Friday, November 1, 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 Alphabet Inc. (GOOGL), Booking Holdings Inc. (BKNG) and Union Pacific Corp. (UNP), as well as a micro-cap stock NVE Corp. (NVEC). 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.
Alphabet’s shares have outperformed the Zacks Internet - Services industry over the year-to-date period (+23.2% vs. +20.7%). The company is riding on strong cloud and search growth. Google Cloud is benefiting from accelerated growth across AI infrastructure, enterprise AI platform Vertex, generative AI (Gen AI) solutions and core Google Cloud Platform products.
GOOGL’s strong AI portfolio is helping it attract new customers, win larger deals, and deepen product adoption among existing customers. Alphabet’s expanding GenAI capabilities present a potential catalyst for future growth. Its dominant position in the search engine market is a strong growth driver.
Major search updates and removal of bad ads to enhance the search results continue to boost traffic on Google’s search engine. However, increasing litigation issues and expenses remain concerns. Rising cloud competition from Microsoft and Amazon is a concern.
(You can read the full research report on Alphabet here >>>)
Shares of Booking Holding’s have outperformed the Zacks Internet - Commerce industry over the year-to-date period (+33.6% vs. +23.7%). The company reported impressive third-quarter 2024 results, wherein both earnings and revenues grew on a year-over-year basis. Revenue growth was driven by growing leisure travel demand. Substantial improvement in its booking trends was a major tailwind.
Strong momentum across its merchant and advertising, and other businesses contributed well to top-line growth. The growing alternative accommodation business was a tailwind for the company. Solid growth in rental car and airline ticket units was a positive. The uptick in booked room nights is contributing well to the gross bookings growth.
However, sluggishness in its agency business remains a concern. The declining trend in agency bookings is a major headwind. Also, geopolitical tensions and market uncertainties rermain concerning for the company.
(You can read the full research report on Booking here >>>)
Union Pacific’s shares have underperformed the Zacks Transportation - Rail industry over the year-to-date period (-3.6% vs. -3.2%). The company is suffering big time as ecommerce sales have normalized and consumer markets have softened.
Geopolitical uncertainty and high inflation continue to hurt consumer sentiment. Reduced fuel surcharge revenues, too, are a concern. Due to these headwinds, volumes declined 1% year over year in 2023.
Operating ratio (operating expenses as a percentage of revenues) deteriorated 220 basis points in 2023, mainly due to revenue woes. Given the soft freight market scenario, the revenue weakness is likely to persist. To combat the revenue weakness, UNP is looking to cut costs. In the meantime, the railroad operator continues paying dividends.
UNP is also active on the buyback front. Management expects to buyback shares worth $1.5 billion in 2024. Considering all these factors, investors are advised to wait for a better entry point.
(You can read the full research report on Union Pacific here >>>)
Shares of NVE have gained +14.4% over the past year against the Zacks Electronics - Semiconductors industry’s gain of +73.2%. This microcap company with market capitalization of $364.3 million pivot to direct sales which lifted its gross margin year over year to 86% in second-quarter fiscal 2025, enhancing profitability and resilience in slowdowns.
Contract R&D revenues, largely from a defense contract, surged 3,950% year over year, creating a high-margin stream with potential defense sales. A $4-$5 million investment in advanced packaging strengthens self-sufficiency and growth capacity. Innovations like the ALT521-10E sensor help the company tap into the industrial and medical markets.
Yet, product sales dropped 14% year over year due to distributor inventory buildup and weak demand, pressuring revenues. Rising R&D and SG&A expenses, combined with cash declines from capex and dividends, squeeze profits. Dividend sustainability concerns grow amid profit pressures. A higher tax rate and distributor inventory risks could further impact earnings.
(You can read the full research report on NVE here >>>)
Other noteworthy reports we are featuring today include Illinois Tool Works Inc. (ITW), Northrop Grumman Corp. (NOC) and Garmin Ltd. (GRMN).
