News

Tursday, July 18, 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 Q2 earnings season, the July Economic Outlook monthly and new research reports on 16 major stocks, including NVIDIA Corporation (NVDA), Meta Platforms, Inc. (META) and Amgen Inc. (AMGN), as well as a micro-cap stock Galaxy Gaming, Inc. (GLXZ). The Zacks microcap research is unique as our research content on these small and under-the-radar companies is the only research of its type in the country.

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 >>>

The July Economic Outlook

John Blank, our Chief Economist, discusses the evolving economic landscape and what that means for Fed policy in the July Economic Outlook report. You can see John's report here >>>To Cut, or Not to Cut - That is the Question

Q2 Earnings Season Scorecard

Including this morning's releases from the likes of D.R. Horton, Abott, Keycorp and others, we now have Q2 results from 61 S&P 500 members or 12.2% of the index's total membership.

Total earnings for these 61 index members are up +7.5% from the same period last year on +4.9% higher revenues, with 82% beating EPS estimates and 55.7% beating revenue estimates. The 82% EPS beats percentage for this group of 61 index members compares to 77% in 2024 Q1, 80.3% in 2023 Q4 and the average for the preceding 20 quarters (5 years) of 79.6%.

The 55.7% revenue beats percentage for this group of companies compares to 63.9% in the preceding period and 20-quarter low of 60.7%.

In other words, companies appear to be struggling to beat consensus revenue estimates at this stage in the Q2 reporting cycle.

Looking at Q2 as a whole, combining the actuals from the 61 companies with estimates for the still-to-come companies, total S&P 500 earnings are on track to be up +8.8% from the same period last year on +4.8% higher revenues.

For a more detailed look at the Q2 earnings season and evolving expectations for the coming periods, please check out our weekly Earnings Trends report here >>>Q2 Earnings Season Starts Positively

NVIDIA shares have outperformed the Zacks Semiconductor - General industry over the past year (+157.4% vs. +115.3%). The company is benefiting from the strong growth of artificial intelligence (AI), high-performance and accelerated computing.

The data center end-market business is benefiting from the growing demand for generative AI and large language models using graphic processing units (GPUs) based on NVIDIA Hopper and Ampere architectures. A surge in hyperscale demand and higher sell-ins to partners across the Gaming and ProViz end markets following the normalization of channel inventory are acting as tailwinds.

Collaborations with Mercedes-Benz and Audi are likely to advance its presence in the autonomous vehicles and other automotive electronics space. However, its near-term prospects are likely to be hurt by softening IT spending amid macroeconomic headwinds.

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

Shares of Meta Platforms have outperformed the Zacks Internet - Software industry over the past year (+48.5% vs. +14.0%). The company is benefiting from steady user growth across all regions, particularly Asia Pacific. Increased engagement for its offerings like Instagram, WhatsApp, Messenger and Facebook has been a major growth driver.

It is leveraging AI to recommend Reels content, which is driving traffic on Instagram and Facebook. Its innovative portfolio, which includes Threads, Reels, Llama 2, Ray-Ban Meta smart glass, and mixed reality device Quest 3 is likely to aid prospects. AI-recommended content now comprises more than 50% of the content people see on Instagram.

Threads have more than 175 million monthly actives. Meta now expects to invest significantly more over the next few years in developing more advanced models and the largest AI services in the world. However, monetization of these AI services will take considerable time, which is a concern.

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

Amgen shares have outperformed the Zacks Medical - Biomedical and Genetics industry over the past year (+45.4% vs. -4.4%). The company expects strong sales growth of products like Tezspire, Evenity, Repatha, Prolia and Tavneos to offset declining revenues from oncology biosimilars and legacy established products such as Enbrel in 2024.

The addition of Horizon’s rare disease drugs should further boost revenue growth. Amgen also has some key pipeline assets in obesity and inflammation, which are indications that can have a large market opportunity. Several key pipeline data readouts are expected in 2024, including from the obesity program, MariTide.

However, increased pricing headwinds and competitive pressure are hurting sales of many products, including some biosimilars. Weakness in some key brands like Otezla and Lumakras create potential revenue headwinds. Estimates have gone down ahead of Q2 earnings releases.

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

Shares of Galaxy Gaming have underperformed the Zacks Gaming industry over the past year (-46.1% vs. +5.0%). This microcap company with market capitalization of $35.69 million is witnessing high debt levels, reliance on key customers, regulatory risks, intense competition, economic cycle vulnerability and integration risks as well as challenges posing from new acquisitions.

Nevertheless, Galaxy Gaming's revenues for first-quarter 2024 grew 7.8% year over year to $8 million, driven by the success of EZ Baccarat and GOS product installations. EBITDA of $3 million, with a margin of 37.5%, highlights strong operational efficiency. The 10-year extension with Evolution Gaming and EZ Baccarat expansion solidifies the market position.

