholders in the first quarter of 2022. Management expects share buybacks in 2022 to be in line with 2021 levels of $7.3 billion. The company’s strong free cash flow generating capacity supports its shareholder-friendly activities. Rising freight revenues (up 17% year-over-year in Q1 2022) as economic activities pick up speed is an additional positive.
However, escalating fuel costs (up 74% in the March quarter) as oil prices move north resulted in a 16% increase in operating expenses. The high debt-to-EBITDA ratio and weak automotive demand are other concerns. High investments can also spoil the party.
Shares of Ford engine have outperformed the industry Zacks Automotive – Domestic over the past year (+27.6% vs. +3.9%). The Zacks analyst believes that the strong vehicle mix supported by F-series trucks and SUV models, including Escape, Explorer, Expedition, EcoSport and Edge, among others, should bolster Ford’s revenue. The robust line of electric vehicles (EVs) – with Mustang Mach-E, E-Transit and F-150 Lightning – are receiving strong reception and are expected to drive growth.
The rosy forecast for 2022 also inspires optimism. The Ford+ plan, focused on growing profitability, the future of electric mobility and improving the customer experience, bodes well. Yet massive electrification spending of more than $50 billion by 2026 risks straining short-term cash flow. High raw material and freight expenses, a tough labor market and logistical challenges will affect earnings in the short term.
Other noteworthy reports we feature today include Biogen Inc. (BIIB), PPG Industries, Inc. (PPG) and Expedia Group, Inc. (EXPE).
Director of Research
Note: Sheraz Mian leads the equity research department at Zacks and is a well-known expert on overall earnings. He is frequently quoted in the written and electronic press and publishes the weekly Earnings Trends and Revenue overview reports. If you would like to receive an email notification whenever Sheraz publishes a new article, please click here>>>
To read today
Biogen’s (BIIB) Upcoming Product Launches Could Boost Growth
The Zacks analyst says potential new product launches like lecanemab, zuranolone and other biosimilars can help jump-start growth at Biogen, which currently faces multiple challenges.
Consistent investments, targeted aid for renewable energies AVANGRID (AGR)
According to the Zacks analyst, AVANGRID’s steady investments to strengthen infrastructure and expand clean energy generation assets will boost its operation.
Higher average daily compression volumes Aid Antero (AM)
Antero Midstream wins on higher average daily compression volumes. However, the rise in the company’s direct operating expenses worries the Zacks analyst.
Strong demand and acquisitions contribute to the performance of Fortive (FTV)
According to the Zacks analyst, strong customer demand trends and synergies from acquisitions are driving Fortive’s revenue performance. The growth of the software sector is another tailwind.
Helping Sallie Mae (SLM) Loan Origin Grow Despite High Leverage
According to the Zacks analyst, secular growth trends in the private student loan industry will drive loans for Sallie Mae. Yet high debt seems unmanageable compared to a weaker cash position.
Cost reduction, acquisitions to help PPG Industries (PPG)
According to the Zacks analyst, PPG will benefit from cost savings through restructuring actions and acquisition synergies amid headwinds from rising raw material and logistics costs.
Expedia (EXPE) benefits from strengthening gross bookings
According to the Zacks analyst, the increase in gross bookings due to improved domestic and international travel demand is helping Expedia Group’s performance.
Gartner (IT) Benefits from a High-Quality Analytics Offering
The Zacks analyst believes Gartner’s high-quality, timely, thought-provoking, and comprehensive analytics offering helps it stave off growing competition.
World Wrestling (WWE) New content creation to increase revenue
According to Zacks analyst, World Wrestling’s focus on creating content, growing subscribers, increasing content rights fees, and monetizing video content on digital and DTC platforms bodes well.
WR Berkley (WRB) set to grow on strong insurance business
According to the Zacks analyst, WR Berkley’s insurance business is expected to grow on the back of rate increases, reserve discipline and improved international unit premiums supported by emerging markets.
China’s dismal performance and high costs hurt Starbucks (SBUX)
Starbucks’ results in the third and fourth quarters of fiscal 202222 will likely be impacted by the resurgence of coronavirus cases in China and high costs, according to the Zacks analyst.
Forex Woes, Mounting Spend Harms Alignment Technology (ALGN)
The Zacks analyst worries about increased operating expenses at Align Technology, which is putting pressure on its results. Adverse movements in foreign currencies continue to hamper financials.
Philip Morris (PM) gross margin impacted by cost inflation
According to the Zacks analyst, Philip Morris is troubled by cost issues. Management expects 2022 gross margin to be impacted by initial cost of IQOS ILUMA devices and inflation on certain key supply chain elements
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.