Tuesday, December 24, 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 T-Mobile US, Inc. (TMUS), Toyota Motor Corp. (TM) and Vertex Pharmaceuticals Inc. (VRTX), as well as two micro-cap stocks BK Technologies Corp. (BKTI) and Servotronics, Inc. (SVT). 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 >>>
T-Mobile’s shares have outperformed the Zacks Wireless National industry over the past year (+45.3% vs. +34.2%). The company continues to boast a leadership position in the 5G market. Its 2.5 GHz spectrum delivers superfast speeds and extensive coverage with signals that go through walls and trees.
The strategic acquisition of US Cellular’s wireless operations, along with 30% of its spectrum assets, will likely enable it to expand both its fast-growing home broadband offerings and fixed wireless products. The launch of new products and solid growth with free cash flows are tailwinds.
However, owing to the stock’s premium valuation, investors should remain cautious as macroeconomic factors and economic downturns may significantly impact its performance. Management’s strategy of introducing several promotional activities, where equipment revenues are not booked upfront, is straining margins. Fierce competition and high debt burden are concerning.
(You can read the full research report on T-Mobile here >>>)
Shares of Toyota Motor have outperformed the Zacks Automotive - Foreign industry over the past year (+2.4% vs. -13.6%). The company’s continued demand for vehicles and a robust lineup of trucks and SUVs are set to fuel Toyota’s sales. The automaker is implementing several strategies to drive growth and strengthen earnings.
While hybrids remain the focus, it is not ignoring the BEV market and targeting the production of one million EVs annually by 2026. The company remains committed to rewarding shareholders through a generous dividend policy.
However, the investment in human resources and growth areas is expected to take a big hit on Toyota’s operating profits in the current fiscal year. Also, high R&D expenses on advanced technologies and alternative fuels are likely to limit near-term margins. Rising debt levels are also concerning. The stock warrants a cautious stance for the time being.
(You can read the full research report on Toyota Motor here >>>)
Vertex Pharmaceuticals’ shares have underperformed the Zacks Medical - Biomedical and Genetics industry over the past six months (-12.8% vs. -8.3%). The company’s dependence on just the CF franchise for revenues is a concern. CF sales are slowing down slightly. Data from a study on suzetrigine for lumbosacral radiculopathy was disappointing.
Nevertheless, Vertex’s cystic franchise sales continue to grow, driven by higher sales of Trikafta/Kaftrio in younger age groups. Its one-shot gene therapy, Casgevy, approved for two blood disorders, diversified its commercial opportunity. Casgevy is expected to contribute significantly to revenues from 2025.
Vertex is preparing for two potential near-term launches — suzetrigine in acute pain and vanza triple in CF in 2025. Vanza triple was approved as Alyftrek in December. It is rapidly progressing its mid- and earlier-stage pipeline, with multiple data readouts expected in next 12 months.
(You can read the full research report on Vertex Pharmaceuticals here >>>)
Shares of BK Technologies have outperformed the Zacks Wireless Equipment industry over the past year (+193.7% vs. +30.3%). This microcap company with market capitalization of $134.55 million has shown consistent financial improvement with its fifth consecutive profitable quarter and third-quarter 2024 GAAP earnings per share (EPS) of $0.63, up from $0.03 in 2023.
Gross margins rose to 38.8%, driven by cost reductions and a favorable product mix, particularly high-margin BKR radios. A $27 million backlog as of Sept. 30, 2024, ensures revenue visibility, supported by strong demand for the BKR 5000 and 9000. Transitioning manufacturing to East West Manufacturing has reduced costs and boosted efficiency.
Despite no debt and improved liquidity, risks include reliance on government funding, narrow market focus and ambitious margin goals. Competitive pressures, product development delays and seasonality also pose challenges, but Vision 2025 targets of $100 million in revenues and 50% gross margins underscore growth potential.
(You can read the full research report on BK Technologies here >>>)
Servotronics’ shares have underperformed the Zacks Diversified Operations industry over the past year (-13.3% vs. -8.3%). This microcap company with market capitalization of $27.69 million is facing risks which include elevated legal costs, customer concentration (88% revenue from a few clients), supply chain disruptions, rising interest expenses, and management instability.
Near-term catalysts are limited, increasing risks to growth and investor confidence. As such, the stock warrants a cautious stance. Nevertheless, Servotronics' 2023 divestiture of its Consumer Products Group refocused the company on aerospace, defense, and industrial markets, emphasizing servo-control components.
