Retail Scorecard and Analyst Reports for Coca-Cola, Oracle & Morgan Stanley

Tuesday, August 16, 2022

The Zacks Research Daily presents the best research output of our analyst team. Today's Research Daily features an update on the ongoing Q2 earnings season and new research reports on 12 major stocks, including The Coca-Cola Company (KO), Oracle Corporation (ORCL) and Morgan Stanley (MS). 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 >>>

Retail Sector Earnings Scorecard (as of August 16, 2022)

Including this morning's results from Walmart and Home Depot, we now have Q2 results from 22 of the 34 retailers in the S&P 500 index. Please note that we have a stand-alone Retail sector, unlike the 'official' S&P GICs where the retailers are placed in the Consumer Discretionary and Staples sectors.

The Zacks Retail sector includes all of the 'traditional' operators as well as online vendors and restaurant players.

Total Q2 earnings for the 22 retailers in the S&P 500 index that have reported results are down -19.5% on +8.8% higher revenues, with 72.7% beating EPS estimates and 50% beating revenue estimates.

This is a weaker beats percentage for this group of 22 retailers than has been the case in the recent past. In fact, the 50% Q2 revenue beats percentage is the lowest for this group of 22 retailers in the preceding 5 years (last 20 quarters), the previous lowest reading was 54.5% in 2019 Q4.

Amazon's weak Q2 earnings results are a big drag on the sector's earnings growth rate. If we exclude Amazon's -86.5% year-over-year decline in earnings, Q2 earnings for the rest of the retailers would actually be up +3.7% from the same period last year, instead of the -19.5% decline with the online retailer's results included.

Looking at Q2 for the S&P 500 index as a whole, total earnings are now on track to up +6.7% on +14% higher revenues. Q2 earnings growth for the index drops to a decline of -3.6% on an ex-Energy basis and improves to +13.9% on an ex-Finance basis.

Estimates for the current period (2022 Q3) continue to come down, with earnings currently expected to be up +2% on +8.8% higher revenues. The +2% expected earnings growth rate today in Q3 is down from +7.2% on July 6th.

Excluding the Energy sector, Q3 earnings for the remainder of the index are currently expected to be down -4.4% from the samer period last year. This is down from +2.1% earnings growth expected on an ex-Energy basis on July 6th.

Today's Featured Analyst Reports

Coca-Cola shares have outperformed the Zacks Beverages - Soft drinks industry over the past year (+16.5% vs. +10.7%) on the back of sustained performance momentum as reflected in the strong Q2 results. The company’s top and bottom lines surpassed estimates for the sixth straight quarter in Q2. The company’s results reflect elasticity in the marketplace despite the ongoing global challenges.

Sales gained from revenue growth across its operating segments, aided by an improved price/mix and an increase in concentrate sales. Coca-Cola benefited from underlying share gains in both at-home and away-from-home channels. It raised the organic revenues and comparable earnings per share growth guidance for 2022. It is poised to gain from innovations and accelerating digital investments.

However, pressures from higher supply chain costs, including transportation and input costs remain. Higher marketing spends and currency headwinds are also concerning.

(You can read the full research report on Coca-Cola here >>>)

Oracle shares have declined -8.2% over the year-to-date basis against the Zacks Computer - Software industry’s decline of -14.8%, with the company's stable enterprise business and emerging cloud opportunity accounting for the relative outperformance.

Oracle is benefiting from the ongoing momentum across its cloud business, driven by the strong uptake of Oracle Cloud Infrastructure services and Autonomous Database offerings. Solid adoption of cloud-based applications, comprising NetSuite Enterprise Resource Planning (ERP), Fusion ERP and Fusion Human Capital Management (HCM), bodes well.

Solid demand for the Oracle Dedicated Region Cloud@Customer is anticipated to drive the top line. Partnerships with Accenture and Microsoft is helping Oracle win new clientele. The company’s share buybacks and dividend policy are noteworthy.

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

Morgan Stanley shares have declined -4.3% over the year-to-date basis against the Zacks Financial - Investment Bank industry’s decline of -7.5%. Uncertainty about the outlook of the capital markets remains a major headwind for Morgan Stanley as well as the broader group, but the company's greater money management business remains a source of strength.

