Friday, May 8, 2020

The Zacks Research Daily presents the best research output of our analyst team. Today's Research Daily provides the Q1 scorecard, in addition to featuring new research reports on 16 major stocks, including Visa (V), PepsiCo (PEP) and salesforce.com (CRM). 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 >>>

Q1 Earnings Scorecard 

For the 434 S&P 500 members that have reported Q1 results through Friday, May 8th, total earnin are down -10.6% on +1.1% higher revenues, with 67.7% beating EPS estimates and 58.3% beating revenue estimates.

The Tech and Finance sectors are having opposite effects on Q1 results. Excluding the Finance sector drag, Q1 earnings for the rest of the index would be down only -2.8% (vs. -10.6% with Finance). Other the hand, the index earnings growth picture would ben even worse once the Technology sector's relatively better results are taken out (-15.3% ex-Tech vs. -10.6% with Tech).

Estimates are still coming down, though the pace of negative revisions has eased a bit in recent days as the Q1 reporting cycle has started winding down. For Q2, S&P 500 earnings are now expected to be down -40.4%, followed by -23% in Q3 and -12.4% for Q4. Full-year 2020 earnings are currently expected to be down -22.2%. 

Featured Research Reports

Visa’s shares have outperformed the Zacks Financial Transaction Services industry over the past year (+15.1% vs. +9.6%). The Zacks analyst believes that this outperformance was driven by an expanded payments volume and processed transaction, partly offset by a decline in cross-border revenues that suffered due to spending cuts as a result of the COVID-19 fallout.

The company is likely to see a slowdown in its cross-border business due to coronavirus outbreak. Numerous acquisitions and alliances plus technology upgrades and effective marketing paved the way for long-term growth and consistently drove revenues.

The acquisition of Visa Europe is a growth strategy for the long haul. Its strong capital position is another positive. However, high client incentives and expenses weigh on its operating margins.

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

Shares of PepsiCo have gained +1.6% over the past six months against the Zacks Soft Drinks Beverages industry’s fall of -10.6%. The Zacks analyst believes that adverse currency rates are likely to hurt the company’s results in 2020.

The company’s top and bottom line surpassed the Zacks Consensus Estimate for the fifth straight quarter in first-quarter 2020. Results gained from its strong portfolio of brands, a responsive supply chain and flexible go-to-market systems, which helped maintain continued supplies amid the coronavirus pandemic.

Further, it sees ample flexibility to meet the investment needs of its business and return cash to shareholders. However, the company withdrew its view for 2020 citing uncertainties across its geographies, retail channels and consumer behaviors due to the coronavirus outbreak. It predicts organic revenues to decline at a low single-digit rate in the second quarter.

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

salesforce’s shares have lost -8.1% over the past three months against the Zacks Computer Software industry’s fall of -4.7%. The Zacks analyst believes that Salesforce has been benefiting from a robust demand environment as customers are undergoing a major digital transformation.

The rapid adoption of its cloud-based solutions is driving demand for its products. Continued deal wins in the international market is another growth driver. Furthermore, Salesforce’s recent acquisition of Tableau positions the company to be a leader in business analytics for actionable results in everything from operations to HR.

However, stiff competition from Oracle and Microsoft is a concern. Besides, increasing investments in international expansions and data centers are an overhang on near-term profitability.  

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

Other noteworthy reports we are featuring today include Fomento Economico Mexicano (FMX), Citigroup (C) and QUALCOMM (QCOM).

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Sheraz Mian

Director of Research

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>>>