Friday, January 3, 2025

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 UnitedHealth Group Inc. (UNH), Costco Wholesale Corp. (COST) and International Business Machines Corp. (IBM), as well as a micro-cap stock Smith-Midland Corp. (SMID). 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 UnitedHealth have declined -6.1% over the past year against the Zacks Medical - HMOs industry’s decline of -9.9%.  The company’s top line remains poised for growth on the back of a strong market position, new deals, renewed agreements and expansion of service offerings. The company’s solid health services segment provides diversification benefits.

The Government business remains well-poised for growth in the future. Adjusted net earnings per share are anticipated to be in the $29.50-$30.00 band in 2025. A sturdy balance sheet enables investments and prudent deployment of capital via share repurchases and dividend payments.

However, membership in its global business continues to be a concern. High operating costs due to rising medical expenses are hurting margins. A debt-laden balance sheet induces an increase in interest expenses. As such, the stock warrants a cautious stance.

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

Costco’s shares have outperformed the Zacks Retail - Discount Stores industry over the past year (+41.1% vs. +25.1%). The company Being a consumer defensive stock, has been surviving the market turmoil pretty well. The discount retailer’s key strengths are strategic investments, a customer-centric approach, merchandise initiatives, and an emphasis on membership growth. These factors have been helping it register decent sales and earnings numbers.

The Zacks analyst expects Costco to register an 11.5% adjusted earnings per share improvement in fiscal 2025 on 6.6% revenue growth. This outlook reflects Costco’s ability to navigate the challenging operating environment, generate solid sales, and register high membership renewal rates.

A favorable product mix, steady store traffic, pricing power, and strong liquidity position should help Costco keep outperforming. While trading at a premium to its peers, its long-term growth prospects should help the stock see a solid upside.

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

Shares of IBM have outperformed the Zacks Computer - Integrated Systems industry over the past year (+41.6% vs. +10.9%). The company is poised to benefit from strong demand for hybrid cloud and AI, driving growth in the Software and Consulting segments. Settlement of ongoing lawsuits with GlobalFoundries will pave the way for future collaboration and exploration of new revenue-generating opportunities.

IBM is collaborating with SAP to tap generative AI technology within the retail industry. The collaboration is likely to facilitate higher productivity and help accelerate business transformation in consumer-packaged goods and retail firms.

However, stiff competition in various end markets is straining profits. Stringent cost-cutting efforts to boost margins beyond a certain threshold are likely to impact product quality. Although the company generates significant cash flow, a high debt level can hinder its ability to sustain dividend payout and impact growth initiatives.

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

Smith-Midland’s shares have outperformed the Zacks Building Products - Concrete and Aggregates industry over the past year (+68.6% vs. +0.2%). This microcap company with market capitalization of $233.51 million has demonstrated record revenue growth, driven by increased production volumes across its plants, especially for infrastructure-related projects.

In the second quarter of 2024, revenues surged 34% year over year to $19.6 million, with a strong $59.2 million backlog supporting continued expansion. The utility segment also showed robust growth, particularly in the Northern Virginia market. The company is strategically positioned with key infrastructure contracts and a solid financial footing, including $7.3 million in cash and a low debt-to-capitalization ratio.

However, concerns include revenue concentration, fluctuating demand in key product lines, exposure to inflation, operational risks and seasonal variability. Rising accounts receivable and the suspension of dividends could strain the company’s cash flow and impact investor sentiment.

(You can read the full research report on Smith-Midland here >>>)

Other noteworthy reports we are featuring today include TE Connectivity plc (TEL), ResMed Inc. (RMD) and Broadridge Financial Solutions, Inc. (BR).

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

Solid Top Line & Strong Cash Flows Drive UnitedHealth (UNH)

Decent Comparable Sales Run to Fuel Costco's (COST) Top Line

IBM Rides on Solid Customer Engagement in Software Segment

Featured Reports

TE Connectivity (TEL) Rides on Strong Transportation Growth
Per the Zacks analyst, TE Connectivity is benefiting from strong growth transportation segment. The growing proliferation of EVs and strong content trends in electronification are driving sales.

Broadridge Gains From Itiviti Buyout, Amid High Competition
Per the Zacks analyst, the Itiviti acquisition has boosted Broadridge's global technology and operations segment. High competition from other players is an overhang.

FactSet (FDS) Gains from CUSIP Acquisition, Amid Competition
Per the Zacks analyst, the CUSIP Global Services enhanced FactSet's position in the global capital markets. Rising competition from other players is an overhang.

Growth Projects Aid Kinross Gold (KGC) Amid Cost Woes
Per the Zacks analyst, Kinross will benefit from the progress of its key development projects, which will boost production and cash flows. However, high production costs will weigh on its margins. n

CACI International (CACI) Rides on Contract Wins, Buyouts
Per the Zacks analyst, CACI International is benefiting from new contracts supporting IT modernization. Moreover, strategic acquisitions like Applied Insight and Azure Summit bode well for growth.

Rezdiffra Sales Boosts Madrigal (MDGL), Narrow Pipeline a Woe
Per the Zacks Analyst, the approval and launch of Rezdiffra for NASH is a huge boost for Madrigal ensuring a regular revenue stream. However, the lack of a deep pipeline is a woe.

Digital Efforts Aid PENN Entertainment (PENN), Margin Hurts
Per the Zacks analyst, PENN's focus on technology-driven engagement, iCasino expansion and strategic partnerships bode well. Yet, declining EBITDAR margins and economic uncertainty are concerns.

New Upgrades

Solid Device Sales, Masks Business Growth Aid ResMed (RMD)
The Zacks analyst is impressed that the market success of ResMed's AirSense 10 and the AirSense 11 platforms fuel the global device sales. New patient activations and ReSupply boosts Masks growth.

Permian Buyouts to Enhance Coterra's (CTRA) Profitability
The Zacks analyst believes that Coterra Energy's recent acquisitions in the Permian Basin allows for longer, more efficient wells and reduces location costs, increasing overall profitability.

Robust AUM, Buyouts & Innovation Aid SEI Investments (SEIC)
Per the Zacks analyst, robust assets under management, strategic acquisitions, technological innovations, diverse products and a solid balance sheet will likely support SEI Investments' financials.

New Downgrades

Supply Chain Disruptions to Hurt Ormat Technologies (ORA)
Per the Zacks analyst, Ormat Technologies is likely to be affected by supply-chain disruptions that may continue to result in delayed deliveries of components used in the manufacturing of its products

Competition, Flucuating Commodity Price Ail Murphy (MUR)
Per the Zacks analyst Murphy Oil future prospects can be adversely impacted by the fluctuating commodity prices, while competitive industry can affect its profitability.

Changing Marketplace Conditions Impairs AMN Healthcare (AMN)
The Zacks analyst is worried about AMN Healthcare's ability to adapt to changing marketplace conditions in evolving care delivery settings. Healthcare industry regulations are an added concern.

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Broadridge Financial Solutions, Inc. (BR) : Free Stock Analysis Report

UnitedHealth Group Incorporated (UNH) : Free Stock Analysis Report

International Business Machines Corporation (IBM) : Free Stock Analysis Report

ResMed Inc. (RMD) : Free Stock Analysis Report

Costco Wholesale Corporation (COST) : Free Stock Analysis Report

TE Connectivity Ltd. (TEL) : Free Stock Analysis Report

Smith-Midland Corp. (SMID): Free Stock Analysis Report

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