Wednesday, October 23, 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 SAP SE (SAP), The Goldman Sachs Group, Inc. (GS) and Lockheed Martin Corp. (LMT), as well as two micro-cap stocks AMREP Corp. (AXR) and Nova LifeStyle, Inc. (NVFY). 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 >>>

SAP’s shares have outperformed the Zacks Computer - Software industry over the year-to-date period (+51.7% vs. +14.9%). The company’s third-quarter performance was driven by solid growth across its cloud business, especially rising demand for the "Rise with SAP" and "Grow with SAP" solutions. 

SAP’s cloud revenues rose 25% year over year to €4.35 billion, driven by momentum in the Cloud ERP Suite sales. Amid a volatile macro backdrop, it is making significant strides in Business AI initiatives, with innovations like SAP Knowledge Graph. Synergies from WalkMe’s acquisition and ongoing restructuring efforts bode well.

SAP's strong operating profit and free cash flow in the quarter position it well for growth. Driven by momentum, it raised 2024 outlook. It now expects cloud and software sales in the €29.5-€29.8 billion band, up from the prior view of €29.0-29.5 billion. However, softness in the Software license and support business segment remains something of a hindrance.

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

Shares of Goldman Sachs have gained +24.0% over the past six months against the Zacks Financial - Investment Bank industry’s gain of +53.7%. The company is refocusing on the core strengths of Investment Banking (IB) and trading businesses through restructuring initiatives. Both this and opportunistic buyouts will boost its presence in overseas markets.

Improvement in global deal-making and underwriting activities and its leading position will likely aid IB's revenue growth. A decent liquidity position will aid capital distribution moves. 

Yet its global banking & markets division will likely be under pressure due to the volatile nature of capital markets. Its continuous efforts to narrow focus on the consumer business will likely hurt revenues in the near term. Given the current geopolitical concerns, high dependence on overseas revenues gives caution.

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

Lockheed Martin’s shares have outperformed the Zacks Aerospace - Defense industry over the past year (+34.4% vs. +7.7%). The company’s broad product offerings allow it to secure major defense contracts, which in turn boosts its backlog count. Lockheed remains the largest U.S. defense contractor with a steady order flow from its leveraged presence in the Army, Air Force, Navy and IT programs. 

The solid U.S. defense budgetary provisions should boost its business. Its products also witness a strong international demand from the countries like Germany, Taiwan, Japan and Australia. Meanwhile, the company also holds a strong solvency position.

However, Lockheed is facing performance issues concerning some of its products that may affect its results. Shortage of skilled labor may adversely impact the company’s operating results. The sanctions imposed by China on Lockheed might also affect its business.

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

Shares of AMREP have outperformed the Zacks Real Estate - Development industry over the past year (+74.8% vs. +34.3%). This microcap company with market capitalization of $154.44 million delivered strong first-quarter fiscal 2025 results, with net income up 146.8% year over year to $4.1 million and revenues rising 85.5% year over year to $19.1 million, driven by a 164.3% increase in home sales and a 40.4% rise in land sales year over year. 

Significant growth in home and land sales highlights robust demand and sales execution. The company benefits from its strategic land holdings in New Mexico's growing housing market, supported by favorable market conditions, including price appreciation and moderating mortgage rates. AMREP’s low debt, strong cash position, increasing cash flow and efficient operations, provide flexibility for future growth.

Yet, rising costs, land inventory declines and customer concentration risks could pressure future profitability. Elevated mortgage rates and affordability concerns persist.

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

Nova LifeStyle’s shares have underperformed the Zacks Furniture industry over the past year (-40% vs. +66.6%). This microcap company with market capitalization of $4.07 million is positioned to effectively meet demand, maintaining customer satisfaction and key retail partnerships. Although inventory is slightly down from $2.2 million at 2023-end, the company continues to manage stock levels efficiently, addressing supply chain concerns. 

Despite a 20% drop in sales for the first half of 2024, gross profit rose 4.9%, driven by cost management. The company remains focused on geographic diversity, particularly in North America and Asia. 

Liquidity challenges persist, with only $0.4 million in cash and sales declining 40% year over year in second-quarter 2024. Nasdaq compliance risk, ongoing losses and macroeconomic pressures further cloud near-term growth prospects. Reliance on external financing and declining sales in core regions further pressure the stock

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

Other noteworthy reports we are featuring today include Zoetis Inc. (ZTS), Synopsys, Inc. (SNPS) and Marvell Technology, Inc. (MRVL).
 

