Thursday, July 25, 2024

The Zacks Research Daily presents the best research output of our analyst team. Today's Research Daily features a real-time scorecard of the Q2 earnings season and updated analyst reports on 16 major stocks, including Netflix (NFLX), Wells Fargo (WFC) and Comcast (CMCSA), as well a micro-cap stock AXIL Brands, Inc. (AXIL).  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 >>>

Q2 Earnings Season Scorecard

Including all of this morning's reports, we now have Q2 results from 181 S&P 500 members or 36.2% of the index's total membership. Total earnings for these companies are up +6.3% from the same period last year on +4.9% higher revenues, with 79.6% beating EPS estimates and 58% beating revenue estimates.

The +6.3% earnings growth in Q2 for this group of companies compares to +8.3% for these companies in 2024 Q1, +2.1% in 2023 Q4, and +4.2% in 2023 Q3. On the revenues side, trhe +4.9% revenue growth for these 181 index members compares to +4.4% in Q1, +3.4% in 2023 Q4 and +3.9% in Q3.

On the beats side, the 79.6% EPS beats percentage compares to the 20-quarter of 79.9% for this group of 181 index members while the 58% revenue beats percentage compares to 70.1% average over the preceding 20-quarter average.

Looking at Q2 as a whole, cobining the actuals that have come out with estimates for the still-to-come companies, total earnings are expected to be up +9.6% from the same peirod last year on +5.1% higher revenues.

Today's Featured Analyst Reports

Netflix shares have outperformed the Zacks Broadcast Radio and Television industry over the year-to-date period (+28.9% vs. +14.8%). The company added 8.05 million paid subscribers globally in second-quarter 2024, with a rise of 1% in average revenue per subscription. The company attributed the robust top-line growth to its paid subscription-sharing offering (part of its password-sharing crackdown), recent price changes and the strength of its business in general. 

Netflix is expected to continue dominating the streaming space, courtesy of its original and diversified content portfolio, which is attributable to heavy investments in the production and distribution of localized and foreign-language content. 

However, stiff competition in the streaming space from the likes of Apple, Amazon Prime Video, Disney+, Peacock and Paramount+ is a headwind. The company's leveraged balance sheet and a higher streaming obligation are concerns.

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

Shares of Wells Fargo have gained +0.6% over the past three months against the Zacks Banks - Major Regional industry’s gain of +7.7%. The company’s second-quarter results reflected lower loan & deposit balances. The company’s loan growth is expected to remain limited, as the asset cap remains in place until it complies fully with regulators’ demands regarding operational risk management. 

Similarly, lower originations because of high rates will continue to affect mortgage banking income. However, its progress on efficiency initiatives, such as branch and footprint reduction, will continue to support expense reduction and drive the bottom-line growth. 

A decent deposit balance is likely to keep supporting its financials, driven by the strength in the Consumer Banking and Lending segment. With a strong capital position and decent liquid profile, the capital-distribution activities seem sustainable.

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

Comcast shares have declined -10.4% over the year-to-date period against the Zacks Cable Television industry’s decline of -15.7%. The company persistently suffers from video-subscriber attrition due to cord-cutting. Moreover, broadband prospects are suffering from increased competition from fixed wireless and fiber businesses. Additionally, a leveraged balance sheet is a major concern.

Nevertheless, Comcast’s second-quarter earnings reflect continued momentum in domestic wireless subscribers and Peacock, offset by a declining broadband subscriber base. The company’s plan to transition to DOCSIS 4.0 is noteworthy. The technology will expand it much faster and at a lower cost compared with its competitors. 

Decreasing programming and production costs bode well for Comcast’s profitability. Its streaming service, Peacock, is a key catalyst in driving broadband sales. Strong free cash flow generation ability is noteworthy.

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

Shares of AXIL Brands have underperformed the Zacks Consumer Products - Staples industry over the past year (-46.1% vs. -13.3%). This microcap company with market capitalization of $38.04 million is witnessing rising operating expenses and declining gross profit margins signal profitability challenges. Inventory management issues and high customer concentration risks, with three customers accounting for 94% of net sales, add to the concerns. Increased accounts payable and reduced cash flow from operating activities highlight cash flow volatility.

Nevertheless, AXIL is expanding globally, diversifying revenue streams across the United States, Canada, the EU and Asia. Strategic initiatives, such as the NASCAR-branded hearing protection product deal with Racing Electronics and a distribution agreement with Kinsey’s, boost market penetration. 

The strategic share repurchases in March 2024, reducing outstanding shares by 55%, enhance shareholder value. Third-quarter fiscal 2024 revenue growth of 14.4% shows effective sales strategies and business expansion.

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

Other noteworthy reports we are featuring today include Chevron Corporation (CVX), Eaton Corporation plc (ETN) and HCA Healthcare, Inc. (HCA).

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>>>