Tuesday, October 1, 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 McDonald's Corp. (MCD), Danaher Corp. (DHR) and S&P Global Inc. (SPGI), as well as two micro-cap stocks Twin Disc, Inc. (TWIN) and The Cato Corp. (CATO). 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 McDonald's have underperformed the Zacks Retail - Restaurants industry over the year-to-date period (+4.5% vs. +6.2%). The company's prospects are marred due to lower global and U.S. comps. McDonald's comps dropped for the first time in the second quarter of 2024 after increasing for 13 straight quarters.

McDonald experienced negative comparable store sales in its internationally operated markets, reflecting broad-based pressure and more cautious spending by customers.

Furthermore, challenges from the ongoing war in the Middle East and reduced consumer confidence in China are concerning. Persisting labor inflation and stiff competition are additional headwinds to the company. Although higher average checks, menu innovation, a loyalty program, and unit expansion are positives, earnings estimates for 2024 have declined in the past 30 days.

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

Danaher’s shares have outperformed the Zacks Diversified Operations industry over the year-to-date period (+20.6% vs. +3.5%). The company’s stable demand in the clinical and molecular diagnostics businesses is supporting its Diagnostics segment. The segment has been witnessing positive responses toward its new products.

Danaher’s commitment to return value to shareholders is encouraging. Synergies from the Abcam acquisition bolster its growth. Through Danaher’s DBS initiatives, it has been able to reduce the impact of supply-chain constraints and inflationary pressures.

However, the company is plagued by weakness in the Life Sciences and Biotechnology units due to decreased demand across major end markets. An increase in SG&A expenses may affect the margin performance. High debt levels may raise its financial obligations and drain its profitability. Given the company’s international exposure, forex woes are weighing on its top line.

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

Shares of S&P Global have outperformed the Zacks Business - Information Services industry over the past year (+42.0% vs. +32.5%). The company remains well-poised to gain from the growing demand for business information services. Buyouts help innovate, increase differentiated content and develop products. The latest service launches have been aiding the company's growth.

Dividend payments and share buybacks boost investors' confidence and positively impact earnings per share. A current ratio of more than 1 indicates that the company will be easily paying off its short-term obligations.

On the flip side, S&P Global remains vulnerable to proceedings, investigations and inquiries concerning the ratings provided, leading to legal charges, damages or fines. Growth initiatives, higher compensations and incentives raise the company's expenses.

(You can read the full research report on S&P Global here >>>)

Twin Disc's shares have underperformed the Zacks Manufacturing - General Industrial industry over the year-to-date period (-22.1% vs. +13.3%). This microcap company with market capitalization of $176.16 million is facing weak industrial demand, rising operational costs, supply chain vulnerabilities, dependence on volatile oil prices, and currency risks could pressure future performance.

Nevertheless, Twin Disc's strategic acquisition of Katsa Oy enhances its product range in power transmission, key to expanding into hybrid and electric marine and industrial solutions. The purchase strengthens its foothold in Europe, driving long-term growth and cross-selling opportunities. The shift toward high-margin products like advanced marine transmissions lifted gross margins to 28.2% in 2024.

Improved operational efficiency in 2024 boosted free cash flow to $25 million. Diversification efforts increased Asia Pacific sales to 28%, reducing over-reliance on North America and amplifying global reach, with overall revenues rising 6.6% to $295.1 million. Despite robust finances, including low net debt and a strong balance sheet, challenges persist.

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

Shares of Cato Corp’s have underperformed the Zacks Manufacturing - General Industrial industry over the year-to-date period (-22.9% vs. +13.9%). This microcap company with market capitalization of $102.64 million is witnessing challenges persist with an 8% sales decline due to store closures, weak e-commerce performance (less than 5% of total sales) and inflationary pressures affecting consumer spending. Cato’s reliance on physical stores and exposure to economic cycles further heighten risks.

Nevertheless, Cato's strong financial position, with $30.8 million in cash and $69.9 million in working capital, enhances its operational stability and ability to invest in future growth. Improved cost control, with a 7% reduction in SG&A expenses, has bolstered profitability, and net income nearly doubled to $11.1 million for the first half of 2024.

The company's disciplined inventory management minimizes markdown risk, preserving margins. Cato’s consistent dividend payments underscore its financial health. Additionally, it is well-positioned to benefit from expected growth in the global apparel market.

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

Other noteworthy reports we are featuring today include KLA Corp. (KLAC), ONEOK, Inc. (OKE) and The Cooper Companies, Inc. (COO).

Mark Vickery
Senior Editor

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>>>