Thursday, August 29, 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 American Express Company (AXP), ServiceNow, Inc. (NOW) and RTX Corporation (RTX), as well a micro-cap stocks Frequency Electronics, Inc. (FEIM).  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 American Express have outperformed the Zacks Financial - Miscellaneous Services industry over the past year (+63.6% vs. +23.4%). The company’s growth initiatives, like launching new products, reaching new agreements and forging alliances, are boosting its revenues. 

Consumer spending on travel and entertainment, which carries higher margins for AmEx, is advancing well. It beat Q2 earnings estimates. Its solid cash-generation abilities enable the pursuit of business investments and prudent deployment of capital via buybacks and dividends. 

However, with higher utilization of AXP’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 >>>)

ServiceNow shares have outperformed the Zacks Computers - IT Services industry over the year-to-date period (+19.0% vs. +3.6%). The company has been benefiting from the rising adoption of its workflows by enterprises undergoing digital transformation. 

ServiceNow had 1,988 total customers with more than $1 million in annual contract value (ACV) at the end of second quarter, which represents 15% year-over-year growth in customers. ServiceNow had 14 deals greater than $5 million in net new ACV and four deals of more than $10 million. It closed 88 deals greater than $1 million net new ACV. 

Generative AI deals continued to gain traction with net new ACV for Now Assist and was part of 11 deals worth more than $1 million in the reported quarter. It is riding on an expanding partner base. Nevertheless, ServiceNow is suffering from persistent inflation, stiff competition, and a challenging macroeconomic environment.

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

Shares of RTX have outperformed the Zacks Aerospace - Defense industry over the past year (+44.1% vs. +0.3%). The company ended second-quarter 2024 on a solid note, with both its revenues and earnings having surpassed their respective Zacks Consensus Estimate. It continues to receive ample orders for its wide range of combat-proven defense products. 

A steadily recovering commercial air traffic has been bolstering commercial OEM as well as commercial aftermarket sales for the company. RTX holds a solid financial position, which enables it to make successful share repurchases. 

However, rising crude price tends to put cost pressure on airlines that may affect the operating results of commercial OEM producers like RTX. The company may also be affected if China enforces its announced sanctions against its missile and defense unit. Supply-chain challenges also pose a threat to RTX.

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

Frequency Electronics shares have outperformed the Zacks Instruments - Control industry over the year-to-date period (+41.8% vs. +10.9%). This microcap company with market capitalization of $135.62 million posted strong financial results in FY 2024, with revenue rising 36% to $55.3 million, driven by U.S. Government satellite programs and DOD customers. 

Frequency Electronics turned a $5.5 million net loss in FY 2023 into a $5.6 million net income, reflecting robust revenue growth, effective cost management and overcoming technical challenges. A record $78 million backlog ensures revenue visibility and supports business momentum. Positioned strategically in the growing satellite payload market, Frequency Electronics is capitalizing on demand for low and medium Earth orbit satellites. 

A debt-free balance sheet with $27 million in working capital provides flexibility for growth, while a $1.00 per share special dividend underscores shareholder value. However, the shift to cost-sensitive contracts pressures margins, and dependence on government contracts adds revenue uncertainty.

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

Other noteworthy reports we are featuring today include Fidelity National Information Services, Inc. (FIS), MPLX LP (MPLX) and Datadog, Inc. (DDOG).

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>>>