Tuesday, January 19, 2021
The Zacks Research Daily presents the best research output of our analyst team. Today’s Research Daily features an update on the ongoing Q4 earnings season and new research reports on 16 major stocks, including Home Depot (HD), BHP Group (BHP) and McDonald’s (MCD). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Q4 Earnings Season Scorecard
We are off to a very good start in the Q4 earnings season, with an above average proportion of companies beating consensus estimates and the outlook for the coming periods steadily improving. Total earnings or aggregate net income for the 33 S&P 500 companies that have reported Q4 results already are up +8.5% from the same period last year on +1.3% higher revenues, with a very high 97% beating EPS estimates and 75.8% beating revenue estimates.
This is a notably better performance relative to what we saw from the same group of 33 index members in the first three quarters of 2020.
For the Finance sector, which has been dominating the early reporting cycle, total Q4 earnings for the 32.2% of the sector’s market cap in the index that have reported already are up +14.1% on -1.5% lower revenues, with all companies beating EPS estimates and 63.6% beating revenue estimates. Looking at Q4 as a whole, combining the actuals that have come out with estimates for the still-to-come companies, total earnings are expected to be down -7% on +0.3% higher revenues.
Home Depot shares have modestly lagged the Zacks Retail Building Products industry over the past year (+18.9% vs. +25%), but the the company is well positioned to the high-demand environment, driven by investments in its business over the years.
Its interconnected retail strategy and underlying technology infrastructure have helped boost web traffic in the past six months. It also gained from strong growth in its Pro and DIY customer categories. Notably, DIY sales outpaced Pro sales growth in the fiscal third quarter owing to rise in home improvement projects.
However, it incurred additional costs related to the coronavirus pandemic. Also, soft margins partly hurt results. During the third-quarter fiscal 2020, the company witnessed continued strong demand for home improvement projects as customers spent more time at home during the coronavirus pandemic.
BHP shares have gained +31.8% in the last six months against the Zacks Mining – Miscellaneous industry’s gain of +22.3%, with the stock benefiting from focus on lowering debt.
Efforts to make operations more efficient through smarter technology adoption across the entire value chain will continue to aid in reducing costs, thereby boosting margins. BHP Group plans to simplify its coal portfolio and concentrate on higher quality coking coals to capitalize on demand from steelmakers.
The company has six major projects under development in petroleum, copper, iron ore and potash, which will drive growth in the long run. Meanwhile, in fiscal 2021, the company expects to produce 244-253 Mt of iron ore. Iron prices have surged 70% so far this year, which will reflect on its results.
McDonald’s shares have lost -7.8% over the past three months against the Zacks Restaurants industry’s rise of +4.3%. The Zacks analyst believes that this trend is likely to reverse in the near term, backed by robust sales building initiatives.
McDonald’s increased focus on delivery and accelerated deployment of EOTF restaurants in the United States is commendable. Additionally, it is making every effort to drive growth in international markets. Of late, estimates for current quarter and year have remained stable.
During the coronavirus pandemic the company is focusing on drive-thru, delivery & take-away. Prior to the pandemic, drive-thru accounted for about two-thirds of all sales in the United States. However, dismal comps and high debt is hurting the company. The company’s comps declined for the third straight quarter after reporting positive comps in the preceding 19 quarters.
Other noteworthy reports we are featuring today include PepsiCo (PEP), SAP SE (SAP) and TOTAL (TOT).
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Director of Research
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
Per the Zacks analyst, penetration for PepsiCo’s Frito and Quaker Food businesses has improved due to increased snacking habits amid the pandemic.
Per the Zacks analyst, strong adoption of S/4HANA and other cloud-based offerings have driven SAP’s top line.
Per the Zacks analyst TOTAL’s focus to develop LNG assets globally and objective to expand clean energy generation through joint venture and acquisition will boost its performance.
Per the Zacks analyst, HSBC Holdings’ efforts to improve efficiency through business restructuring will aid profits.
Stryker continues to fain from solid prospects of its core MedSurg arm. The Zacks analyst is apprehensive of the cutthroat competition in the MedTech space.
The Zacks Analyst likes Waste Management’s execution of its core operating initiatives targeting focused differentiation and continuous improvement.
Per the Zacks analyst Exelon’s cost management initiatives will have positive impact on margins and its planned $26B investments through 2023 will strengthen its operation.
Per the Zacks analyst, robust spectrum portfolio and accretive subscriber base, along with incremental 5G investments, are likely to drive America Movil’s growth momentum in Latin America.
Per the Zacks analyst, Ally Financial’s efforts to diversify revenues and rise in consumer loans will aid profitability. Given a solid balance sheet position, it is well poised to expand operations.
According to the Zacks analyst, CF Industries will benefit from higher demand for nitrogen fertilizers in major markets. Lower natural gas costs should also drive its margins.
Per the Zacks analyst, dismal RevPAR & occupancy owing to the pandemic is likely to hurt the company’s results in the coming quarters. Soft leisure demand across the world is hurting the company.
The Zacks analyst is concerned about revenue decline at Varian’s Oncology Systems segment.
Per the Zacks analyst, Prothena is highly dependent on its collaboration partners. The company itself does not have enough resources to independently conduct studies.
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TOTAL SE (TOT): Free Stock Analysis Report
SAP SE (SAP): Free Stock Analysis Report
PepsiCo, Inc. (PEP): Free Stock Analysis Report
McDonalds Corporation (MCD): Free Stock Analysis Report
The Home Depot, Inc. (HD): Free Stock Analysis Report
BHP Group Limited (BHP): 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.