Tuesday, December 20, 2022

The Zacks Research Daily presents the best research output of our analyst team. Today's Research Daily features a real-time update on the Q4 earnings season and new research reports on 16 major stocks, including Broadcom Inc. (AVGO), United Parcel Service, Inc. (UPS) and Amgen Inc. (AMGN). 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 >>>

Q4 Earnings Season Scorecard

General Mills became the 9th S&P 500 member to report results for its fiscal quarter ending in November. All of these November-quarter results get classified as part of the 2022 Q4 earnings season tally. Total Q4 earnings for these 9 index members are down -11.2% from the same period last year on +9.8% higher revenues, with 66.7% beating EPS estimates and an equivalent proportion beating revenue estimates.

This is a weaker showing relative to what we saw from this same group of 9 index members in the preceding reporting cycle. The -11.2% decline in aggregate earnings for these 9 index members compares to growth of +6.5% in 2022 Q3 while the +9.8% revenue growth in Q4 is down from +15.1% growth in 2022 Q3. The 66.7% EPS beats % for these 9 index members is unchanged from the preceding period, but up from 55.6% revenue beats % in 2022 Q3.

Looking at 2022 Q4 as a whole, total earnings for the index are expected to be down -6.5% from the same period last year on +4.1% higher revenues. Excluding the strong Energy sector contribution, Q4 earnings for the rest of the index would be down 

Estimates are steadily coming down

Shares of Broadcom have declined -14.7% over the past year against the Zacks Electronics - Semiconductors industry’s decline of -28.7%. The company is facing increasing competition, along with high debt levels, are persistent overhangs. Nevertheless, Broadcom’s Top-line growth was driven by strength in cloud and service provider segments.

Networking is riding on strong adoption of Broadcom’s next-gen merchant switching and routing solutions by hyperscalers, enterprises and service providers. Aggressive adoption of its next-generation server storage solutions by hyperscalers is expected to drive top-line growth.

Broadcom expects fiscal fourth-quarter networking and server storage revenues to grow 30% and 45% on a year-over-year basis, respectively. An upbeat fourth-quarter fiscal 2022 guidance is encouraging. The VMware acquisition will aid prospects over the long term.

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

Shares of United Parcel have declined -11.9% over the past year against the Zacks Transportation - Air Freight and Cargo industry’s decline of -18.1%. The company’s elevated operating expenses are hurting its bottom line. Due to the 66.4% rise in fuel expenses, operating costs increased 4.6% in the first nine months of 2022. A decline in shipping volumes due to weakening demand is also very concerning.

However, though the economies are reopening, the urge for online shopping refuses to relent among consumers. High shipping rates also bode well for UPS. Moreover, its strong free cash flow generating ability pleases us and supports UPS' shareholder-friendly activities.

In the first nine months of 2022, UPS generated a free cash flow of $8,472 million. In the first nine months of 2022, UPS paid out dividends worth $3.8 billion and repurchased shares of $2.2 billion. UPS aims to reward its shareholders with $8.2 billion in 2022 through dividends ($5.2 billion) and share buybacks ($3 billion).

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

Amgen shares have outperformed the Zacks Medical - Biomedical and Genetics industry over the past year (+20.8% vs. -24.1%). The company beats Q3 estimates for earnings and sales. While key drugs like Prolia, Repatha and Otezla are driving sales, increasing competition for its legacy products is hurting the same.

Amgen is rapidly advancing its robust pipeline. New drugs Lumakras and Tezspire are off to an encouraging start. The acquisition of ChemoCentryx has added a strategic new growth asset in Tavneos to Amgen’s portfolio. Amgen boasts a strong biosimilars portfolio with potential new products expected to drive long-term growth.

However, increased pricing headwinds and competitive pressure are hurting sales of many of Amgen’s products including some biosimilars. The Humira U.S. sales erosion in 2023 and increasing biosimilar competition for some other legacy products create potential revenue headwinds.

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

Other noteworthy reports we are featuring today include América Móvil, S.A.B. de C.V. (AMX), Occidental Petroleum Corporation (OXY) and Manulife Financial Corporation (MFC).

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>>>