News

Tuesday, May 7, 2024

The Zacks Research Daily presents the best research output of our analyst team. Today's Research Daily features a real-time update on the Q1 earnings season, in addition to updated research reports on 16 major stocks, including Tesla, Inc. (TSLA), Johnson & Johnson (JNJ) and Netflix, Inc. (NFLX). 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 >>>

Q1 Earnings Season Scorecard

Including all of the reports that came out this morning, we now have Q1 results for 426 S&P 500 members or 85.2% of the index's total membership. Total earnings for these companies are up +5.2% from the same period last year on +4.1% higher revenues, with 78.2% beating EPS estimates and 61% beating revenue estimates.

The Q1 EPS beats percentage of 78.2% compares to a 20-quarter average of 77.8% and high-low range of 68.8% and 86.6% for this group of 426 index members. The Q1 revenue beats percentage of 61% compares to a 20-quarter average for this group of 426 index members of 70.1%, with the high-low range of 58.8% and 86.2%.

In other words, positive revenue surprises are on the lower side relative to recent history. The Q1 earnings and revenue growth rates represent an acceleration from what we had been seeing over the last few quarters, with the growth rates imrpoving further when seen on an ex-Energy basis.

Excluding the Energy sector, Q1 earnings growth for the rest of the index would be up +8.4%. If also adjust for the big Brystal Myers one-charge, the Q1 earnings growth improves to +12.1% on +4.7% higher revenues.

Today's Featured Analyst Reports

Shares of Tesla have underperformed the Zacks Automotive - Domestic industry over the year-to-date period (-25.6% vs. -22.7%). The company’s shrinking automotive margins and a slowdown in deliveries amid a cooling electric vehicle (EV) market have been plaguing. Tesla expects its vehicle volume growth rate for 2024 to be noticeably lower than 2023.

With competition intensifying in the EV space, Tesla’s focus on autonomous driving and artificial intelligence (AI) is expected to be a game changer. It aims to launch affordable vehicles, transition into an AI company and is banking on its robotaxi venture. The successful introduction of its Full Self Driving (FSD) software in China amid stiff competition marks a significant win.

Additionally, TSLA’s Energy Generation and Storage business is thriving. While near-term challenges persist, long-term prospects appear promising, driven by its big bet on driverless software and AI in an attempt to revive sales.

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

Johnson & Johnson shares have underperformed the Zacks Large Cap Pharmaceuticals industry over the past year (-5.7% vs. +19.4%). The company is witnessing headwinds like generic competition and pricing pressure continue. J&J faces the upcoming patent expiration of Stelara. Though it has taken meaningful steps to resolve its talc and opioid litigation, uncertainty regarding the talc litigations persists.

Nevertheless, J&J’s Innovative Medicine unit is performing at above-market levels. Its growth is being driven by existing products like Darzalex, Stelara, Tremfya and Erleada, and also the continued uptake of new launches, including Spravato, Carvykti and Tecvayli.

The MedTech unit is showing improving trends, driven by a recovery in surgical procedures and contribution from new products. J&J is making rapid progress with its pipeline and line extensions.

(You can read the full research report on Johnson & Johnson here >>>)

Shares of Netflix have outperformed the Zacks Broadcast Radio and Television industry over the year-to-date period (+22.6% vs. +7.4%). The company added 9.33 million paid subscribers globally in first-quarter 2024, with a rise of 1% in average revenue per subscription. The company attributed the robust top-line growth to its paid subscription-sharing offering (part of its password-sharing crackdown), recent price changes and the strength of its business in general.

Netflix is expected to continue dominating the streaming space, courtesy of its diversified content portfolio, which is attributable to heavy investments in the production and distribution of localized and foreign-language content.

However, stiff competition in the streaming space from the likes of Apple, Amazon Prime Video, Disney+, Peacock and Paramount+ is a headwind. NFLX’s leveraged balance sheet and a higher streaming obligation are concerns.

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

Other noteworthy reports we are featuring today include Abbott Laboratories (ABT), TotalEnergies SE (TTE) and ConocoPhillips (COP).

