Tuesday, August 27, 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 Toyota Motor Corporation (TM), International Business Machines Corporation (IBM) and Stryker Corporation (SYK), as well a micro-cap stock Fossil Group, Inc. (FOSL). 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 >>>

Toyota Motor shares have outperformed the Zacks Automotive - Foreign industry over the past year (+8.0% vs. -9.1%). The company’s robust lineup of trucks and sport utility vehicles is set to fuel sales. To capitalize on the global shift to environment-friendly vehicles, the auto giant is deepening its focus on manufacturing hybrid, electric and hydrogen fuel-cell vehicles, which will bolster the company’s product competitiveness.

It aims to expand global sales of BEVs to 1.5 million units in 2026 and 3.5 million units a year by 2030. Toyota’s commitment to maximizing shareholders’ value via dividends and buybacks is also praiseworthy.

However, labor cost inflation is expected to continue to weigh on margins. Rising debt levels, along with high R&D expenses and capex, might pose challenges. Also, Toyota expects sales in Japan to decrease, given the lower shipments of Daihatsu. Thus, the stock warrants a cautious stance now.

(You can read the full research report on Toyota Motor here >>>)

Shares of IBM have outperformed the Zacks Computer - Integrated Systems industry over the past year (+41.0% vs. +32.2%). The company is poised to benefit from strong demand for hybrid cloud and AI, driving growth in Software and Consulting. Its growth is expected to be driven primarily by analytics, cloud computing, and security in the long haul.

A combination of a better business mix, improving operating leverage through productivity gains and increased investment in growth opportunities will likely drive profitability. The infrastructure segment is benefiting from broad-based demand for hybrid and distributed infrastructure, especially IBM Z. Improved cybersecurity operations will likely bring long-term benefits.

However, net sales in the Consulting segment are impacted by a pullback in discretionary spending. Although IBM generates significant cash flow, a high debt level can jeopardize its ability to sustain dividend payout. Fierce competition remains a concern.

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

Stryker shares have outperformed the Zacks Medical - Products industry over the past year (+28.6% vs. +15.8%). The company exited second-quarter 2024 on a strong note with better-than-expected earnings and revenues. The company witnessed strong performance across its segments in the United States. Strong International sales also buoy optimism.

The momentum is expected to continue in 2024 on the back of ongoing procedural recovery and a strong order book for capital equipment. Stryker’s prospects in 2024 seem promising on the back of strong customer demand for its existing products as well as new launches. The company’s guidance for earnings and revenues appears encouraging. A solid solvency position is a plus.

However, inflationary pressure and supply-chain challenges continue to plague Stryker. Stiff competition in the MedTech space remains a woe. Contraction in both gross and operating margin is a woe.

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

Shares of Fossil’s have outperformed the Zacks Retail - Apparel and Shoes industry over the past six months (+8.6% vs. -0.1%). This microcap company with market capitalization of $62.17 million have seen gross margin expanded by 340 bps for the 26 weeks ended June 29, 2024, driven by SKU rationalization, pricing adjustments and exiting the lower-margin smartwatch category under the TAG Plan.

Further margin expansion is anticipated in the second half of 2024. The company also reduced SG&A expenses by 19.1%, narrowing the adjusted operating loss by 32% year over year, and is on track to achieve $100 million in annualized benefits. Fossil's liquidity improved to $156 million, aided by a $57 million tax refund and a 38% reduction in inventory.

Strategic exits from the smartwatch category and store closures have optimized operations, contributing to gross margin gains. Despite these positives, net sales declined 20% due to strategic shifts, with a $100 million negative impact expected for the full year. Pressure on licensed watch brands and high debt levels present ongoing challenges.

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

Other noteworthy reports we are featuring today include ConocoPhillips (COP), Altria Group, Inc. (MO) and Synopsys, Inc. (SNPS).

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>>>