Revenue rose 12.3% year over year to $35.1 million for the nine months ended Sept. 30, 2024, with gross margin up to 20.1%, supported by higher volumes and pricing. SG&A expenses fell 16.6% year over year, improving cost efficiency. The company benefits from aerospace recovery, defense diversification, and strong financial flexibility, with a low debt-to-capitalization ratio of 11.5%.
(You can read the full research report on Servotronics here >>>)
Other noteworthy reports we are featuring today include Ecolab Inc. (ECL), Robinhood Markets, Inc. (HOOD) and Tyler Technologies, Inc. (TYL).
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
Solid Growth in 5G and New Launches Aid T-Mobile (TMUS)
Surge in Hybrid Adoption Aids Toyota (TM) Amid Rising Expenses
Vertex (VRTX) Prepares for Upcoming Launches
Featured Reports
Ecolab (ECL) Gains From Rising Demand for Water Solutions
Per the Zacks analyst, Ecolab's water treatment solutions are seeing strong global demand. However, stiff competition and fluctuating costs remain a challenge.
Buyouts, Rate Cuts Aid Robinhood (HOOD), SBC Expenses Hurt
Per the Zacks analyst, interest rate cuts, strategic buyouts, new product launches and a solid balance sheet will support Robinhood's financials. Yet, high SBC costs and high regulatory risk are woes.
Public Sector Cloud Migration, Acquisitions Aid Tyler (TYL)
Per the Zacks analyst, Tyler is benefiting from the public sector's ongoing transition from on-premise to scalable cloud-based systems. Also,acquisitions like ARInspect and ResourceX are positive.
Menu Innovation Aids Darden's (DRI) Prospects, Costs High
Per the Zacks analyst, Darden is likely to benefit from menu innovation, new restaurant openings and Uber partnership. However, rise in labor costs are a concern.
Investments Aid First Solar (FSLR) Amid Manufacturing Issues
Per the Zacks analyst, First Solar makes substantial investments to expand its manufacturing capacity. Yet manufacturing issues resulted in premature power loss in some of its modules.
Antero Midstream (AM) to Gain From Growing LPG & LNG Exports
Antero Midstream is poised to benefit from the growing LNG export capacity and increasing LPG exports, ensuring revenue growth. However, its significant debt burden concerns the Zacks analyst.
Acquisitions, Solid Balance Sheet Aid First American (FAF)
Per the Zacks analyst, a number of acquisitions have helped First American to expand business and witness inorganic growth. Moreover, a solid balance sheet enables investment in business.
New Upgrades
TechnipFMC (FTI) to Gain from Expanding Backlog
The Zacks analyst believes that TechnipFMC's record backlog of $14.7 billion ensures strong revenue visibility and supports margin improvements.
Under Armour (UAA) Gains on Strategic Brand Transformation
Per the Zacks analyst, Under Armour is progressing in its multi-year transformation to strengthen its brand through deeper customer engagement, effective innovations and disciplined market strategy.
Strong Sales for Nerlynx Aid Puma Biotech's (PBYI) Revenues
Per the Zacks analyst, Puma Biotech's cancer drug, Nerlynx, is witnessing consistent sales growth in the United States. The acquisition of alisertib also holds promise as it holds huge potential.
New Downgrades
Low Iron Ore Prices & High Costs to Hurt BHP Group (BHP)
Per the Zacks analyst, iron ore prices will be weighed down by subdued steel demand in China, hurting BHP's top-line results. High input and labor costs will further pressure margins.
Lower Volumes are a Concern for Lamb Weston's (LW) Top Line
Per the Zacks analyst, soft volumes are a concern for LW. In fiscal second-quarter, total volume fell 6% due to weak global restaurant traffic trends and customer share losses among other reasons.
High Mortgage Rates & Increased Costs Hurt Lennar (LEN)
Per the Zacks analyst, Lennar is hurting from a lag in the home sales pace due to a high mortgage rate scenario and low average selling price. Also, increased costs and expenses are added headwinds.
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.
Free: See Our Top Stock And 4 Runners UpToyota Motor Corporation (TM) : Free Stock Analysis Report
Ecolab Inc. (ECL) : Free Stock Analysis Report
Vertex Pharmaceuticals Incorporated (VRTX) : Free Stock Analysis Report
T-Mobile US, Inc. (TMUS) : Free Stock Analysis Report
Tyler Technologies, Inc. (TYL) : Free Stock Analysis Report
Servotronics, Inc. (SVT): Free Stock Analysis Report
BK TECHNOLOGIES, INC. (BKTI): Free Stock Analysis Report
Robinhood Markets, Inc. (HOOD) : 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.
