Today's Must Read
Upstream Unit Buoys PetroChina (PTR) Amid Gas Import Losses
Aerospace Segment Drives Honeywell (HON), High Costs Hurt
Monday, September 9, 2019
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 United Parcel Service (UPS), PetroChina Company (PTR) and Honeywell International (HON). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
United Parcel Service’s shares have outperformed the Zacks Transportation - Air Freight and Cargo industry (20% vs.12.7%) in the last three months. The Zacks analyst is appreciative of UPS' efforts to reward its shareholders through dividends and buybacks.
In 2018, the company rewarded its shareholders to the tune of $4.2 billion. Continuing its pro-investor approach, UPS increased its quarterly dividend by 5.5% in February 2019. Robust free cash flow generation by UPS supports the possibility of a dividend hike going forward. E-commerce growth is an added positive and has been aiding results for the past few quarters. UPS expects cross-border e-commerce volume to grow by 28% during the 2019-2021 period.
However, UPS' high capital expenditures are worrisome. Additionally, trade-related uncertainty with China poses a threat to the company's growth. UPS' high debt equity ratio is also concerning.
Shares of PetroChina have underperformed the Zacks International Integrated Oil industry over the past six months, losing -21.5% vs -11.6%. The Zacks analyst thinks that with higher production and lower lifting costs supporting the state-run giant's upstream unit, the stock might regain favor.
PetroChina's E&P segment posted 5.9% increase in production in the first half of 2019, while oil and gas lifting costs decreased 2.4% from what it averaged in the first six months of last year.
However, in a sign of weakness in PetroChina’s downstream business, consisting of the refining and chemicals’ activities, earnings plunged due to higher operating expense, narrowing profit margin and lower chemicals prices. Limited international operation and losses on gas imports give investors more reason to be cautious on the stock.
Honeywell International’s shares have gained 29.5% in the year-to-date period, outperforming the Zacks Diversified Operations industry, which has gained 18.1% over the same period.
The Zacks analyst believes that strength in its commercial aerospace, warehouse and process automation businesses as well as solid demand for its commercial fire and security products will boost revenues in the quarters ahead.
Stronger sales volume, increased productivity and ongoing commercial effectiveness actions will improve its near-term profitability. For 2019, Honeywell raised earnings guidance from $7.90-$8.15 to $7.95-$8.15 per share.
However, the stock has been overvalued compared with the industry in the past year. Also, the company is experiencing softness in its productivity products business while high debts remain a concern. Earnings estimates for the company have declined for both 2019 and 2020 in the past couple of months.
Other noteworthy reports we are featuring today include CME Group (CME), Alexandria Real Estate Equities (ARE) and HP (HPQ).
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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>>>