Friday, August 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 Costco Wholesale Corp. (COST), Merck & Co., Inc. (MRK) and Linde plc (LIN), as well as two micro-cap stocks Hamilton Beach Brands Holding Co. (HBB) and Armanino Foods of Distinction, Inc. (AMNF). 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 >>>

Costco’s shares have outperformed the Zacks Retail - Discount Stores industry over the year-to-date period (+34.2% vs. +23.2%). This 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. 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 Merck have gained +8.0% over the year-to-date period against the Zacks Large Cap Pharmaceuticals industry’s gain of +28.9%. The company is witnessing generic competition for several drugs and rising competitive pressure, mainly on the diabetes franchise, will continue to be overhangs on the top line. 

There are concerns about Merck’s ability to grow its non-oncology business ahead of Keytruda’s loss of exclusivity later in the decade. However, Merck beat second-quarter estimates for earnings and sales. Products like Keytruda and Gardasil have been driving sales. With continued label expansion into new indications, particularly earlier-stage launches, Keytruda is expected to see continued growth. 

Animal health and vaccine products are core growth drivers. Merck boasts a strong cancer pipeline, including Keytruda, which should drive long-term growth. Merck is investing in M&A activity to strengthen its pipeline.

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

Linde’s shares have outperformed the Zacks Chemical - Specialty industry over the year-to-date period (+14.6% vs. -17.5%). The company being a global leader in industrial gas manufacturing, supplies a wide range of essential gases to industries such as energy, steel, healthcare, manufacturing and electronics. 

The firm secures long-term contracts with key on-site clients that feature minimum purchase agreements. This helps stabilize earnings during economic downturns, supported by its robust business model. Linde reported strong second-quarter earnings, driven by higher pricing from the Americas segment. 

However, increasing competition for new projects poses a challenge to the company's return on investment. Additionally, the volatility of energy prices, particularly for natural gas and diesel fuel, presents a significant concern for profitability. An increasing regulatory burden may also negatively impact the industrial gas producer’s overall financial health.

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

Shares of Hamilton Beach Brands have outperformed the Zacks Household Appliances industry over the year-to-date period (+66.3% vs. -13.8%). This microcap company with market capitalization of $383.56 million reports robust second-quarter 2024 results, driven by a 590-bps year-over-year improvement in the gross profit margin to 25.9%, reflecting effective cost management and strategic pricing. 

Revenues grew 14% year over year to $156.2 million, fueled by a strong core market performance in the United States, Mexico and Latin America, and a strategic focus on flagship brands. HBB's financial position strengthened significantly in the second quarter, with net debt reduced to $12.8 million and cash reserves rising to $37.2 million. 

Sales in premium markets grew 20%, supported by innovation and strategic licensing. The company’s initiatives and solid global commercial market performance underpin a positive outlook for sustained growth.

(You can read the full research report on Hamilton Beach Brands here >>>)

Armanino Foods of Distinction’s shares have outperformed the Zacks Food - Miscellaneous industry over the year-to-date period (+19.8% vs. +3.0%). This microcap company with market capitalization of $179.57 million delivered record sales and profitability in second-quarter 2024, with a 16% year-over-year increase in net sales to $17.48 million and a 90% surge in pre-tax income, driven by cost efficiencies and margin improvements. 

Armanino Foods of Distinction boasts 84 consecutive profitable quarters and a solid balance sheet, with $21.39 million in cash reserves, supporting its growth initiatives. Armanino increased its dividend by 10% and launched a $7-million stock buyback program, highlighting management's confidence. 

Strategic geographic expansion, strong market penetration and product diversification, including a 65% market share in food service pesto, enhance its competitive edge. Armanino's commitment to quality, evidenced by its BRC Grade AA certification, underpins its market leadership and positions the company for continued growth.

(You can read the full research report on Armanino Foods of Distinction here >>>)

Other noteworthy reports we are featuring today include Chipotle Mexican Grill, Inc. (CMG), Truist Financial Corp. (TFC) and M&T Bank Corp. (MTB).

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

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

Keytruda to Remain Merck's (MRK) Key Top-Line Driver

Linde's (LIN) Long-Term Contracts With Minimum Volume Aid

Featured Reports

Chipotle (CMG) Banks on Digital Initiatives, High Costs Ail
Per the Zacks analyst, Chipotle's consistent strength in digital sales, rise in menu prices and new restaurant openings bode well. However, elevated labor expense is a concern.

High Rates, Fee Income Aid Truist Financial (TFC), Costs Ail
Per the Zacks analyst, Truist Financial's efforts to improve fee income and the current high-rate environment will aid the top line. Elevated costs due to investments in technology will hurt profits.

Loan Growth Supports M&T Bank (MTB), Rising Costs a Woe
Per the Zacks analyst, M&T Bank's top line gets support from increasing loans and deposits balances. However, an escalating expense base keep bottom line under pressure.

Cost Management & Regulated investment Aid Exelon (EXC)
Per the Zacks analyst Exelon's cost management initiatives will have positive impact on margins and its planned $34.5B investments through 2027 will strengthen its operation.

Strong Momentum Across Segments Aids HubSpot's (HUBS) Revenues
Per the Zacks Analyst, strong user engagement across all segments is boosting HubSpot's (HUBS) top line. Integration of AI across its product suite further aids the company.

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.

Improving User Engagement, Partnerships to Drive Snap (SNAP)
Per the Zacks analyst, extended partnerships with the likes of Comcast and Viacom related to new content production are expected to boost Snap's audience base as well as user engagement.

New Upgrades

Strong Demand, Price Hikes Aid Packaging Corporation (PKG)
Per the Zacks analyst, Packaging Corp will gain on robust packaging demand backed by e-commerce and rising requirement for packaging of food, beverages and medicines as well as its pricing actions.

Universal Health (UHS) Rides on Solid Acute Care Platform
Per the Zacks Analyst, growing patient admissions and expansion initiatives in the Acute Care Hospital Services unit drive revenue growth. An adequate cash balance ensures business investments.

Rising Orders at Architectural Services to Aid Apogee (APOG)
Per the Zacks analyst, a solid backlog and a strong project pipeline in its Architectural Services segment will drive Apogee's performance. Focus on improving efficiency will aid margins.

New Downgrades

Copa Holdings' (CPA) Prospects Hurt by High Operating Costs
High fuel and labor expenses at Copa Holdings bother the Zacks analyst. Weakness pertaining to passenger yield and cargo revenues represents another headwind.

Excess Inventory & Declining Order Backlog Ail Winnebago (WGO)
Per the Zacks analyst, the presence of excess inventory in the motorhome RV and marine categories poses challenges to Winnebago. The declining backlog in motorized RV & towable RV is also concerning.

Destocking and FX Headwind To Ail West Pharmaceutical (WST)
Per the Zacks analyst, higher customer destocking across West Pharmaceutical's business units is likely to continue in upcoming quarters, hurting sales. FX headwind to hurt 2024 revenues by $5 million

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

Merck & Co., Inc. (MRK) : Free Stock Analysis Report

Chipotle Mexican Grill, Inc. (CMG) : Free Stock Analysis Report

M&T Bank Corporation (MTB) : Free Stock Analysis Report

Costco Wholesale Corporation (COST) : Free Stock Analysis Report

Linde PLC (LIN) : Free Stock Analysis Report

Hamilton Beach Brands Holding Company (HBB) : Free Stock Analysis Report

Armanino Foods of Distinction Inc. (AMNF): Free Stock Analysis Report

Truist Financial Corporation (TFC) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research