Thursday, August 22, 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 Texas Instruments Incorporated (TXN), Union Pacific Corporation (UNP) and Vertex Pharmaceuticals Incorporated (VRTX), as well as two micro-cap stocks Tile Shop Holdings, Inc. (TTSH) and Gencor Industries, Inc. (GENC). 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 Texas Instruments have gained +28.6% over the year-to-date period against the Zacks Semiconductor - General industry’s gain of +113.1%. The company’s second-quarter results were hurt by widespread weakness in the industrial, and automotive markets. Sluggishness in its Analog, Embedded Processing and Other segments was a negative. Increasing manufacturing costs was a concern

Nevertheless, solid data center demand is boosting TXN's prospects in the enterprise systems market. Improving personal electronics and communication equipment markets are a plus. Texas Instruments’ growing investments in new growth avenues and competitive advantages are tailwinds. 

Its deepening focus on manufacturing, advanced technology infusion, product portfolio expansion and consistent returns to shareholders, is another positive. However, overall weak demand environment and growing U.S.-China tensions remain concerns.

(You can read the full research report on Texas Instruments here >>>)

Union Pacific shares have outperformed the Zacks Transportation - Rail industry over the year-to-date period (+1.0% vs. -0.7%). 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. Management resumed buying back shares in the second quarter of 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 Vertex Pharmaceuticals have outperformed the Zacks Medical - Biomedical and Genetics industry over the year-to-date period (+19.0% vs. +2.6%). The company’s cystic franchise sales continue to grow, driven by higher sales of Trikafta/Kaftrio in younger age groups. Its one-shot gene therapy, Casgevy, was approved for two blood disorders in multiple regions, which diversified its commercial opportunity. 

Vertex has additional near-term launches planned — suzetrigine in acute pain and vanza triple in CF. It is rapidly progressing its mid- and earlier-stage pipeline, with multiple milestones expected in the second half of the year. The Alpine acquisition has added povetacicept, which Vertex believes has a “pipeline in a product” potential. 

However, Vertex’s dependence on just the CF franchise for revenues is a concern. CF sales are slightly slowing down.

(You can read the full research report on Vertex Pharmaceuticals here >>>)

Tile Shop’s shares have gained +5.2% over the past year against the Zacks Building Products - Retail industry’s gain of +15.2%. This microcap company with market capitalization of $265.22 million saw gross margin improved to 66% from 64.2% in the prior year, reflecting effective cost management and lower product costs and freight rates despite a 7.3% decline in net sales. The company's strong liquidity, with $25.3 million in cash and no debt, along with a $75 million credit line, provides financial stability. 

E-commerce growth of more than 25% underscores successful digital investments, while the Superior private label brand bolstered professional customer engagement and enhanced market penetration. 

However, a 6.9% decline in comparable store sales, rising selling, general and administrative (SG&A) expenses, and a 75.9% decline in net income to $1.2 million raise concerns about sustained profitability. Persistent margin erosion and declining cash flow may pressure the stock amid a tough retail environment.

(You can read the full research report on Tile Shop here >>>)

Shares of Gencor Industries have outperformed the Zacks Manufacturing - Thermal Products industry over the past year (+38.3% vs. +22.0%). This microcap company with market capitalization of $272.92 million have strong demand and future revenue potential despite a recent revenue decline. The company's solid financial position, with $116.6 million in cash and no debt, enhances its strategic flexibility. 

Benefits from the Infrastructure Investment and Jobs Act (IIJA) further support Gencor's market position. Yet, challenges persist, including an 8.3% third-quarter fiscal 2024 revenue decline due to shipment delays, decreasing gross margins and rising operating expenses. 

While Gencor's robust backlog is a positive indicator, over-reliance could expose the company to risks if order fulfillment delays persist. Additionally, increased reliance on non-operating income and marketable securities introduces volatility, posing risks in uncertain economic conditions.

(You can read the full research report on Gencor Industries here >>>)

Other noteworthy reports we are featuring today include Gilead Sciences, Inc. (GILD), Trane Technologies plc (TT) and Dominion Energy, Inc. (D).

Director of Research

Sheraz Mian

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>>>