News

Friday, July 26, 2024

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 Costco Wholesale Corporation (COST), Danaher Corporation (DHR) and ServiceNow, Inc. (NOW), as well as two micro-cap stocks AMREP Corporation (AXR) and Autoscope Technologies Corporation (AATC). 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 >>>

Costco’s shares have outperformed the Zacks Retail – Discount Stores industry over the year-to-date period (+23.6% vs. +14.2%). The company being a consumer defensive stock, has been surviving the market turmoil pretty well. The discount retailer’s key strengths are strategic investments, a customer-centric approach, merchandise initiatives, and an emphasis on membership growth.

These factors have been helping it register decent sales and earnings numbers. This outlook reflects Costco’s ability to navigate the challenging operating environment, generate solid sales, and register high membership renewal rates.

A favorable product mix, steady store traffic, pricing power, and strong liquidity position should help Costco keep outperforming. While trading at a premium to its peers, its long-term growth prospects should help the stock see a solid upside.

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

Shares of Danaher have outperformed the Zacks Diversified Operations industry over the year-to-date period (+16.7% vs. -4.9%). The company is witnessing stable demand in the clinical and molecular diagnostics businesses which is supporting its Life Sciences segment. The segment has been witnessing positive responses toward its new products.

Danaher’s commitment to return value to shareholders is encouraging. Synergies from the Abcam acquisition bolster its growth. Through Danaher’s DBS initiatives, it has been able to reduce the impact of supply-chain constraints and inflationary pressures.

However, the company is plagued by weakness in the Life Sciences and Biotechnology units due to decreased demand across major end markets. An increase in SG&A expenses may affect the margin performance. High debt levels may raise its financial obligations and drain its profitability. Given the company’s international exposure, forex woes are weighing on its top line.

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

ServiceNow’s shares have outperformed the Zacks Computers - IT Services industry over the year-to-date period (+17.4% vs. +4.2%). The company has been benefiting from the rising adoption of its workflows by enterprises undergoing digital transformation.

ServiceNow had 1,988 total customers with more than $1 million in annual contract value (ACV) at the end of second quarter, which represents 15% year-over-year growth in customers. ServiceNow had 14 deals greater than $5 million in net new ACV and four deals of more than $10 million. It closed 88 deals greater than $1 million net new ACV.

Generative AI deals continued to gain traction with net new ACV for Now Assist and was part of 11 deals worth more than $1 million in the reported quarter. It is riding on an expanding partner base. Nevertheless, ServiceNow is suffering from persistent inflation, stiff competition, and a challenging macroeconomic environment.

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

Shares of AMREP have outperformed the Zacks Real Estate - Development industry over the past year (+27.4% vs. -6.6%). This microcap company -- with market capitalization of $115 million -- has a land portfolio in high-growth Rio Rancho, NM, covering 17,000 acres, positioning it to benefit from rising demand. In fiscal 2024, revenues grew 6%, driven by diverse streams.

The homebuilding segment grew with 36 homes sold and 64 in production in fiscal 2024. AMREP had $30.2 million in liquidity and minimal debt, supporting new projects. Property sales and adaptive strategies to market conditions enhance their portfolio management. Despite increased costs and inflation pressures, AMREP’s effective cost management and sustainable development practices maintain profitability.

Yet, challenges like declining net income, high dependency on a few homebuilders, real estate market cyclicality, regulatory risks and high competition persist. Slower land and home sales, liquidity constraints and interest rate sensitivity also pose risks.

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

Autoscope Technologies’ shares have outperformed the Zacks Technology Services industry over the past year (+48.8% vs. +38.3%). This microcap company with market capitalization of $36.71 million benefits from strong demand for its Autoscope Vision product, driven by North American infrastructure funding, evidenced by a 4% year-over-year increase in the first quarter of 2024 royalty revenues.

A high gross margin (96% overall, 97% for royalties) supports profitability. Shareholder returns are strong, with consistent dividends and a special $1.32-per-share payout. Strategic restructuring, including the sale of the RTMS radar line, has improved operational efficiency. Innovation continues with Autoscope IntelliSight's launch in Europe.

However, heavy reliance on Econolite royalties, reduced cash reserves, declining product sales and intensifying competition present significant risks. The company’s success depends on navigating these challenges while leveraging government funding and maintaining technological leadership.

