Earnings Season Update and Analyst Reports for Broadcom, JNJ & Verizon
Monday, June 10, 2024
The Zacks Research Daily presents the best research output of our analyst team. Today's Research Daily features an update on the earnings season and udpated analyst reports on 16 major stocks, including Broadcom Inc. (AVGO), Johnson & Johnson (JNJ) and Verizon Communications Inc. (VZ), as well as two micro-cap stocks Taylor Devices, Inc. (TAYD) and 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 >>>
Earnings Season Update
The Q2 earnings season will really get going on July 12th when JPMorgan comes out with its quarterly results. But the reporting cycle actually gets underway before that when companies with fiscal quarters ending in May report their results. In fact, the recent results from Costco and AutoZone for their fiscal quarters ending in May will get counted as part of the 2024 Q2 tally.
Total S&P 500 earnings for Q2 are expected to be up +8.6% from the same period last year on +4.6% higher revenues. Estimates have held up really well, compared to other recent periods.
The +8.6% earnings growth expected for Q2 today is down from +8.8% at the start of April. Estimates inched up through the end of April, but started coming down a bit in May and since then. All in all, Q2 earnings estimates have held up a lot better relative to what we have seen in other recent periods.
Today's Featured Research Reports
Broadcom shares have outperformed the Zacks Electronics - Semiconductors industry over the year-to-date period (+26.6% vs. +16.0%). The company is benefiting from the robust adoption of AI and the strong deployment of generative AI. In the first quarter of 2024, under its semiconductor segment, AI revenues quadrupled year over year to $2.3 billion despite sluggish enterprise and telcos end markets.
Broadcom now expects fiscal 2024 AI revenues of roughly $10 billion. Networking revenues are expected to rally 35% year over year, driven by the accelerating deployment of networking connectivity and the expansion of AI accelerators within hyperscalers.
Broadcom expects continued strong bookings at VMware will accelerate revenue growth through the rest of fiscal 2024. VMware revenues are expected to grow double-digit percentage sequentially through the rest of the fiscal year. However, it expects flat growth in wireless segment.
(You can read the full research report on Broadcom here >>>)
Shares of Johnson & Johnson have underperformed the Zacks Large Cap Pharmaceuticals industry over the year-to-date period (-4.6% vs. +21.5%). The company is facing headwinds like generic competition and pricing pressure continue. J&J faces the upcoming patent expiration of Stelara. Though it has taken meaningful steps to resolve its talc and opioid litigation, uncertainty regarding the talc litigations persists.
Nevertheless, J&J’s Innovative Medicine unit is performing at above-market levels. Its growth is being driven by existing products like Darzalex, Stelara, Tremfya and Erleada, and also the continued uptake of new launches, including Spravato, Carvykti and Tecvayli.
The MedTech unit is showing improving trends, driven by a recovery in surgical procedures and contribution from new products. J&J is making rapid progress with its pipeline and line extensions.
(You can read the full research report on Johnson & Johnson here >>>)
Verizon shares have gained +23.6% over the past year against the Zacks Wireless National industry’s gain of +27.9%. The company is offering various mix and match pricing in both wireless and home broadband plans, which has led to solid client additions. Focus on emerging growth services like cloud, security and professional services will likely reap long-term benefits.
The deployment of a cloud-native, container-based, virtualized architecture has led to higher flexibility, scalability and cost efficiency across its network. It is likely to benefit from customer-focused planning, disciplined engineering and steady investments for a comprehensive service portfolio.
However, lower wireline and wireless equipment revenues are major concerns. Huge promotional expenses and lucrative discounts to expand customer base are weighing on margins. High capital expenditure for continuous network upgrade and fiber deployment is a headwind. A muted guidance for 2024 is worrisome.
(You can read the full research report on Verizon here >>>)
Shares of Taylor Devices have outperformed the Zacks Manufacturing - General Industrial industry over the year-to-date period (+112.0% vs. +3.1%). This microcap company with market capitalization of $165.22 million has shown strong financial performance. Sales in the aerospace/defense sector jumped by 88%, offsetting declines in other sectors and highlighting strategic realignment toward profitable segments.
Gross profit margins improved to 46% from 41%, reflecting enhanced operational efficiency and cost management. The company boasts solid liquidity with $3.1 million in cash and short-term investments, underpinning financial stability and strategic initiative support. A positive $30.2 million order backlog indicates future revenue visibility.
However, reliance on the aerospace/defense sector poses risks, while rising SG&A expenses could impact future growth.
(You can read the full research report on Taylor Devices here >>>)
Frequency Electronics’ shares have outperformed the Zacks Instruments - Control industry over the past year (+45.1% vs. +22.1%). This microcap company with market capitalization of $88.66 million shows strong investment potential with 42.9% revenue growth, from $27.8 million to $39.7 million for the nine months ended Jan 31, 2024, driven by increased sales in government and commercial sectors, particularly in satellite and communication technologies.
