Friday, June 21, 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 Abbott Laboratories (ABT), BP p.l.c. (BP) and Gilead Sciences, Inc. (GILD), as well as two micro-cap stocks Smith-Midland Corp. (SMID) and Crimson Wine Group, Ltd. (CWGL).
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 >>>
Shares of Abbott have declined -1.5% over the past year against the Zacks Medical – Products industry’s decline of -1.6%. The company’s pipeline is generating several new growth prospects, which will help sustain the positive momentum and contribute to the strong growth projection in 2024.
Alinity, the company’s next-generation suite of systems, is a key driver in the core lab diagnostics business. EPD’s impressive stretch of strong performance stems from the company’s unique business model. Freestyle Libre CGM device is also on a great trajectory, continually outpacing market growth.
Within Nutrition, after a period of hiccups, Abbott has finally reestablished itself as the market leader in the infant formula business, underscoring strong customer confidence in the company’s products. However, the slump in COVID-19 testing-related sales is hurting Abbott’s overall growth. Tough macro conditions also pose a concern for its operations.
(You can read the full research report on Abbott here >>>)
BP’s shares have gained +1.4% over the past year against the Zacks Oil and Gas – Integrated – International industry’s gain of +6.6%. The company has a strong portfolio of upstream projects, supporting notable growth in production. The integrated energy company exhibits robust upstream growth with the start-up of major projects like Seagull, which boosts its production capacity.
Diversification into renewables through the Lightsource BP acquisition supports long-term sustainability amid energy transitions. The divestment strategy aims to reach $25 billion by 2025, enhancing the balance sheet and returning capital to shareholders.
However, a high debt-to-capitalization ratio raises financial flexibility and balance sheet concerns. Also, despite resolving significant litigation expenses from the 2010 oil spill, BP had to sell valuable assets. These divestitures could potentially limit future cash generation. Refining margins may face pressure due to narrower crude differentials.
(You can read the full research report on BP here >>>)
Shares of Gilead have declined -8.6% over the past year against the Zacks Medical – Biomedical and Genetics industry’s decline of -11.2%. The company’s recent pipeline setbacks weigh on its balance sheet. Gaining incremental market share is likely to get tougher due to the competition in the HIV market.
Nevertheless, Gilead’s flagship HIV therapy, Biktarvy, continues to maintain its strong growth, thereby fueling the top line. The approval of new therapies has boosted the company’s market-leading HIV franchise. Gilead’s efforts to develop better HIV treatments are commendable.
Substantial growth in Yescarta and Tecartus, and the strong uptake of Trodelvy have strengthened its oncology franchise. Gilead’s efforts to bolster its oncology and virology franchises through internal pipeline development and collaborations are encouraging.
(You can read the full research report on Gilead here >>>)
Smith-Midland’s shares have outperformed the Zacks Building Products – Concrete and Aggregates industry over the past year (+71.7% vs. +14.7%). This microcap company with market capitalization of $174.47 million hit a record $59.6 million in 2023, up 19% year over year due to expanded sales of soundwalls and barrier rentals, supported by strategic manufacturing investments and a global licensee network.
Operational efficiency improved, turning a prior year operating loss into a $542,000 operating income in fourth-quarter 2023. Infrastructure spending tailwinds from the Infrastructure and Jobs Act may boost the 2024 results. Financial health is strong, with $9.2 million in cash and $5 million invested in production capacity.
However, rising material and labor costs, high receivables, and intense competition pose risks. The dependence on key customers and potential regulatory penalties could impact SMID’s financials. The possibility of reduced government infrastructure spending could further strain performance.
(You can read the full research report on Smith-Midland here >>>)
Shares of Crimson Wine have declined -2.3% over the past year against the Zacks Beverages – Alcohol industry’s decline of -12.3%. This microcap company with market capitalization of $119.88 million boasts a strong portfolio of seven luxury wine brands, appealing to affluent consumers with wines retailing more than $16 per 750 ml bottle. It has a healthy balance sheet, with $22.6 million in cash and a current ratio of 10.3.
Continued investment in premium brands and a robust inventory of 0.7 million cases position the company well. CWGL has a $60-million credit facility with no drawdowns, reflecting financial flexibility and an improved gross margin. Yet, Crimson Wine Group reported first-quarter net loss of $633,000, with rising operating expenses outpacing revenue growth.
