Thursday, July 21, 2022
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 Johnson & Johnson (JNJ), Cigna Corporation (CI), and Vertex Pharmaceuticals Incorporated (VRTX). 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 >>>
Johnson & Johnson shares have gained +0.8% over the past year against the Zacks Large Cap Pharmaceuticals industry’s +20.3% gain. The company’s Covid vaccine effort has turned out to be less than stellar, but the Zacks analyst sees JNJ’s diversified revenue base makes it relatively resilient amid macroeconomic turmoil.
Its Pharma unit is performing at above-market levels, supported by its blockbuster drugs, Darzalex and Stelara, and contribution from newer drugs, Erleada and Tremfya. Sales in the MedTech unit recovered in Q1 and the company is focusing on growing this business through new products.
However, sales in the consumer unit are being hurt by external supply constraints. J&J is making rapid progress with its pipeline and line extensions. Several pivotal data readouts are expected in 2022. Headwinds like generic competition and pricing pressure continue. Though J&J has taken meaningful steps to resolve its talc and opioid litigation, they continue to remain an overhang on the stock.
Cigna shares have outperformed the Zacks Insurance – Multi line industry over the past year (+17.0% vs. -11.1%). The company’s revenues have been increasing consistently for the past several years, driven by acquisitions, superior operating performance and high-quality products portfolio.
Business streamlining by divesting Group Life and Disability insurance business will help it focus on core growth areas. An expected increase in medical membership on the back of a diversified product portfolio, wide agent network and superior service are major positives.
It has been resorting to prudent capital deployment moves. In June 2022, it signed an accelerated share buyback agreement of $3.5 billion. However, high leverage can affect its financial flexibility. Rising operating costs might dent its margins.
Vertex shares have outperformed the Zacks Medical – Biomedical and Genetics industry over the past year (+45.7% vs. -36.7%). The company’s cystic franchise sales continue to grow driven by its triple therapy, Trikafta/Kaftrio. New reimbursement agreements in ex-U.S markets and label expansions to younger age groups in the United States are driving Trikafta/Kaftrio sales higher.
Meanwhile, Vertex has a broad clinical non-CF pipeline across six disease areas, which are progressing rapidly with impressive data presented from multiple programs recently, which established proof-of-concept.
Vertex faces only minimal competition in its core CF franchise. However, Vertex’s dependence on just the CF franchise for commercial revenues is a concern. Vertex’s non-CF programs carry significant risk, which is a concern.
Other noteworthy reports we are featuring today include Chipotle Mexican Grill, Inc. (CMG), Xcel Energy Inc. (XEL) and Illumina, Inc. (ILMN).
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
Chipotle (CMG) Banks on Digital Initiatives, High Costs Ail
Per the Zacks analyst, Chipotle’s consistent strength in digital sales and positive customer reception to new menu items bode well. However, inflationary wage pressures are a concern.
Infrastructure Investment, Clean Assets Aid Xcel Energy (XEL)
Per the Zacks analyst, Xcel Energy’s investment of $26 billion through 2026 to enhance clean electricity generation and strengthen its infrastructure will boost its profitability.
Strong NextSeq Uptake Aids Illumina (ILMN) Amid Rising Costs
The Zacks analyst is encouraged by the strong market adoption of Illumina’s NextSeq 1000 and 2000 platforms. Yet, escalating operating costs are weighing on the company’s bottom line.
Accelerating Non-Trading Revenue Base Aids Nasdaq (NDAQ)
Per the Zacks analyst, Nasdaq is set to grow on its focus toward Market Technology and Information Services businesses. However, increasing expenses weighing on margin expansion is likely a concern.
Online Buying Facility Aids CarMax (KMX), High Costs Hurt
Its reputed online platform provides ample growth and exposure to CarMax as the largest online buyer of used autos. But, soaring costs and expenses are likely to clip margins, per the Zacks analyst.
Tapestry’s (TPR) Strong Digital Endeavors to Boost Sales
Per the Zacks analyst, Tapestry has been directing resources toward expanding digital and data analytics capabilities. During the third quarter digital sales rose 20% year over year.
Science Applications (SAIC) Rides on Contract Wins, Buyouts
Per the Zacks analyst, Science Applications is benefiting from new contracts supporting IT modernization. Moreover, strategic acquisitions like Halfaker and Associates bode well for growth.
Incyte (INCY) Lead Drug Jakafi Label Expansion Fuels Growth
Per the Zacks analyst, Incyte maintains momentum driven by growth in patient demand for the lead drug, Jakafi, higher royalty revenues, and encouraging uptake of other recently approved drugs.
Recruiting Efforts, Acquisitions to Aid LPL Financial (LPLA)
Per the Zacks analyst, LPL Financial’s recruiting efforts and solid advisor productivity will likely aid advisory revenues. Its inorganic growth efforts make it well poised for top-line improvement.
Magellan (MMP) to Benefit from Wide Refining Footprint
The Zacks analyst likes Magellan Midstream’s extensive refined products pipeline network that earns stable cash flows from long-term contracts.
Labor Shortage and Afghanistan Exit Issues Hit AAR (AIR)
Per the Zacks analyst, labor shortages in its MRO business and exit of the U.S. Army from Afghanistan and resultant winding down of AAR Corp.’s activity in Afghanistan might hurt the stock’s results.
Xerox (XRX) Hurt by Decreased Demand for Paper-Related Products
According to the Zacks analyst, Xerox is grappling with decreased demand for paper-related systems and products. Lower liquidity is also a concern.
Dollar Strength & Business Wind Down Affect IBM Cash Flow
Per the Zacks analyst, despite solid second-quarter performance, a muted cash flow outlook for 2022 due to dollar strength and winding down of business operations in Russia remain a downside for IBM.
5 Stocks Set to Double
Each was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2021. Previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.