Stock Analysts’ Downgrades for November, 2nd (BMY, EA, ENS, ERJ, GOOGL, MO, NSC, PEG, PNR, PYPL)
Bristol-Myers Squibb (NYSE:BMY) was downgraded by analysts at Zacks Investment Research from a buy rating to a hold rating. According to Zacks, “Bristol-Myers reported mixed results for the third-quarter wherein earnings missed expectations although revenue beat on the same. The miss in earnings was attributable to lower gross margin which in turn was due to product mix and decline in virology business. The increase in earnings guidance was encouraging. The company’s blockbuster immuno-oncology Opdivo continues to perform well along with, Eliquis and Orencia. The company is looking to expand Opdivo’s label further and recently won FDA approvals for liver and colorectal cancers which should boost performance. The company is also looking to counter generic threat for its key drugs through deals and acquisitions. The company recently entered into a deal with AbbVie and Halozyme. However, Opdivo is currently facing competitive challenges in the United States. The virology business is also under pressure. Shares of the company have underperformed the industry in the year so far.”
Electronic Arts (NASDAQ:EA) was downgraded by analysts at Zacks Investment Research from a buy rating to a hold rating. According to Zacks, “Electronic Arts' reported second quarter fiscal 2018 results wherein earnings came in ahead of the Zacks Consensus Estimate. Revenues registered strong year over year growth driven by continued increases in digital sales and strength in franchises like Battlefield, Star Wars, and EA Sports titles like FIFA & Madden bodes well for the company. Moreover, growing revenues from live services has emerged as a big growth catalyst for EA. In the current quarter, management is slated to release Star Wars Battlefront II. Star Wars is expected to drive topline in the quarter given the holiday season. Despite a big release, EA has given a tepid outlook for the current quarter. Net bookings are expected to be 3% lower than the year-ago figure as growth in live services are expected to be marred by several product launches.The hit driven and competitive nature of video game industry begets caution.”
Enersys (NYSE:ENS) was downgraded by analysts at Zacks Investment Research from a hold rating to a sell rating. According to Zacks, “EnerSys’ shares have yielded a negative return over the past six months, comparing unfavorably to the industry’s average positive return. Volatility in the cost of commodities (particularly lead) has weighed upon the company’s profitability in recent times. To combat the lead price rise, EnerSys has already initiated price increases but its taking much longer than expected for the results to show. In addition, currency fluctuations and stiff competition in the industry are also eroding the company’s profits. EnerSys is in the midst of a transformation, wherein it has been undertaking multiple long-term investments to boost growth. However, these efforts are impacting the company’s gross profit percentage adversely in the near-term. Despite these negatives, EnerSys’ dominant position in the lead-acid battery market, diligent cost reduction efforts and financial health add to its strength.”
Embraer-Empresa Brasileira de Aeronautica (NYSE:ERJ) was downgraded by analysts at Zacks Investment Research from a hold rating to a sell rating. According to Zacks, “Embraer posted mixed results in the third quarter of 2017. While the company’s earnings surpassed the Zacks Consensus Estimate, its revenues failed to meet the corresponding consensus mark. However, year-over-year results were disappointing on both fronts. Notably, Embraer operates in a highly competitive commercial aircraft manufacturing industry, which requires it to invest heavily in technology and performance enhancements to meet growing demand of the industry. The soft Defense and Security business is also a headwind. Moreover, Embraer’s share price has underperformed the industry’s gain over a year. Meanwhile, Embraer continues to lead the 70- to 130-seat commercial jet market. “
Alphabet (NASDAQ:GOOGL) was downgraded by analysts at Zacks Investment Research from a buy rating to a hold rating. According to Zacks, “Alphabet is one of the leading providers of target-based advertisements on the web. The company delivered strong top line in the third quarter on the back of higher overall advertising revenues and strong paid click growth. On a year to date basis, the stock has outperformed the industry it belongs to. Alphabet has shown good execution to date, more or less maintaining its dominant share in a competitive, fast-growing search market. Its focus on innovation, AI, cloud, home automation space, strategic acquisitions and Android OS should continue to generate strong cash flows. Its diversification strategy is also positive, but requires significant investment and involves uncertain payback periods, particularly since these efforts are at the cutting edge of technology. However, increasing litigation issues could continue to impact the company’s profits.”
Altria Group (NYSE:MO) was downgraded by analysts at Zacks Investment Research from a buy rating to a hold rating. According to Zacks, “Altria has surpassed the industry in the past month, thanks to its progress in the smokeless products category. Growth in market share for smokeless products also benefited the company’s third-quarter 2017 earnings, which rose year over year and topped the Zacks Consensus Estimate. Further, the company expects the smokeless product category, including e-vapor products to continue performing well. Moreover, Altria remains on track with its cost-reduction initiatives and consolidation of its manufacturing facilities to streamline operations. However, declining demand of tobacco products and stringent government regulations to curb tobacco consumption has been hurting Altria’s top line. Evidently, sales have lagged the consensus mark in seven out of the last nine quarters. Altria’s Wine category has also remained dismal for sometime now, owing to heightened competition.”