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
Alphabet (GOOGL) Benefits From Cloud & Search Initiatives
Booking Holdings Benefits From Strong Leisure Travel Demand
Union Pacific (UNP) Dividends Strong Despite Revenue Woes
Featured Reports
Automotive OEM Unit Aids Illinois Tool (ITW) Amid Forex Woes
Per the Zacks analyst, Illinois Tool is benefiting from its Automotive OEM unit, driven by strength in the electric vehicle and Chinese OEM markets. However, forex woes are an added concern.
Order Growth Benefits Northrop (NOC), Labor Shortage Woes
As per the Zacks analyst, Northrop Grumman is likely to benefit from increasing defense order growth. Yet, labor shortage issues might result in product delivery delays for the company.
Strength Across Outdoor & Fitness Segments Aid Garmin (GRMN)
Per the Zacks analyst, Garmin is riding on solid demand for adventure watches and advanced wearables which is driving the performance of its Outdoor and Fitness segments.
Strength in Omnipod, Robust Solvency Aids Insulet (PODD)
The Zacks analyst is impressed that Insulet's focus on shifting users from MDI to Omnipod therapy is fueling its customer base and driving market expansion. Sound financial health is another upside.
Campbell Soup (CPB) Gains on Strong Meals & Beverages Unit
Per the Zacks analyst, Campbell Soup is benefiting from growing Meals & Beverages division. The segment saw an increase in organic net sales, fueled by a solid 2% rise in volume in Q4.
Solid Demand in NA On-Highway Market Drives Allison (ALSN)
While strong demand for Class 8 vocational vehicles is boosting Allison's sales in the North American On-Highway market, the Zacks analyst is concerned about the company's elevated leverage.
Rising Loans & NII Aids Comerica (CMA), Capital Level Solid
Per the Zacks Analyst, the rising loan balances and NII growth is set to strengthen Comerica's top-line expansion. Further, a strong capital position is an added advantage.
New Upgrades
Reinsurance Group (RGA) Rides on Solid In-force Business
Per the Zacks analyst, Reinsurance Group is set to gain from better pricing and expanding business in the pension risk transfer market. Solid in-force business ensures predictable long-term earnings.
Improved Menu Pricing & Expansion Efforts Aid Brinker (EAT)
Per the Zacks analyst, Brinker benefits from favorable comparable restaurant sales driven by menu pricing and higher traffic. Also, focus on menu innovation and expansion efforts bode well.
NETGEAR (NTGR) Gains From Destocking, New Product Launches
Per the Zacks analyst, NETGEAR's performance gains from inventory clearance, which will help with aligning sell-in with sell-through with channel partners. New product launches are another tailwind.
New Downgrades
High Volatility in Feedstock Costs Ails Phillips 66 (PSX)
Per the Zacks analyst, Phillips 66 is exposed to high volatility in feedstock costs that may squeeze its profit margins. Further, rising input costs due to high crude prices add to the concern.
WEX Facing High Debt Servicing Costs, Low Cash Flexibility
Per the Zacks analyst, servicing a high debt adds to WEX's operational costs, reducing cash flow flexibility for reinvestment into innovation or other growth opportunities.
Weak Residential End Markets Ails Leggett & Platt (LEG)
Per the Zacks analyst, Leggett & Platt's third-quarter performance was hurt by weak demand in the company's residential end markets due to a challenging macro environment and soft consumer spending.
Research Chief Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
This company targets millennial and Gen Z audiences, generating nearly $1 billion in revenue last quarter alone. A recent pullback makes now an ideal time to jump aboard. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.
Northrop Grumman Corporation (NOC) : Free Stock Analysis Report
Illinois Tool Works Inc. (ITW) : Free Stock Analysis Report
Garmin Ltd. (GRMN) : Free Stock Analysis Report
Union Pacific Corporation (UNP) : Free Stock Analysis Report
Alphabet Inc. (GOOGL) : Free Stock Analysis Report
NVE Corporation (NVEC) : Free Stock Analysis Report
Booking Holdings Inc. (BKNG) : Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