Innovations like GOS 2.0 and global expansion, with operations in 30 countries and 5,146 table installations, enhance growth prospects. Financial stability is demonstrated with a 4.8% cash increase to $17.5 million and a net leverage ratio of 3.8x. High customer satisfaction and a 91.7% recurring revenue model reduce financial risk.

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

Other noteworthy reports we are featuring today include UnitedHealth Group Incorporated (UNH), GE Aerospace (GE) and BHP Group Limited (BHP).

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

NVIDIA (NVDA) Rides on Strong Adoption of GPUs, Partnerships

User Growth, Instagram Strength Aids Meta Platforms (META)

Amgen (AMGN) Well-Poised for Growth on a Solid Pipeline

Featured Reports

Solid Optum Unit Drives UnitedHealth (UNH), High Costs Hurt
Per the Zacks analyst, growing Health Services business, Optum, and domestic membership growth are set to fuel UnitedHealth's top-line growth. However, rising operating expenses are a woe.

Strength in Aerospace Business Benefits GE Aerospace (GE)
Per the Zacks analyst, GE Aerospace's Aerospace business is driven by robust demand for commercial engines and services. Also, rising U.S. & international defense budgets augur well.

Investments to Drive BHP Group (BHP) Amid Price Volatility
The Zacks analyst believes BHP's strong cash flow, focus on lowering debt, investment in growth projects and operational efficiency will aid growth despite lower iron ore and copper prices.

Uber (UBER) Benefits From Delivery Business Amid High Debt
The Zacks Analyst likes Uber's efforts to expand its Delivery operations in response to the surge in business. However, high debt does not bode well for its bottom line.

Progressive's (PGR) Solid Policies in Force Aid, Cat Loss Ail
Per the Zacks analyst, Progressive is set to grow on, solid policies in force, competitive rates and leadership position. However, cat loss exposure inducing underwriting volatility ails.

Strong Portfolio & Acquisitions to Drive PTC's Performance
Per the Zacks analyst, PTC's performance is being driven by robust demand for its CAD and PLM products. Weak global macroeconomic conditions along with stiff competition remain concerns.

Range Resources' (RRC) Low-Risk Appalachian Assets Aid
Range Resources' focus on stacked-pay gas projects within the prolific Appalachian Basin positions it for long-term gains. However, its higher-than-average debt level concerns the Zacks analyst.

New Upgrades

New Customers, Robust Omnipod 5 Sales Aid Insulet (PODD)
The Zacks analyst is bullish about solid new customer gains and increasing volume growth through the U.S. pharmacy channel of Insulet. Also, the robust global uptake of Omnipod 5 seems encouraging.

Dillard's (DDS) E-commerce Unit & Other Strategies Encouraging
Per the Zacks analyst, Dillard's has been capturing opportunities in brick-and-mortar stores and e-commerce business. Its efforts to enhance brands, in-trend categories and store remodels bode well.

High-quality, Low-cost Coking Coal Aid Arch Resources (ARCH)
Per the Zacks analyst, Arch Resources will gain from the production of high-quality, low-cost coking coal at the new Leer South longwall mine. It will also benefit from long-term supply contracts.

New Downgrades

V.F. Corp's (VFC) Performance Hurt By Drab Wholesale Business
Per Zacks analyst, V.F. Corp has been witnessing dismal wholesale performance for a while, along with sluggishness in the Americas region and Vans brand. These have been weighing on VFC's performance.

Declining Fee Income & Rising Costs Ail Bank of Hawaii (BOH)
Per the Zacks Analyst, Bank of Hawaii's declining fee income restricts its top-line expansion. Also, the escalating expense base remains a near-term headwind.

Falling Lumber and OSB Prices to Hit Weyerhaeuser (WY) Hard
Per the Zacks analyst, a declining pricing environment for lumber and oriented strand board (OSB) to hurt Weyerhaeuser's results.

Buy 5 Stocks BEFORE Election Day

Biden or Trump? Zacks is releasing a FREE Special Report, Profit from the 2024 Presidential Election (no matter who wins).

Since 1950, presidential election years have been strong for the market. This report names 5 timely stocks to ride the wave of electoral excitement.

They include a medical manufacturer that gained +11,000% in the last 15 years… a rental company absolutely crushing its sector… an energy powerhouse planning to grow its already large dividend by 25%... an aerospace and defense standout that just landed a potentially $80 billion contract… and a giant chipmaker building huge plants in the U.S.

Don’t Wait. Download 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

GE Aerospace (GE) : Free Stock Analysis Report

UnitedHealth Group Incorporated (UNH) : Free Stock Analysis Report

Amgen Inc. (AMGN) : Free Stock Analysis Report

BHP Group Limited Sponsored ADR (BHP) : Free Stock Analysis Report

NVIDIA Corporation (NVDA) : Free Stock Analysis Report

Galaxy Gaming Inc. (GLXZ) : Free Stock Analysis Report

Meta Platforms, Inc. (META) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

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