Top Analyst Reports For Microsoft, Merck & Union Pacific

Monday, April 9, 2018

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 Microsoft (MSFT), Merck (NYSE:MRK) and Union Pacific (UNP). 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 >>>

Microsoft’s shares have outperformed the Zacks Technology sector over the last year (up +37.7% versus +16.1%) Microsoft has a dominant position in the desktop PC market, with its operating systems being used in the majority of PCs worldwide. The company’s strategic growth investments in cloud business and AI are a positive. The launch of Surface LTE and the new generation of Windows 10 PCs from its OEM partners bodes well for the company.

Also, Microsoft’s recent blockchain deals with Hapoalim and Accenture and its Coco framework are tailwinds. The Zacks analyst thinks rapid adoption of Azure and Office 365 to remain the key catalysts in the near future. Further, collaborations with Amazon (NASDAQ:AMZN), Red Hat, Symantec (NASDAQ:SYMC), Cray and PAREXEL are positive for the company's growth prospects.

Microsoft’s strategic initiatives to enter the augmented reality and virtual reality market are other positives. However, its business reorganization and “cloud-first mobile-first” execution risks remain. Competition remains stiff.

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

Shares of Merck have underperformed the Zacks Large Cap Pharmaceuticals industry over the past year, losing -14.7% versus a gain of +5.2%. The Zacks analyst thinks Merck’s new products like Keytruda, Lynparza and Bridion should continue to contribute meaningfully to the top line in 2018. Keytruda sales are gaining strong momentum with approval for additional indications especially in the first-line lung cancer setting.

The Animal Health unit is also strong and remains a core growth driver for Merck. Meanwhile, Merck will continue to focus on cost-cutting initiatives to drive the bottom line. However, generic competition for several drugs and pricing pressure will continue to be overhangs on the top line.

Rising competitive pressure on the diabetes franchise and on products like Isentress (HIV), Zepatier (HCV) and Zostavax (vaccine) will remain headwinds in 2018. Estimates have gone up slightly ahead of the company’s Q1 earnings release. Merck has a positive record of earnings surprises in the recent quarters.

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

Union Pacific’s shares have outperformed the Zacks Rail industry (+21 vs. +11.9%) as well as fellow railroad operator Norfolk Southern Corporation (NYSE:NSC) (+12%) over the last year. The Zacks analyst thinks higher freight revenues will boost Union Pacific's first-quarter results, scheduled to be released on Apr 26. The metric is expected to increase on the back of overall volume growth, among other factors.

Moreover, the intermodal unit is anticipated to continue with its impressive performance in the soon-to-be reported quarter. The company's efforts to reward shareholders are also encouraging. The $3.3 billion capital plan announced by the company earlier in the year is impressive as well.

A bulk of the amount will be spent toward promoting safety and enhancing productivity. However, weakness pertaining to the automotive sector is concerning. In fact, automotive volumes are also expected to be soft in the first quarter. Union Pacific's high debt levels also remain a woe.

(You can read the full research report on Union Pacific here >>>).

Other noteworthy reports we are featuring today include Rockwell Collins (NYSE:COL), AstraZeneca (AZN) and Schwab (SCHW).

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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>>>