Director of Research

Sheraz Mian

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

Featured Reports

Abbott (ABT) Gains From Robust R&D Pipeline and Libre Sales
The Zacks Analyst is impressed that Abbott's accelerated investments in the R&D pipeline are driving new growth opportunities. Robust Freestyle Libre CGM sales is also encouraging.

Expanding LNG & Clean Energy Assets Aid TotalEnergies (TTE)
Per the Zacks analyst TotalEnergies's presence in entire LNG value chain and expansion of clean energy generation through joint venture and acquisition will boost its performance.

Increasing Global LNG Footprint Aids ConocoPhillips (COP)
ConocoPhillips stands to gain from its growing global LNG presence, given LNG's pivotal role in energy transition. However, the company's declining free cash flow concerns the Zacks analyst.

Keurig Dr Pepper (KDP) Refreshment Beverages Unit Performs Well
Per the Zacks analyst, Keurig Dr Pepper is seeing strength in the Refreshment Beverages segment for a while now. In first-quarter 2024, sales in the segment rose 4.3% year over year.

Higher Rates Support BNY Mellon (BK), Rising Costs A Concern
Per the Zacks analyst, global footprint, higher interest rates and strong balance sheet are expected to keep supporting BNY Mellon's financials amid higher expenses and rising funding costs.

AXIS Capital (AXS) Set to Grow on Improved Portfolio Mix
Per the Zacks analyst, AXIS Capital continues to build on Specialty Insurance, Reinsurance plus Accident and Health. Improved portfolio mix and effective capital deployment should pave way for growth.

FormFactor (FORM) Rides on Strong Demand for Probe Cards
Per the Zacks analyst, FormFactor is benefiting from robust demand for probe cards driven by strong adoption of advanced packaging processes by major foundry and logic customers.

New Upgrades

Pinterest (PINS) Rides on Healthy User Engagement, AI Focus
Per the Zacks analyst, growing monthly active users across all regions will likely drive Pinterest's top line. Integration of AI to improve personalization and boost conversion rate is a tailwind.

Product Expansion & Partnerships Aid Hasbro's (HAS) Prospects
Per the Zacks analyst, Hasbro is poised to benefit from product innovation, operational excellence initiative and a strong product line up. Also, strategic partnership with Playmates bode well.

Operational Excellence & Buyouts Aid Armstrong World (AWI)
Per the Zacks analyst, Armstrong World has been benefiting from operational excellence and recent acquisitions. Also, solid contributions from the Mineral Fiber and Architectural Specialties segments

New Downgrades

Schneider (SNDR) Continues to Grapple With Segmental Weakness
Per the Zacks Analyst, below par performance in the Intermodal and Logistics segments is hurting Schneider's top line. Lowered earnings outlook for 2023 looks disappointing.

High Input Costs, Supply Constraints to Hurt Astec (ASTE)
The Zacks analyst is concerned that elevated input costs and manufacturing challenges due to supply chain and logistic disruptions will continue to weigh on Astec's results this year.

Dependency on Respiratory Revenues Hurt QuidelOrtho (QDEL)
Per the Zacks analyst, QuidelOrtho is being negatively impacted by its over-dependency on diagnostic tests. Stiff competitive space along with macroeconomic concerns persist as well.

Where Will Stocks Go…

If Biden Wins? If Trump Wins?

The answers may surprise you.

Since 1950, even after negative midterm years, the market has never had a lower presidential election year. With voters energized and engaged, the market has been almost unrelentingly bullish no matter which party wins!

Now is the time to download Zacks' free Special Report with 5 stocks that offer extreme upside for both Democrats and Republicans…

1. Medical manufacturer has gained +11,000% in the last 15 years.

2. Rental company is absolutely crushing its sector.

3. Energy powerhouse plans to grow its already large dividend by 25%.

4. Aerospace and defense standout just landed a potentially $80 billion contract.

5. Giant Chipmaker is building huge plants in the U.S.

Hurry, Download Special Report FREE >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

To read this article on Zacks.com click here.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.