Tursday, July 18, 2024

The Zacks Research Daily presents the best research output of our analyst team. Today's Research Daily features a real-time update on the Q2 earnings season, the July Economic Outlook monthly and new research reports on 16 major stocks, including NVIDIA Corporation (NVDA), Meta Platforms, Inc. (META) and Amgen Inc. (AMGN), as well as a micro-cap stock Galaxy Gaming, Inc. (GLXZ). 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 >>>

 

The July Economic Outlook

John Blank, our Chief Economist, discusses the evolving economic landscape and what that means for Fed policy in the July Economic Outlook report. You can see John's report here >>>To Cut, or Not to Cut - That is the Question

Q2 Earnings Season Scorecard

Including this morning's releases from the likes of D.R. Horton, Abott, Keycorp and others, we now have Q2 results from 61 S&P 500 members or 12.2% of the index's total membership.

Total earnings for these 61 index members are up +7.5% from the same period last year on +4.9% higher revenues, with 82% beating EPS estimates and 55.7% beating revenue estimates. The 82% EPS beats percentage for this group of 61 index members compares to 77% in 2024 Q1, 80.3% in 2023 Q4 and the average for the preceding 20 quarters (5 years) of 79.6%.

The 55.7% revenue beats percentage for this group of companies compares to 63.9% in the preceding period and 20-quarter low of 60.7%.

In other words, companies appear to be struggling to beat consensus revenue estimates at this stage in the Q2 reporting cycle.

Looking at Q2 as a whole, combining the actuals from the 61 companies with estimates for the still-to-come companies, total S&P 500 earnings are on track to be up +8.8% from the same period last year on +4.8% higher revenues.

For a more detailed look at the Q2 earnings season and evolving expectations for the coming periods, please check out our weekly Earnings Trends report here >>>Q2 Earnings Season Starts Positively

NVIDIA shares have outperformed the Zacks Semiconductor - General industry over the past year (+157.4% vs. +115.3%). The company is benefiting from the strong growth of artificial intelligence (AI), high-performance and accelerated computing. 

The data center end-market business is benefiting from the growing demand for generative AI and large language models using graphic processing units (GPUs) based on NVIDIA Hopper and Ampere architectures. A surge in hyperscale demand and higher sell-ins to partners across the Gaming and ProViz end markets following the normalization of channel inventory are acting as tailwinds. 

Collaborations with Mercedes-Benz and Audi are likely to advance its presence in the autonomous vehicles and other automotive electronics space. However, its near-term prospects are likely to be hurt by softening IT spending amid macroeconomic headwinds.

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

Shares of Meta Platforms have outperformed the Zacks Internet - Software industry over the past year (+48.5% vs. +14.0%). The company is benefiting from steady user growth across all regions, particularly Asia Pacific. Increased engagement for its offerings like Instagram, WhatsApp, Messenger and Facebook has been a major growth driver. 

It is leveraging AI to recommend Reels content, which is driving traffic on Instagram and Facebook. Its innovative portfolio, which includes Threads, Reels, Llama 2, Ray-Ban Meta smart glass, and mixed reality device Quest 3 is likely to aid prospects. AI-recommended content now comprises more than 50% of the content people see on Instagram. 

Threads have more than 175 million monthly actives. Meta now expects to invest significantly more over the next few years in developing more advanced models and the largest AI services in the world. However, monetization of these AI services will take considerable time, which is a concern.

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

Amgen shares have outperformed the Zacks Medical - Biomedical and Genetics industry over the past year (+45.4% vs. -4.4%). The company expects strong sales growth of products like Tezspire, Evenity, Repatha, Prolia and Tavneos to offset declining revenues from oncology biosimilars and legacy established products such as Enbrel in 2024. 

The addition of Horizon’s rare disease drugs should further boost revenue growth. Amgen also has some key pipeline assets in obesity and inflammation, which are indications that can have a large market opportunity. Several key pipeline data readouts are expected in 2024, including from the obesity program, MariTide. 

However, increased pricing headwinds and competitive pressure are hurting sales of many products, including some biosimilars. Weakness in some key brands like Otezla and Lumakras create potential revenue headwinds. Estimates have gone down ahead of Q2 earnings releases.

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

Shares of Galaxy Gaming have underperformed the Zacks Gaming industry over the past year (-46.1% vs. +5.0%). This microcap company with market capitalization of $35.69 million is witnessing high debt levels, reliance on key customers, regulatory risks, intense competition, economic cycle vulnerability and integration risks as well as challenges posing from new acquisitions.

Nevertheless, Galaxy Gaming's revenues for first-quarter 2024 grew 7.8% year over year to $8 million, driven by the success of EZ Baccarat and GOS product installations. EBITDA of $3 million, with a margin of 37.5%, highlights strong operational efficiency. The 10-year extension with Evolution Gaming and EZ Baccarat expansion solidifies the market position. 

Innovations like GOS 2.0 and global expansion, with operations in 30 countries and 5,146 table installations, enhance growth prospects. Financial stability is demonstrated with a 4.8% cash increase to $17.5 million and a net leverage ratio of 3.8x. High customer satisfaction and a 91.7% recurring revenue model reduce financial risk. 

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

Other noteworthy reports we are featuring today include UnitedHealth Group Incorporated (UNH), GE Aerospace (GE) and BHP Group Limited (BHP).

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>>>