Tuesday, July 23, 2019

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), JPMorgan (JPM) and Wells Fargo (WFC). 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 gained +29% in the past year, outperforming the S&P 500’s’ gain of +4.1% during the same period. Microsoft reported stellar fourth-quarter results. Both top and bottom lines increased year over year. Robust execution and better-than-expected demand from customers for hybrid cloud offerings drove quarterly results.

Moreover, strong Commercial business positively impacted top and bottom line. The Zacks analyst thinks Microsoft is benefiting from a growing user base for several of its applications like Office 365 commercial, Dynamics, Outlook mobile and Teams. Further, acquisitions like PlayFab and GitHub expand Microsoft’s TAM and penetration.

Also, Microsoft’s collaboration with AT&T bodes well. The company is consistently integrating the cloud capabilities of Azure into its gaming segment which is yet another positive. However, stiff competition remains a concern.

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

Shares of JPMorgan have gained +1.7% in the past three months, outperforming the Zacks Major Regional Banks industry’s decline of -0.2%. It has an impressive earnings surprise history, having surpassed expectations in three of the trailing four quarters. The bank’s second-quarter 2019 results depict decent loan growth and lower credit costs, while dismal trading and investment banking performance was on the downside.

The Zacks analyst thinks improving loan balance, strong balance sheet, branch openings in new regions, focus on strengthening credit card business and the deal to acquire InstaMed will support the bank’s financials. However, weak mortgage banking performance, mainly due to lower origination volume and rise in competition, is a concern.

The company’s excessive dependence on capital markets revenues is another major concern. These concerns are expected to hamper fee revenue growth to some extent.

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

Wells Fargo’s shares have underperformed the Zacks Major Regional Banks industry in the past six months (-6.1% vs. +3.5%). Its earnings surprise history is impressive, with results surpassing expectations in three of the trailing four quarters. Second-quarter results reflect fee income growth and lower costs, partially offset by higher provisions.

The Zacks analyst thinks restructuring activities and higher interest income, aided by loan growth, are a tailwind. Further, reinvestment in businesses to enhance compliance and risk management capability bodes well. However, Wells Fargo has been slapped with several sanctions, including a cap on asset growth by the Fed.

These restrictions will remain in force given the CFPB’s dissatisfaction with the bank’s progress on fixing risk-management issues. Also, rising expenses due to pending litigation issues and hike in personnel costs curb bottom-line expansion.  

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

Other noteworthy reports we are featuring today include American Express (AXP), Schlumberger (SLB) and Exxon Mobil (XOM).

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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 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 Cloud & Office 365 Strength Aids Microsoft (MSFT)

New Branches, Loan Growth Aid JPMorgan (JPM), Mortgage Ails

Loan Growth Supports Wells Fargo (WFC), Legal Issues Linger

Featured Reports

Solid Balance Sheet, Rising Revenues Aid American Express (AXP)

Per the Zacks analyst, rise in revenue from business growth in new verticals, shift toward digital and increase in consumer spending are positives.

Schlumberger (SLB) Banks on International Oilfield Services

The Zacks analyst thinks higher spending by explorers through 2019 in international markets will boost Schlumberger’s oilfield services.

VALE (VALE) Bets on High Iron Prices, Lower Production Ails

Per the Zacks analyst, Vale will benefit from lower debt, efforts to transform its base metals business and higher iron ore prices despite lost production due to the Brumadinho tailings dam failure.

Cloud & Software Business Growth Aids SAP, Spend on the Rise

Per Zacks analyst, SAP’s resilient Cloud and Software business, and robust adoption of S/4 HANA are key catalysts.

Diverse Revenue Mix Aids Moody’s (MCO), Elevated Costs a Woe

Per the Zacks analyst, Moody’s is poised for growth given its diverse revenue mix and low-risk product portfolio.

Gentex (GNTX) Rides on Product Strategy Amid Expense Woes

Per the Zacks analyst, improved product strategy with better mix and innovative launches are aiding Gentex’s revenues growth.

United Rentals (URI) Gains From Buyouts, Poor Weather Hurts

Per the Zacks analyst, United Rentals gains from Project XL initiatives, accretive acquisitions and solid end-market demand.

New Upgrades

HP (HPQ) Benefits From Growing Demand for Commercial PCs

Per the Zacks analyst, buoyant demand in the commercial PC market owing to the Windows 10 refresh cycle is boosting HP’s top line.

Assets Growth, Inflows Support Eaton Vance (EV) Revenues

Per the Zacks analyst, improving assets under management balance, steady inflows and Eaton Vance’s diverse product offerings, investment strategies and global footprint will aid revenues.

Solid Mortgage insurance in Force Drives Radian (RDN)

Per the Zacks analyst, Radian is poised for growth banking on solid persistency driving insurance in force as well as an increase in new mortgage insurance business and declining claim payments.

New Downgrades

Turnaround Work Affects ExxonMobil’s (XOM) Downstream Unit

The Zacks analyst is concerned about the heavy turnaround activities that will affect ExxonMobil’s downstream operations.

Unplanned Outages Weigh on NRG Energy (NRG)

Per the Zacks analyst, despite up-gradation and repair, unplanned outages in old facilities resulting in lower production may hurt NRG Energy’s profitability.

Badger Meter (BMI) Plagued by Order Deferrals, High R&D Costs

Per the Zacks analyst, order deferrals and lack of concrete order visibility have clouded the revenue-generating capabilities of Badger Meter. High R&D costs are likely to further strain bottom line.

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Exxon Mobil Corporation (XOM) : Free Stock Analysis Report
Wells Fargo & Company (WFC) : Free Stock Analysis Report
Schlumberger Limited (SLB) : Free Stock Analysis Report
Microsoft Corporation (MSFT) : Free Stock Analysis Report
JPMorgan Chase & Co. (JPM) : Free Stock Analysis Report
American Express Company (AXP) : Free Stock Analysis Report
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