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

Other noteworthy reports we are featuring today include IBM Corp. (IBM), PayPal Holdings, Inc. (PYPL) and Nasdaq, Inc. (NDAQ).

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

Decent Comparable Sales Run to Fuel Costco's (COST) Top Line

Strong Diagnostics Unit Aids Danaher (DHR), High Debt Ails

Growing Customer Base & Partnerships Aid ServiceNow (NOW)

Featured Reports

IBM Rides on Strong Customer Growth in Software Segment
Per the Zacks analyst, solid traction across Transaction Processing, Red Hat, Hybrid Platform & Solutions business in the Software segment will likely boost IBM's top line.

Accelerating Non-Trading Revenue Base Aids Nasdaq (NDAQ)
Per the Zacks analyst, Nasdaq is set to grow on its focus toward Market Technology and Information Services businesses. However, increasing expenses weighing on margin expansion is likely a concern.

Macao Business Aids Las Vegas Sands (LVS), High Debt Ail
Per the Zacks analyst, Las Vegas Sands benefits from solid Macao and Singapore business, driven by strategic investments. However, high debt and stiff competition remain a concern.

Tenet (THC) to Gain From USPI Strength & Strategic Buyouts
The Zacks analyst expects the rising surgical cases in the USPI business will drive Tenet Healthcare's performance, while acquisitions will add scale. Yet, increasing costs are a concern.

Solid Interventional Arm Aids Teleflex (TFX), FX Woes Stay
Per the Zacks analyst, Teleflex's Interventional portfolio drivers such as balloon pumps, MANTA, as well as new product launches should help sustain growth. Yet, adverse currency woes hurt margins.

Ionis' (IONS) Progress With Internal Pipeline Encouraging
The Zacks Analyst is encouraged by Ionis' progress with its wholly owned pipeline candidates. Its collaboration with big pharma companies provides it with funds to invest in their development.

Oceaneering (OII) to Benefit from Subsea Robotics' Unit
The Zacks analyst believes that Oceaneering's Subsea Robotics unit will continue to see increased activity and pricing gains but is worried about the lack of investment in subsea greenfield projects.

New Upgrades

PayPal (PYPL) Benefits From Increasing Total Payment Volume
Per the Zacks analyst, PayPal's total payment volume is rising owing to solid adoption of Venmo and merchant services. Further, growing momentum across PayPal Checkout experiences is positive.

Investments, Permian Assets Aid Plains All American (PAA)
Per the Zacks analyst Plains All American Pipelines will gain from systematic investments to expand its operation and its wide presence in Permian Basin through organic projects and JVs.

G-III Apparel (GIII) Key Brands to Aid Topline Growth
Per the Zacks analyst, G-III Apparel's DKNY and Karl Lagerfeld brands saw double-digit sales growth in first-quarter fiscal 2025. The Donna Karan relaunch has been highly successful.

New Downgrades

United Parcel Service (UPS) Reels Under Revenue & Cost Woes
The Zacks analyst is worried about the weakness pertaining to total revenues due to a weak demand-scenario. Disruptions due to the labor negotiations and high costs are concerns.

Lower Volumes and Elevated Costs Hurt Sonoco
Per the Zacks analyst, lower volumes due to lower consumer spending will impact Sonoco's results. Elevated raw material, energy and freight cost will also impact earnings.

Choppy Office Market and High Rates to Affect Vornado (VNO)
Per the Zacks analyst, the overall choppiness in the office market amid rightsizing and elevated interest rates offer bleak prospects for Vornado despite having premium assets in select markets.

Free Report: 5 “Whisper” Stocks Poised to Stun Wall Street

Analysts may be seriously underestimating these stocks. When they announce earnings, they could immediately jump +10-20%.

See Stocks Now >>

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

Nasdaq, Inc. (NDAQ) : Free Stock Analysis Report

International Business Machines Corporation (IBM) : Free Stock Analysis Report

Danaher Corporation (DHR) : Free Stock Analysis Report

Costco Wholesale Corporation (COST) : Free Stock Analysis Report

ServiceNow, Inc. (NOW) : Free Stock Analysis Report

PayPal Holdings, Inc. (PYPL) : Free Stock Analysis Report

AMREP Corporation (AXR): Free Stock Analysis Report

Autoscope Technologies Corporation (AATC) : Free Stock Analysis Report

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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.