Norfolk Souther Corporation (NYSE:NSC) was downgraded by analysts at Zacks Investment Research from a buy rating to a hold rating. According to Zacks, “Shares of Norfolk Southern have outperformed its industry so far this year. Ushering in further good news, the company reported better-than-expected revenues and earnings per share in the third quarter of 2017. Both metrics improved on a year-over-year basis. Overall volumes grew 4% on the back of impressive performances at key segments like coal and intermodal.The company is looking to cut costs in order to drive the bottom line. It registered a record operating ratio of 65.9% in the quarter. The metric improved 160 basis points from the year-ago quarter. Norfolk Southern aims to achieve an operating ratio of below 65% by 2020 or even earlier. Automotive volume, however, decreased in the quarter due to sluggish vehicle production in the United States.”
Public Service Enterprise Group (NYSE:PEG) was downgraded by analysts at Zacks Investment Research from a buy rating to a hold rating. According to Zacks, “Public Service Enterprise reported dismal quarterly numbers for the third quarter of 2017. Both the top and bottom-line figures failed to meet the respective Zacks Consensus Estimates. Year over year also results were disappointing. Nevertheless, the company’s consistent capital-investment plans backed by a stable liquidity position have the potential to boost its performance. Apart from focusing on transmission and distribution infrastructure, the company is also expanding its renewable assets. Its share price has outperformed the broader industry over a year. However, environmental issues, such as restrictions on carbon dioxide emissions and other pollutants produced by Public Service Enterprise’s fossil units, may enhance compliance-related costs for the company. The company’s huge capital investment also remains a concern.”
Pentair PLC. (NYSE:PNR) was downgraded by analysts at Zacks Investment Research from a buy rating to a hold rating. According to Zacks, “Pentair’s third-quarter 2017 earnings surged around 22%, while sales inched up 1%, both on a year-over-year basis. Earnings beat the Zacks Consensus Estimate, while sales came in line with the Consensus mark. The company raised its full-year 2017 adjusted EPS guidance to $3.53 and reaffirmed the revenue guidance of $4.9 billion. The company also expects its adjusted core sales to grow approximately 2%. It also guided fourth-quarter 2017 adjusted EPS of 93 cents, up around 19% year over year. The company is poised to grow on its focus on reorganization activities, which includes the spin-off its Electrical business. However, Pentair’s Aquatic Systems will bear the burnt of the impact of recent Hurricanes. Material and other cost inflation, declines in project orders, particularly within the energy and infrastructure businesses will hurt results. Pentair underperformed the industry with respect to price over the past year.”
PayPal Holdings (NASDAQ:PYPL) was downgraded by analysts at Zacks Investment Research from a buy rating to a hold rating. According to Zacks, “PayPal is a worldwide online payments system operator. The company delivered strong third-quarter 2017 results, surpassing the Zacks Consensus Estimate on both counts. The results were driven by continued strong performance in global payments, both online and mobile. Currently, the company is riding high on partnerships and mobile centrism. PayPal’s ongoing strategic partnerships with Visa and MasterCard offer great flexibility and choice to consumers. Partnerships with Google, Facebook, Pinterest, Alibaba, Intuit and other major retailers and financial institutions are also delivering positive results. However, continuous exposure to foreign exchange and interest rate risks are concerns. Year to date, the stock has outperformed the industry it belongs to.”
TCF Financial Corporation (NYSE:TCF) was downgraded by analysts at Zacks Investment Research from a buy rating to a hold rating. According to Zacks, “Shares of TCF Financial have outperformed the industry over the past six months. Yet, the company’s earnings surprise history is not impressive. It missed the Zacks Consensus Estimate for earnings in three of the trailing four quarters. Third-quarter results were affected by higher expenses and provisions, partially offset by rise in loans and deposits. TCF Financial’s revenues continue to be hurt by the consistently declining banking fees over the last few years. Also, mounting costs due to increasing staff level is expected to impact bottom line. However, increasing loans, strong deposit mix and easing margin pressure will likely to aid profitability. The company has been also benefiting from improving credit quality in consumer real estate portfolio and has witnessed enhanced profitability ratios as well, which keeps us encouraged.”
Teva Pharmaceutical Industries Limited (NYSE:TEVA) was downgraded by analysts at Wells Fargo & Company to a market perform rating. They currently have $11.36 target price on the stock, down from their previous target price of $17.00.
UnitedHealth Group (NYSE:UNH) was downgraded by analysts at Zacks Investment Research from a buy rating to a hold rating. According to Zacks, “Shares of UnitedHealth Group outperformed the industry in past six months. Robust Government business and continued strong performance at Optum are driving the company’s long-term growth. International business and strong capital position are its other positives. It has been witnessing an increase in membership for the past many years. On the back of its impressive earnings in the first nine months, the company raised its 2017 guidance. It has reduced exposure to the troubled public exchange business. Though this move will shield it from losses in this business, premium revenues are likely to be affected. Charges related to Penn Treaty are other causes of concern.”
Union Pacific Corporation (NYSE:UNP) was downgraded by analysts at Zacks Investment Research from a buy rating to a hold rating. According to Zacks, “Shares of Union Pacific have outperformed its industry as well as fellow railroad operator Kansas City Southern over the last three months. While the company gained 14.1%, the industry it belongs to and Kansas City Southern have rallied 8.2% and 3.3%, respectively, in the same period. Ushering in further good news, Union Pacific reported better-than-expected earnings per share and revenues in the third quarter of 2017. Results were aided by strong performances of the company's intermodal and industrial products units. We are impressed by the company's efforts to cut costs to drive its bottom line as well. Efforts to reward investors also raise optimism in the stock. However, declining coal revenues in the third quarter raise concerns. Automotive volumes also decreased due to sluggish vehicle production in the United States.”
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