The company is continuously undertaking measures, including the acquisitions of Eaton Vance and E*Trade Financial, to become less dependent on the capital markets-driven revenue sources. These initiatives are bearing fruits. Increased focus on corporate lending will likely keep supporting financials in the quarters ahead. Further, higher interest rates will support net interest income.

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

Other noteworthy reports we are featuring today include Honeywell International Inc. (HON), Amgen Inc. (AMGN), and TotalEnergies SE (TTE).

Sheraz Mian

Director of Research

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

Coca-Cola's (KO) Digital Investments to Aid the Top Line

Oracle (ORCL) Gains from Cloud Suite Adoption & Partnerships

High Rates, Buyouts Aid Morgan Stanley (MS), High Costs Ails

Featured Reports

Aerospace Unit Backs Honeywell (HON) Amid Supply Chain Woes
The Zacks analyst is encouraged by continued growth in the Aerospace segment owing to recovery in commercial flight hours. However, supply chain disruptions and inflationary pressure remain concerns.

Amgen (AMGN) New Drugs Off to Good Start; Pipeline Strong
The Zacks analyst believes Amgen's new drugs Lumakras and Tezspire are off to an encouraging start. Amgen is rapidly advancing its robust pipeline of early and late-stage assets.

Enbridge (ENB) to Gain From $4.5B Midstream Growth Projects
The Zacks Analyst believes Enbridge is likely to generate significant cash flows from the $4.5-billion newly sanctioned growth projects in 2022. Yet, its huge debt exposure is concerning.

Improving Clearing and Transaction Fees Aid CME Group (CME)
Per the Zacks analyst, CME is set to grow on higher clearing and transaction fees as market position, diverse derivative product lines and global reach drive volumes. However, escalating expense ails.

Expanding Cloud Portfolio & Partner Base Aids VMWare (VMW)
Per the Zacks analyst, VMware is benefiting from strong demand for its expanding cloud-based solutions, strong partner base and Carbon Black & Pivotal acquisitions.

Beer Business to Boost Constellation Brands' (STZ) Feat
Per the Zacks analyst, Constellation Brands is gaining from strength in beer business on robust consumer demand and share gains for its iconic brands, particularly Modelo Especial and Corona Extra.

FUJIFILM (FUJIY) To Benefit From Strong Product Portfolio
Per the Zacks analyst, FUJIFILM's performance benefitted from strong revenue growth across all business segments. However, increasing cost and high debt remain concerns.

New Upgrades

Expanding LNG & Clean Energy Assets Aid TotalEnergies (TTE)
Per the Zacks analyst TotalEnergies's presence in entire LNG value chain and expansion of clean energy generation through joint venture and acquisition will boost its performance.

H&R Block (HRB) Benefits From Block Horizons 2025 Strategy
Per the Zacks analyst, Block Horizons is expected to help H&R Block deliver sustainable revenues and operating profit growth, improve return on investments, and maintain a strong liquidity position.

LNG Demand, Buybacks Boost Golar LNG's (GLNG) Prospects
The Zacks analyst is bullish on soaring demand for liquefied natural gas (LNG). Efforts to reward its shareholders and reduce debt load are also encouraging.

New Downgrades

Chip Crisis, Soaring SG&A Expenses Ail Standard Motor (SMP)
Per the Zacks analyst, Standard Motor is hard hit by the chip and parts shortage. Rise in costs of vital inputs increase manufacturing costs and high SG&A expenses are likely to dent margins.

A Highly-Regulated HealthCare Industry Ails LHC Group (LHCG)
The Zacks analyst is worried about LHC Group's operation in a highly competitive and fragmented home healthcare market.

High Costs to Hurt Red Robin's (RRGB) Margin in Near Term
Per the Zacks analyst, commodity and wage rate inflation will continue to hurt Red Robin performance in the near term.

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Morgan Stanley (MS) : Free Stock Analysis Report

CocaCola Company The (KO) : Free Stock Analysis Report

Honeywell International Inc. (HON) : Free Stock Analysis Report

Amgen Inc. (AMGN) : Free Stock Analysis Report

Oracle Corporation (ORCL) : Free Stock Analysis Report

TotalEnergies SE Sponsored ADR (TTE) : Free Stock Analysis Report

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