Top Analyst Reports for Microsoft, Merck & Union Pacific

Monday, April 9, 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 Microsoft (MSFT), Merck (MRK) and Union Pacific (UNP). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.

You can see all of today’s research reports here >>>

Microsoft’s shares have outperformed the Zacks Technology sector over the last year (up +37.7% versus +16.1%) Microsoft has a dominant position in the desktop PC market, with its operating systems being used in the majority of PCs worldwide. The company’s strategic growth investments in cloud business and AI are a positive. The launch of Surface LTE and the new generation of Windows 10 PCs from its OEM partners bodes well for the company.

Also, Microsoft’s recent blockchain deals with Hapoalim and Accenture and its Coco framework are tailwinds. The Zacks analyst thinks rapid adoption of Azure and Office 365 to remain the key catalysts in the near future. Further, collaborations with Amazon, Red Hat, Symantec, Cray and PAREXEL are positive for the company's growth prospects.

Microsoft’s strategic initiatives to enter the augmented reality and virtual reality market are other positives. However, its business reorganization and “cloud-first mobile-first” execution risks remain. Competition remains stiff.

(You can read the full research report on Microsoft here >>>).

Shares of Merck have underperformed the Zacks Large Cap Pharmaceuticals industry over the past year, losing -14.7% versus a gain of +5.2%. 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.

The 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. Estimates have gone up slightly ahead of the company’s Q1 earnings release. Merck has a positive record of earnings surprises in the recent quarters.

(You can read the full research report on Merck here >>>).

Union Pacific’s shares have outperformed the Zacks Rail industry (+21 vs. +11.9%) as well as fellow railroad operator Norfolk Southern Corporation (+12%) over the last year. The Zacks analyst thinks higher freight revenues will boost Union Pacific's first-quarter results, scheduled to be released on Apr 26. The metric is expected to increase on the back of overall volume growth, among other factors.

Moreover, the intermodal unit is anticipated to continue with its impressive performance in the soon-to-be reported quarter. The company's efforts to reward shareholders are also encouraging. The $3.3 billion capital plan announced by the company earlier in the year is impressive as well.

A bulk of the amount will be spent toward promoting safety and enhancing productivity. However, weakness pertaining to the automotive sector is concerning. In fact, automotive volumes are also expected to be soft in the first quarter. Union Pacific's high debt levels also remain a woe.

(You can read the full research report on Union Pacific here >>>).

Other noteworthy reports we are featuring today include Rockwell Collins (COL), AstraZeneca (AZN) and Schwab (SCHW).

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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 Earnings Trends and Earnings Preview reports. If you want an email notification each time Sheraz publishes a new article, please click here>>>

Today's Must Read

Adoption of Azure & Office 365 Strength Aids Microsoft (MSFT)

New Drugs to Drive Merck's (MRK) Sales as Competition Soars

Volume Growth Buoys Union Pacific (UNP) Amid Debt Woes

Featured Reports

Hess' (HES) Cost-Reduction Plan Dents Lower Gulf Output

Although lower contribution from Gulf of Mexico hurts Hess, the company's impressive cost-reduction plan for 2018 will boost future earnings, per the Zacks analyst.

Strong Class 8 Lineup & Cost Savings Aid Navistar (NAV)

Per the Zacks analyst, Navistar is gaining from new products & improved Class 8 lineup. Also, cost-saving initiatives like engine restructuring and reductions in discretionary spending are aiding it.

American Eagle's (AEO) Sturdy Comps Run to Propel Top-Line

Per the Zacks analyst, enhanced online and in-store customer experiences at both brands due to able use of omni-channel strategies should drive sales.

Product and Service Lines to Aid Intercontinental (ICE)

Per the Zacks analyst, Intercontinental Exchange's focus on boosting its already strong product and service lines will continue to contribute to top-line growth, thus driving overall performance.

Asset Growth Aids Invesco's Top-Line (IVZ), High Costs a Woe

Per the Zacks analyst, Invesco's top line is aided by assets under management growth, which is driven by volatility in the equity markets.

Trading Business Braces Schwab (SCHW), Higher Costs a Woe

Per the Zacks analyst, Schwab's aggressive efforts to strengthen trading revenues and higher interest rates will support profitability.

Williams-Sonoma (WSM) Banks on Innovation, Competition Stiff

The Zacks analyst stresses that Williams-Sonoma's innovative products and marketing techniques drive revenues in the wake of a competitive retail environment.

New Upgrades

Order Growth and R&D Program to Aid Rockwell Collins (COL)

Per the Zacks analyst, Rockwell Collins' strong order growth for its varied products boost its growth trajectory. Also its steady focus on research and development will drive its future revenues.

Cost Cuts, Strong Demand to Aid Century Aluminum (CENX)

The Zacks analyst thinks that Century Aluminum should gain from its actions to reduce operating costs and strong demand for primary aluminum across automotive and aerospace end-use markets.

Hill-Rom (HRC) Gains Ground on Connex Cardio ECG Platform

Per the Zacks analyst, Hill-Rom is focusing on product innovation, the latest one being Connex Cardio ECG. Solid global foothold will also provide the company with a competitive edge in MedTech.

New Downgrades

AstraZeneca (AZN) Faces Generic Woes and Diabetes Pressure

The Zacks analyst informs that AstraZeneca's core products like Nexium, Crestor and Seroquel are facing generic competition which is hurting sales. The diabetes franchise also faces stiff competition.

Arconic (ARNC) Hurt by Hefty LIFO Charges, Pricing Woes

Per the Zacks analyst, Arconic faces earnings headwind from sizable charges related to LIFO (last-in, first-out) method of accounting. It is also exposed to pricing pressure in GRP and EP&S segments.

Monsanto (MON) to be Hit by China's Latest 25% Tariff Notice

Per the Zacks analyst, China's 25% tariffs (announced Apr 4) on agricultural products, like soybean, or headwinds, like stiff industry rivalry, might dent Monsanto's profitability.

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Union Pacific Corporation (UNP) : Free Stock Analysis Report
 
The Charles Schwab Corporation (SCHW) : Free Stock Analysis Report
 
Microsoft Corporation (MSFT) : Free Stock Analysis Report
 
Merck & Co., Inc. (MRK) : Free Stock Analysis Report
 
Rockwell Collins, Inc. (COL) : Free Stock Analysis Report
 
AstraZeneca PLC (AZN) : Free Stock Analysis Report
 
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