Thursday, August 29, 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 American Express Company (AXP), ServiceNow, Inc. (NOW) and RTX Corporation (RTX), as well a micro-cap stocks Frequency Electronics, Inc. (FEIM).  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 American Express have outperformed the Zacks Financial - Miscellaneous Services industry over the past year (+63.6% vs. +23.4%). The company’s growth initiatives, like launching new products, reaching new agreements and forging alliances, are boosting its revenues. 

Consumer spending on travel and entertainment, which carries higher margins for AmEx, is advancing well. It beat Q2 earnings estimates. Its solid cash-generation abilities enable the pursuit of business investments and prudent deployment of capital via buybacks and dividends. 

However, with higher utilization of AXP’s cards, costs in the form of card member services and card member rewards are likely to go up. Rising marketing costs are straining its margins. Its current debt level amid a high-interest rate environment induces a rise in interest expenses. The stock is overvalued at the moment. As such, the stock warrants a cautious stance.

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

ServiceNow shares have outperformed the Zacks Computers - IT Services industry over the year-to-date period (+19.0% vs. +3.6%). The company has been benefiting from the rising adoption of its workflows by enterprises undergoing digital transformation. 

ServiceNow had 1,988 total customers with more than $1 million in annual contract value (ACV) at the end of second quarter, which represents 15% year-over-year growth in customers. ServiceNow had 14 deals greater than $5 million in net new ACV and four deals of more than $10 million. It closed 88 deals greater than $1 million net new ACV. 

Generative AI deals continued to gain traction with net new ACV for Now Assist and was part of 11 deals worth more than $1 million in the reported quarter. It is riding on an expanding partner base. Nevertheless, ServiceNow is suffering from persistent inflation, stiff competition, and a challenging macroeconomic environment.

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

Shares of RTX have outperformed the Zacks Aerospace - Defense industry over the past year (+44.1% vs. +0.3%). The company ended second-quarter 2024 on a solid note, with both its revenues and earnings having surpassed their respective Zacks Consensus Estimate. It continues to receive ample orders for its wide range of combat-proven defense products. 

A steadily recovering commercial air traffic has been bolstering commercial OEM as well as commercial aftermarket sales for the company. RTX holds a solid financial position, which enables it to make successful share repurchases. 

However, rising crude price tends to put cost pressure on airlines that may affect the operating results of commercial OEM producers like RTX. The company may also be affected if China enforces its announced sanctions against its missile and defense unit. Supply-chain challenges also pose a threat to RTX.

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

Frequency Electronics shares have outperformed the Zacks Instruments - Control industry over the year-to-date period (+41.8% vs. +10.9%). This microcap company with market capitalization of $135.62 million posted strong financial results in FY 2024, with revenue rising 36% to $55.3 million, driven by U.S. Government satellite programs and DOD customers. 

Frequency Electronics turned a $5.5 million net loss in FY 2023 into a $5.6 million net income, reflecting robust revenue growth, effective cost management and overcoming technical challenges. A record $78 million backlog ensures revenue visibility and supports business momentum. Positioned strategically in the growing satellite payload market, Frequency Electronics is capitalizing on demand for low and medium Earth orbit satellites. 

A debt-free balance sheet with $27 million in working capital provides flexibility for growth, while a $1.00 per share special dividend underscores shareholder value. However, the shift to cost-sensitive contracts pressures margins, and dependence on government contracts adds revenue uncertainty.

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

Other noteworthy reports we are featuring today include Fidelity National Information Services, Inc. (FIS), MPLX LP (MPLX) and Datadog, Inc. (DDOG).

Director of Research

Sheraz Mian

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

Strong Card Member Spending Aids AmEx (AXP) Amid High Costs

Growing Customer Base & Partnerships Aid ServiceNow (NOW)

Solid Order Growth Aids RTX, Rising Crude Oil Price Woes

Featured Reports

Datadog (DDOG) Banks on Cloud Partnerships, Customer Additions
Per the Zacks Research analyst, Datadog is benefitting from expanding customer base driven by increased adoption of its cloud-based monitoring and analytics platform.

TELUS (TU) Benefits from Increasing Subscriber Engagements
Per the Zacks analyst, TELUS' performance is cushioned by the continued expansion of its subscriber base. Softness across the TELUS Digital segment remains a woe.

Market Adoption Aids Zimmer Biomet (ZBH) amid Macro Issues
The Zacks analyst is impressed with Zimmer Biomet's solid market share gains banking on new launches across all wings. Yet, macroeconomic woes in the form of supply and staffing shortages dent profit.

Improving Volumes to Aid Ball Corporation (BALL), Costs Ail
The Zacks analyst believes improving volumes in North America and EMEA along with its focus on driving operating efficiency and productivity will negate the impact of elevated costs on its results.

WEX Benefits From Payzer Acquisition Amid Low Liquidity
Per the Zacks Analyst, the Payzer buyout aids WEX's growth strategy, offering scalable SaaS to 150,000 small business customers. Liquidity decline is a woe.

Asset Growth Aids Invesco (IVZ), High Level of Goodwill Hurt
Per the Zacks analyst, Invesco's diverse product offerings and rising assets under management will aid revenues. The presence of high levels of goodwill on its balance sheet is a woe.

Build-To-Order Model Aids Toll Brothers (TOL), High Costs Ail
Per the Zacks analyst, Toll Brothers is benefiting from its Build-To-Order model and and land acquisition strategies. However, supply constraint and high-cost environment are concerning.

New Upgrades

Strong Organic Growth and Buyouts Aid Fidelity National (FIS)
Per the Zacks analyst, the strong performance of Fidelity National's Merchants Solution segment is driving revenues. Acquisitions continue to boost its presence across several regions.

Focus on Expansion Initiatives to Benefit MPLX LP (MPLX)
Per the Zacks analyst, MPLX's robust capital expenditure forecast for 2024, with a significant portion dedicated to expansion initiatives, should support its long-term growth.

Growing Top Line, Solid Capital Position Aid Palomar (PLMR)
Per the Zacks analyst, Palomar's growing revenues driven by higher premiums and net investment income have led to significant growth. Moreover, robust capital position supports capital deployment.

New Downgrades

Ironwood's (IRWD) Overdependence on Linzess Poses Concern
Per the Zacks analyst, Ironwood's heavy dependence on its sole marketed drug Linzess for growth is a woe. Also, competition for Linzess in the target market is intensifying, which is an overhang.

Soft Demand to Hurt Capri Holdings (CPRI) Top Line
Per the Zacks analysts, softness in demand for luxury fashion items is likely to hurt Capri Holdings top line. The company is seeing sluggishness across its brands.

Lamb Weston's (LW) Volumes Hurt by Soft Restaurant Traffic
Per the Zacks analyst, Lamb Weston is battling soft volumes. In the fourth quarter of fiscal 2024, volumes fell 8% due to weak restaurant traffic as consumers are still adapting to higher menu prices.

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

American Express Company (AXP) : Free Stock Analysis Report

Fidelity National Information Services, Inc. (FIS) : Free Stock Analysis Report

MPLX LP (MPLX) : Free Stock Analysis Report

ServiceNow, Inc. (NOW) : Free Stock Analysis Report

Frequency Electronics, Inc. (FEIM): Free Stock Analysis Report

RTX Corporation (RTX) : Free Stock Analysis Report

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