High inventory levels suggest misalignment with market demand. Climate change and adverse weather pose risks to grape quality and production costs. Also, CWGL faces technological and cybersecurity risks with its new ERP system and inflationary pressures.
(You can read the full research report on Crimson Wine here >>>)
Other noteworthy reports we are featuring today include Constellation Brands, Inc. (STZ), D.R. Horton, Inc. (DHI) and Waste Connections, Inc. (WCN).
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
Abbott (ABT) Banks on Nutrition Arm, Solid Libre Prospect
BP’s Robust Upstream Portfolio to Boost Production Capacity
HIV, Oncology Fuel Gilead (GILD) Amid Pipeline Setbacks
Featured Reports
Brand Building Boosts Constellation Brands’ (STZ) Market Share
Per the Zacks analyst, Constellation Brands’ consistent focus on brand building and inclusion of new products are key revenue drivers. This helped boost market share, mostly in the U.S. beer category.
D.R. Horton’s (DHI) Affordable Homes Aid, High Rates Ail
D.R. Horton to gain from its robust backlog, industry-leading market share, acquisitions and focus on more entry-level affordable homes, per the Zacks analyst. Yet, higher rates are concerns.
Operating Prowess Aid Waste Connections (WCN), Liquidity Low
Per the Zacks analyst, Waste Connections’ low-overhead, highly efficient operational structure allows it to expand into geographically contiguous markets. Low liquidity remains a concern.
Darden (DRI) Banks on Unit Growth & Digitization, Costs High
Per the Zacks analyst, Darden is likely to benefit from new restaurant openings, the integration of Ruth’s Chris Steak House and digital efforts. However, commodity and wage inflation is a concern.
Strength in Aerospace, Industrial Sectors Aids Woodward (WWD)
Per the Zacks analyst, momentum across Aerospace and Industrial segments is cushioning Woodward’s top-line performance. The Industrial unit is expected to gain from higher demand for power generation.
Rayonier (RYN) Rides on Solid Portfolio Amid High Rates
Per the Zacks analyst, a solid timberland portfolio and unlocking the long-term value of its HBU development and rural property portfolio are likely to support Rayonier despite high interest rates.
Rising Production Aids SolarEdge (SEDG), Lower Demand Woes
Per the Zacks analyst, growing production capacity and steady inverter shipments is likely to boost SolarEdge’s revenues. Yet, lower installation in Europe might adversely impact its overall growth.
New Upgrades
Packaging Demand, Cost Savings Actions Aid WestRock (WRK)
Per the Zacks analyst, WestRock will gain from stable packaging demand in the food, beverage, and e-commerce sectors. Pricing strategies and cost-saving measures will help improve its margins.
Sprouts Farmers’ (SFM) Omnichannel Offering to Propel Sales
Per the Zacks analyst Sprouts Farmers’ assortment of better-for-you products, focus on providing hassle-free shopping through omnichannel offering and a network of fresh distribution centers bode well
Growing Top Line, Solid Capital Position Aid Palomar (PLMR)
Per the Zacks analyst, Palomar’s growing revenues driven by higher premiums and net investment income have led to significant growth. Moreover, robust capital position supports capital deployment.
New Downgrades
Lower IT Spending to Hurt Avnet’s (AVT) Growth Prospects
Per the Zacks Analyst, Avnet’s growth prospects might be hurt by soft IT spending as organizations are pushing back their large IT investment plans amid the macroeconomic headwinds.
Lower Steel Prices, High Debt Ail Nucor (NUE)
Per the Zacks analyst, the company faces margin headwinds from a significant decline in steel prices due to a slowdown in end-market demand. A high debt level is also a concern.
Declining Premiums, Soft Cash Flows Hurt Amerisafe (AMSF)
Per the Zacks analyst, product concentration and constrained premiums are hurting Amerisafe’s top-line growth. A decline in operating cash flows remains a concern.
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Abbott Laboratories (ABT) : Free Stock Analysis Report
BP p.l.c. (BP) : Free Stock Analysis Report
Gilead Sciences, Inc. (GILD) : Free Stock Analysis Report
Constellation Brands Inc (STZ) : Free Stock Analysis Report
D.R. Horton, Inc. (DHI) : Free Stock Analysis Report
Waste Connections, Inc. (WCN) : Free Stock Analysis Report
Smith-Midland Corp. (SMID): Free Stock Analysis Report
Crimson Wine Group Ltd. (CWGL): Free Stock Analysis Report
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