The company's strategic positioning in markets with high barriers to entry, like precision time and frequency control products essential for defense and communication, ensures stable revenue streams and long-term contracts. Operational efficiencies have also improved, with cost reductions boosting gross margins from 13.7% to 31%.
The company maintains healthy liquidity. However, significant reliance on U.S. Government contracts poses risks due to political and budgetary uncertainties. Stringent regulatory requirements and global political tensions present risks.
(You can read the full research report on Frequency Electronics here >>>)
Other noteworthy reports we are featuring today include NextEra Energy, Inc. (NEE), Enbridge Inc. (ENB) and Becton, Dickinson and Company (BDX).
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>>>
Today's Must Read
Strong Demand for Networking Products Aids Broadcom (AVGO)
J&J's (JNJ) Innovative Medicine Unit to Drive Growth in 2024
Verizon (VZ) Rides on Network Scalability, Cost Efficiency
Featured Reports
NextEra (NEE) Gains from Renewable Focus, Steady Investment
Per the Zacks analyst, NextEra's planned long-term investment to enhance clean electricity generation and strengthen its infrastructure will boost its profitability.
Enbridge (ENB) to Gain From Its Vast Transportation Network
Per the Zacks analyst, Enbridge's vast pipeline network supports its low-risk business model via long-term transportation contracts. However, its substantial long-term debt remains a cause of concern.
Continued Focus on R&D Aids BD (BDX) Amid Forex Volatility
The Zacks analyst is upbeat about BD's continued focus on research and development (R&D) in recent times despite its business being exposed to foreign exchange volatility.
Strategic Buyouts, Solid Balance Sheet Aid Public Storage (PSA)
Per the Zacks analyst, Public Storage is poised to benefit from its high brand value, strategic acquisitions and solid balance sheet, though softening demand and high interest rates are concerns.
Expanding Clientele, Hybrid-Working Solutions Aids Zoom (ZM)
Per the Zacks analyst, Zoom is benefiting from solid adoption of hybrid-working solutions like Zoom Phone and expanding subscriber base driven by the need for digital transformation among enterprises.
Diversification Efforts Aid Ally Financial (ALLY), Costs Ail
Per the Zacks analyst, Ally Financial's efforts to diversify revenue base and the rise in consumer loans will aid profits. Elevated costs due to inorganic growth efforts might hurt the bottom line.
AXIS Capital (AXS) Set to Grow on Improved Portfolio Mix
Per the Zacks analyst, AXIS Capital continues to build on Specialty Insurance, Reinsurance plus Accident and Health. Improved portfolio mix and effective capital deployment should pave way for growth.
New Upgrades
Solid B2B Strategy Aids William-Sonoma (WSM) Performance
Per the Zacks analyst, William-Sonoma benefits from strong e-commerce business and B2B initiative. Also, the emphasis on digitalization & marketing initiatives and global expansion plans bode well.
Abercrombie (ANF) Gains From Brand Strength & Other Efforts
Per Zacks analyst, Abercrombie is experiencing strength in both its brands for a while. The company is focused on rationalizing its store base by reducing its dependence on the underperforming stores.
Solid Demand, Pricing Actions Aid Carpenter Technology (CRS)
Per the Zacks analyst, Carpenter Technology is gaining from strong demand across its end-use markets. Cost-reduction initiatives and efforts to preserve liquidity are also driving growth.
New Downgrades
Schneider (SNDR) Continues to Grapple With Segmental Weakness
Per the Zacks Analyst, below par performance in the Truckload, Intermodal and Logistics segments is hurting Schneider's top line. Lowered earnings outlook for 2023 looks disappointing.
High Costs & Low Iron Ore Prices to Hurt BHP Group (BHP)
The Zacks Analyst is concerned lower iron ore prices due to weak demand in China as well as escalated input costs will impact BHP's results.
Lower IT Spending to Hurt CrowdStrike's (CRWD) Prospects
Per the Zacks Analyst, CrowdStrike's growth prospects might be hurt by soft IT spending as organizations are pushing back their large IT investment plans amid the macroeconomic headwinds.
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NextEra Energy, Inc. (NEE) : Free Stock Analysis Report
Johnson & Johnson (JNJ) : Free Stock Analysis Report
Verizon Communications Inc. (VZ) : Free Stock Analysis Report
Becton, Dickinson and Company (BDX) : Free Stock Analysis Report
Enbridge Inc (ENB) : Free Stock Analysis Report
Broadcom Inc. (AVGO) : Free Stock Analysis Report
Frequency Electronics, Inc. (FEIM): Free Stock Analysis Report
Taylor Devices, Inc. (TAYD): Free Stock Analysis Report
