Thursday, February 2 2017

The Zacks Research Daily features the best output of our research team every day. In today’s write-up, we are featuring analyst reports on 16 major stocks, including reports on Eli Lilly (LLY), Aetna (AET) and Automatic Data Processing (ADP). These stock research reports have been hand-picked from the 70 or so reports published by our analyst team today. You can see all of today’s research reports here >>

In addition to these stock research reports, we are also giving you a real-time scorecard of the ongoing Q4 earnings season. We take pride in closely monitoring each and every earnings report and presenting our analysis of emerging trends in the weekly Earnings Trends and Earnings Preview reports. Our latest Earnings Preview report is: 4 Things to Know About the Q4 Earnings Season

Q4 Earnings Scorecard

We crossed the halfway mark in the Q4 earnings season this morning, with results from 258 S&P 500 members, or 51.5% of the index's total membership, already out. Total earnings for the 258 index members that have reported results already are up +7.3% on +3.8% higher revenues, with 68.6% beating EPS estimates and 54.3% beating revenue estimates.

This is better earnings and revenue growth performance than we have seen from this group of 258 S&P 500 members in other recent periods, even after adjusting for the strong growth from the Finance sector. The proportion of companies beating EPS and revenue estimates, however, is tracking below other recent periods.

Looking at Q4 as a whole, combining the actual results from the 258 index members with estimates from the still-to-come 242 companies, total earnings are expected to be up +6.6% from the same period last year on +4% higher revenues. This is the best earnings and revenue growth pace in two years. Importantly, estimates for the current period (2017 Q1) are holding up fairly well; they are coming down, but not at the pace as would typically expected. All of this should help add to confidence in market expectations for the current and following quarters when growth is expected to notably ramp up.

Today's Featured Research Reports

Pharmaceutical stocks have been under pressure since last year on pricing and regulatory concerns and Eli Lily shares have been no different. Lilly’s fourth-quarter results were mixed with earnings missing estimates but revenues coming out ahead. But the analyst is encouraged by the fact that Lilly expects to launch 20 new products in a 10 year time-frame ranging from 2014 to 2023 and could launch at least 2 new indications/line extensions on average every year. Moreover, Lilly expects to return to annual dividend increases and to return excess cash through share buybacks. (You can read the full research report on Eli Lilly here >>)

Aetna shares performed strongly following the November election, as did most of the HMO stocks, but the stock has underperformed the peer group since early December on disappointments over the Humana deal. Aetna's Q4 results came in better than expected, but the company continues to struggle in the public exchanges and membership growth remains under pressure. Rising medical benefit ratios and cessation of share buybacks are some of the other negatives in the Aetna story. On the positive side, the analyst points to the company's long-term growth potential from the government business, management's cost-reduction initiatives and a strong balance sheet. (You can read the full research report on Aetna here >>)

ADP shares have gained 16% over the last one year, underperforming the Zacks outsourcing industry, which has gained 19.2% over the same period. ADP reported mixed fiscal second quarter results with earnings surpassing expectations and revenues falling short of estimates. But the analyst likes ADP’s dominant position in the payroll processing and human capital management market, primarily due to its robust product portfolio. However, uncertainty over the repeal of ACA and the U.S. business environment post the elections affected second-quarter results. These factors are expected to impact new business bookings, which the company now anticipates to remain flat from fiscal 2016. (You can read the full research report on ADP here >>)

Other noteworthy reports we are featuring today include CSX Corp. (CSX), Dollar General (DG) and Sprint (S).

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Sheraz Mian

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 >>>