Tuesday, July 16, 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 Berkshire Hathaway Inc. (BRK.B), McDonald's Corporation (MCD) and American Express Company (AXP), as well as a micro-cap stock Steel Partners Holdings L.P. (SPLP). 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 Berkshire Hathaway have outperformed the Zacks Insurance - Property and Casualty industry over the year-to-date period (+21.8% vs. +19.9%). The company is one of the largest property and casualty insurance companies with numerous diverse business activities. A strong cash position supports earnings-accretive bolt-on buyouts and is indicative of its financial flexibility. 

Continued insurance business growth fuels increase in float, drive earnings and generates maximum return on equity. The non-insurance businesses have also been doing well in the last few years. The addition of Pilot Travel Centers (PTC) has strengthened its energy business. A sturdy capital level provides further impetus. 

However, exposure to cat loss induces earnings volatility and also affects the underwriting results. Huge capital expenditure remains a headwind. With the demise of Charles Munger, uncertainty looms over the company's performance. 

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

McDonald's shares have underperformed the Zacks Retail - Restaurants industry over the past year (-14.8% vs. -12.4%). The company is witnessing macroeconomic challenges and commodity and wage inflation are primary headwinds. Earnings estimates for 2024 have declined in the past 60 days, depicting analysts concern regarding the stock growth potential. 

Nevertheless, McDonald’s is likely to benefit from marketing campaigns, unit expansion and a loyalty program. McDonald’s is increasing its focus on menu innovation, as it believes that the strengthening of the core menu and solid marketing are likely to pave the way for additional growth in the upcoming periods. 

Also, emphasis on Accelerating the Arches strategy bodes well. McDonald’s expects its velocity accelerators of Experience of the Future, digital and delivery to drive growth over the long term.

(You can read the full research report on McDonald’s here >>>)

Shares of American Express have outperformed the Zacks Financial - Miscellaneous Services industry over the past year (+39.3% vs. +13.0%). The company’s growth initiatives, like launching new products, reaching new agreements and forging alliances, are boosting its revenues. 

Consumer spending on T&E, which carries higher margins for AmEx, is advancing well. Its balance sheet looks strong with ample cash. Solid cash-generation abilities enable the pursuit of business investments and prudent deployment of capital via buybacks and dividends. 

However, with higher utilization of the firm’s cards, costs in the form of card member services and card member rewards are likely to go up. Rising marketing costs are straining its margins. Its current debt level amid a high-interest rate environment induces a rise in interest expenses. The stock is overvalued at the moment. As such, the stock warrants a cautious stance.

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

Steel Partners' shares have underperformed the Zacks Diversified Operations industry over the past year (-3.8% vs. +9.9%). This microcap company with market capitalization of $734.16 million have seen EBITDA margin declined from 14.2% to 12.3% in the first quarter of 2024 due to an underperformance in the Energy and Diversified Industrial segments. Energy revenues fell 33.7% and Diversified Industrial sales decreased 3.9%, impacting profitability. Also, fluctuations due to geopolitical tensions impact operational costs and investor confidence.

Nevertheless, Steel Partners' revenues rose 7% year over year to $476.3 million in the first quarter of 2024, driven by a consolidation in its supply chain and an 18.5% rise in Financial Services revenues. 

With a diversified portfolio across various sectors and the inclusion of Steel Connect, SPLP mitigates risks and boosts growth. As of Mar 31, 2024, SPLP had $273.9 million in cash, with debt reduced to $92.8 million. SPLP also reduced interest expenses by 76.7% in the first quarter.

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

Other noteworthy reports we are featuring today include Analog Devices, Inc. (ADI), Dell Technologies Inc. (DELL) and GE HealthCare Technologies Inc. (GEHC).

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>>>