Friday, February 10, 2023
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 SAP SE (SAP), Northrop Grumman Corp. (NOC) and TC Energy Corp. (TRP). 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 >>>
Shares of SAP have declined -1.4% over the past year against the Zacks Computer - Software industry’s decline of -9.7%. The company’s performance is affected due to continued softness in software licenses and the support business segment, coupled with supply chain constraints, global macroeconomic weakness and geopolitical instability. Also, increasing research & development and sales & marketing expenses to cope with intensifying competition in the cloud space are concerns.
However, SAP’s Q1 performance benefited from continued strength in its cloud business (especially the new "Rise with SAP" solution) across all regions. There is momentum in SAP’s business technology platform, particularly the S/4HANA solutions.
The company’s restructuring plan is expected to better align its operating models and go-to-market approach with its accelerated cloud transformation. Frequent product launches like SAP Build and strategic collaborations bode well.
(You can read the full research report on SAP here >>>)
Northrop Grumman’s shares have outperformed the Zacks Aerospace - Defense industry over the past year (+13.6% vs. -8.1%). The company continues to witness strong demand for its products, driven by programs like F-35, Triton and SABR radar Global Hawk. Solid U.S. budgetary provisions make the analyst confident about a solid contract inflow from the Pentagon. Northrop also holds a strong solvency position.
However, a comparative analysis of the stock’s trailing 12-month EV/Sales ratio reflects a relatively gloomy picture. The prolonged impact of COVID-19 may cause extended disruptions in its supply chain. High inflation rates across the U.S. might also hurt the stock. It expects further impacts related to the conflict in Ukraine and economic sanctions imposed on Russia.
(You can read the full research report on Northrop Grumman here >>>)
Shares of Calgary, Alberta-based TC Energy have underperformed the Zacks Alternative Energy - Other industry over the past year (-22.1% vs. +4.0%). The company is witnessing continued timing and cost overrun issues over large construction projects, plus the cancellation of Keystone XL, are major overhangs.
Moreover, further share price appreciation will likely be tied to the progress on its debt reduction front, which sits at a massive C$40.92 billion. Therefore, investors are advised to wait for a better entry point.
Nevertheless, TC Energy is predominantly a natural gas pipeline operator, with operations spanning Canada, the U.S. and Mexico. A quality stock with industry-leading wide-moat assets, TC Energy has a secured portfolio of C$34 billion in growth projects.
This should support the company’s stated dividend growth commitment of 3-5% annually in the future. TC Energy’s takeover of its TC Pipelines unit last year has helped it to improve corporate governance and lower the cost of capital.
(You can read the full research report on TC Energy here >>>)
Other noteworthy reports we are featuring today include Nucor Corp. (NUE), Extra Space Storage Inc. (EXR) and MGM Resorts International (MGM).
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
Solid Momentum in Cloud Business Driving SAP's Performance
Solid Demand Aids Northrop (NOC), Supply Chain Turmoil Woes
TC Energy's (TRP) C$34B Growth Projects to Boost Earnings
High Demand, Strategic Acquisitions Aids Extra Space (EXR)
Per the Zacks Analyst, Extra Space Storage is poised to gain from its high brand value, healthy demand and strategic acquisitions. Yet, a development boom in many markets might intensify competition.
MGM Resorts (MGM) Banks on Sport Betting, Traffic Woes Stay
Per the Zacks analyst, MGM Resorts is likely to benefit from sports betting expansion, asset light strategy and non-gaming activities. However, subdued visitation in Macau region remain concerns.
Increasing Transaction Fees Aids Cboe Global Market (CBOE)
Per the Zacks analyst, Cboe Global is set to grow on increasing transaction fees driven by trading volume growth given strength in its proprietary products. However, rising expenses concerns.
Pro-Investor Steps Aid Robert Half (RHI), Liquidity Hurts
The Zacks analyst is impressed by Robert Half's commitment to reward its shareholders through dividends & buybacks. However, decreasing current ratio is worrisome.
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.
Masimo (MASI) Rides on a Slew of Positive Study Outcomes
The Zacks analyst is upbeat about Masimo's products being subject of various studies over the past few months despite its operation in a highly competitive market.
Litigation Woes Hurt Bausch (BHC) Amid Business Separation
Per the Zacks Analyst, Bausch's decision to separate eye health business makes sense but the patent litigation for Xifaxan and an earlier-than-expected generic entry will adversely impact sales.
Nucor (NUE) Gains on Strong Demand, Expansion Actions
Per the Zacks analyst, Nucor will benefit from strong demand in its major end markets. Efforts to boost production capacity through several growth projects will also drive profitability.
CNA Financial (CNA) Poised to Grow on Improving Premiums
Per the Zacks analyst, CNA Financial is poised to row on rising premiums driven by compelling product portfolio, better retention, improving pricing, and new business growth.
Deckers' (DECK) Omni-Channel Expansion Efforts on Track
Per the Zacks analyst, Deckers has been constantly developing its e-commerce portal to capture higher sales. Direct-to-consumer net sales rose 18.7% during the third quarter of fiscal 2023.
NuStar Energy (NS) Hurt by High Long-Term Debt
The Zacks analyst believes that NuStar Energy's high long-term debt of $3.3 billion is a concern, as it restricts the partnership's financial freedom to tap into growth opportunities.
High SG&A Costs and Capex to Clip Advance Auto's (AAP) FCF
Advance Auto's rising SG&A costs and capex, needed to support its store expansion efforts, are likely to weigh on its margins and free cash flow, per the Zacks analyst.
NVIDIA (NVDA) Hurt by Weakening Demand, High Inventory Level
Per the Zacks analyst, NVIDIA is hurt by weakening demand for its chips across the gaming and data center end-markets. Moreover, higher channel inventory level is negatively impacting chip prices.
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