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>>>

Today's Must Read

SAP Gains from Momentum in Cloud Business & AI Innovations

Rising IB Revenues & Solid Deal-Making Aid Goldman (GS)

Order Growth Boosts Lockheed (LMT), Tiff With Turkey Ails

Featured Reports

Pet-Care Portfolio Boost Zoetis (ZTS), Disease Outbreaks A Woe
Per the Zacks Analyst, the companion animal product sales are expected to boost Zoetis in the quarters ahead. Potential supply challenges and disease outbreaks could, however, hurt prospects.

Solid Storage & Networking Chip Demand Aid Marvell (MRVL)
Per the Zacks Analyst, Marvell is growing on solid demand for its storage and networking chips from accelerated 5G infrastructure deployment and increased adoption of cloud-based storage solutions.

Kinder Morgan (KMI) to Benefit from Rising US Gas Demand
The Zacks analyst sees Kinder Morgan benefiting from a 19% rise in U.S. natural gas demand by 2030, thanks to its vast pipeline network. However, a sharp decline in project backlog raises concerns.

Diamondback (FANG) to Benefit from Low Breakeven Costs
The Zacks analyst likes Diamondback Energy's extremely low oil price breakeven costs, wherein the company needs the commodity to be at just $40 a barrel to be profitable.

Manulife (MFC) Benefits From Solid Asia Business and Buyouts
Per the Zacks analyst, Manulife Financial is well poised to grow on its solid Asia business. Moreover, buyouts have aided in increasing the scale of its business lines and strengthening presence.

Synchrony Financial (SYF) Gains on Buyouts Amid Cash Flow Concerns
Per the Zacks Analyst, buyouts have enhanced Synchrony's capabilities and diversified the business. However, sustaining positive cash flows is a concern.

Snap-on's (SNA) Business Model & Other Efforts Encouraging
Per the Zacks analyst, Snap-on's business model helps in enhancing value-creation processes. Its strategic efforts aimed at creating value in areas like Rapid Continuous Improvement process.

New Upgrades

Synopsys (SNPS) Banks on Strong Product Menu, Contract Wins
Per the Zacks analyst, Synopsys' focus on strengthening its product portfolio is helping it cater to the growing demand in the EDA market. Deal wins at leading semiconductor companies is a tailwind.

Ryanair (RYAAY) Continues to Benefit From Improved Traffic
The Zacks Analyst is impressed with Ryanair's improved traffic growth, which implies increased passenger volume. Measures to expand its fleet to cater to the rising travel demand are encouraging.

Solid Afirma Adoption, LT Growth Drivers Aid Veracyte (VCYT)
Per the Zacks analyst, the robust volume growth of Veracyte's Afirma test is backed by its performance evidence and ease of use for physicians. Progress with long-term growth drivers look promising.

New Downgrades

Rising Adjusted SG&A and High Leverage to Ail Asbury (ABG)
Per the Zacks analyst, Asbury's adjusted SG&A as a percentage of gross profit is expected to remain elevated in 2024. The high long-term debt-to-capital ratio is also concerning.

High Funding Costs Hurt AGNC Investment (AGNC) Book Value
Per the Zacks Analyst, relatively higher interest rates increase funding costs for AGNC Investment's and will adversely affect its book value.

Soft Traffic at NIKE Digital & China Hurt NIKE's (NKE) Sales
Per the Zacks analyst, pronounced traffic softness at NIKE Digital and its partner stores in Greater China, led to lower-than-planned retail sales for NIKE, including wholesale partners.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Lockheed Martin Corporation (LMT) : Free Stock Analysis Report

The Goldman Sachs Group, Inc. (GS) : Free Stock Analysis Report

SAP SE (SAP) : Free Stock Analysis Report

Marvell Technology, Inc. (MRVL) : Free Stock Analysis Report

Synopsys, Inc. (SNPS) : Free Stock Analysis Report

Zoetis Inc. (ZTS) : Free Stock Analysis Report

AMREP Corporation (AXR): Free Stock Analysis Report

Nova Lifestyle, Inc (NVFY): Free Stock Analysis Report

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