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Top Stock Reports for Berkshire Hathaway, Eli Lilly & PepsiCo

Friday, June 14, 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 Berkshire Hathaway Inc. (BRK.B), Eli Lilly and Co. (LLY) and PepsiCo, Inc. (PEP), as well as two micro-cap stocks Hovnanian Enterprises, Inc. (HOV) and IDT Corporation (IDT). 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 >>>

Berkshire Hathaway’s shares were in line with the Zacks Insurance - Property and Casualty industry over the year-to-date period (+13.8% vs. +13.8%). The company is one of the largest property and casualty insurance companies with numerous diverse business activities. A strong cash position supports earnings-accretive bolt-on buyouts and is indicative of its financial flexibility.

Continued insurance business growth fuels increase in float, drive earnings and generates maximum return on equity. The non-insurance businesses have also been doing well in the last few years. The addition of Pilot Travel Centers (PTC) has strengthened its energy business. A sturdy capital level provides further impetus.

However, exposure to cat loss induces earnings volatility and also affects the underwriting results. Huge capital expenditure remains a headwind. With the demise of Charles Munger, uncertainty looms over the company's performance.

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

Shares of Eli Lilly have outperformed the Zacks Large Cap Pharmaceuticals industry over the year-to-date period (+52.0% vs. +21.8%). The company boasts a solid portfolio of core drugs for diabetes, autoimmune diseases and cancer. Its revenue growth is being driven by higher demand for drugs like Mounjaro, Verzenio, Jardiance, Taltz and others.

Eli Lilly’s new tirzepatide medicines, diabetes drug Mounjaro and obesity medicine, Zepbound, are seeing exceptionally strong demand trends. Lilly has also launched some other new products like Omvoh and Jaypirca. Mounjaro, Zepbound and other new products are expected to drive Lilly’s top line in 2024.

Lilly is also making rapid pipeline progress in areas like obesity, diabetes and Alzheimer’s. However, generic competition for some drugs, rising pricing pressure and challenges in meeting strong demand for incretin products like Zepbound and Mounjaro are some top-line headwinds.

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

PepsiCo’s shares have underperformed the Zacks Beverages - Soft drinks industry over the year-to-date period (-2.4% vs. +2.2%). The company witnessed soft sales trends in the QFNA segment due to recent product recalls. Adverse currency rates also remain headwinds.

Nevertheless, PepsiCo has been benefiting from strength and resilience in core categories, diversified portfolio, modernized supply chain, improved digital capabilities, flexible go-to-market distribution systems and robust consumer demand trends.

Additionally, PEP’s international business continues to hallmark its overall performance, delivering significant volume and organic revenue growth in the first quarter. These factors along with robust pricing aided PepsiCo’s earnings and organic revenues first-quarter 2024. The company’s productivity and cost-management initiatives bode well.

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

Shares of Hovnanian have outperformed the Zacks Building Products - Home Builders industry over the past year (+54.5% vs. +34.2%). This microcap company with market capitalization of $920.57 million has substantially improved its financial health, reducing debt from $2.5 billion to under $1 billion as of the second quarter of fiscal 2024.

Its aggressive growth in controlled lots, which rose 29% year over year to 36,841 at the end of the second quarter of fiscal 2024, and a planned community count increase of 5-10% by year-end will support revenue growth. The company targets niche markets like active adults and innovates in-home designs, ensuring solid sales potential.

However, Hovnanian faces legal risks from litigation and regulatory challenges, especially in environmental issues. The competitive homebuilding market threatens market share and profitability, exacerbated by the dependency on volatile housing market conditions. A declining contract backlog could affect the company’s profitability and growth.

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

IDT’s shares have outperformed the Zacks Diversified Communication Services industry over the past year (+38.6% vs. -9.4%). This microcap company with market capitalization of $929.95 million is innovating its B2B2X financial services and leveraging digital payments, enhancing operational efficiency with a notable rise in NRS EBITDA margin from 1% to 20%.

DT's NRS segment reported $82 million in recurring revenues with a 30% year-over-year increase, driven by a suite of merchant services. The POS network grew 28% to 28,700 terminals, tapping into a TAM of 200,000 retailers. BOSS Money's remittance service saw a 42% revenue uptick, boosting the fintech space.

Challenges include regulatory risks in fintech, reliance on volatile segments like Traditional Communications for cash flow, and intense competition in POS and remittance markets. Macroeconomic factors and one-time costs may impact profitability. Despite growth, concerns about expense management and the unpredictability of new investments could affect investor sentiment.

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

Other noteworthy reports we are featuring today include Broadcom Inc. (AVGO), McDonald's Corp. (MCD) and Amphenol Corp. (APH).

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

Solid Insurance Business Aid Berkshire (BRK.B), Cat Loss Ail

Lilly (LLY) New Products Hold Key to Sales Growth in 2024


PepsiCo's (PEP) Business Investments to Bolster Performance

Featured Reports

Strong Demand for Networking Products Aids Broadcom (AVGO)
Per the Zacks analyst, Broadcom is riding on robust demand for networking solutions. Strong adoption of AI accelerators among hyperscalers is driving top-line growth.

McDonald's (MCD) Banks on Strategic Initiatives, High Costs Ail
Per the Zacks analyst, McDonald's is likely to benefit from the loyalty program, menu innovation and Accelerating the Arches strategy. However, commodity and wage inflation pose concerns.

GE HealthCare (GEHC) To Gain from Rising Product Demand
Per the Zacks analyst, GE HealthCare's (GEHC) topline is likely to driven by rising demand for its products as it cater to growing markets. However, choppy macro environment to weigh on the stock.

High Margin Assets & Cost Management Aid Devon Energy (DVN)
Per the Zacks analyst Devon's strong production from its high margins assets and efficient cost management will drive performance over the long run.

Rental Unit Demand Aid Essex Property (ESS) Amid High Supply
Per the Zacks Analyst, Essex Property is likely to benefit from the healthy demand for residential units amid high home ownership costs, though new deliveries and high interest rates are woes.

Genpact (G) Gains From AI Product Portfolio Amid Talent Cost
Per the Zacks analyst, Genpact has growth potential in Artificial Intelligence with a strong product portfolio and benefits from acquisitions. A competitive talent market remains a concern.

Operational Efficiency Aids Silgan (SLGN) Amid Low Volumes
Per the Zacks analyst, Silgan is gaining from disciplined capital allocation model and strong operational performance. However, lower volumes will continue to hurt its top-line performance.

New Upgrades

End-Market Strength & Diversification Aids Amphenol (APH)
Per the Zacks analyst, Amphenol benefits from commercial air, military, industrial and automotive end-market demand. Diversified business model also lowers volatility of individual geographies.

Robust Construction Activity & Acquisitions Aid EMCOR (EME)
Per the Zacks analyst, EMCOR is benefiting from increased project flows from high-tech manufacturing and network and communications market sectors. Also, focus on acquisitions bode well.

Loan Demand, Fee Income, High Rates Aid BankUnited (BKU)
Per the Zacks analyst, decent loan demand, high rates and focus on fee income will keep on aiding BankUnited's revenues. Solid balance sheet and liquidity positions will support capital distributions.

New Downgrades

Macro Headwinds and Cautious Customer Spending to Dent FLEX
Per the Zacks analyst, Flex's performance is likely to be impacted by macro headwinds across multiple end markets coupled with cautious customer spending behaviour and rising global tax rates.

Medifast (MED) Troubled by Customer Acquisition Challenges
Per the Zacks analyst, Medifast is battling customer acquisition challenges due to the rising popularity of weight loss medications. Consequently, the company expects soft revenues in second quarter.

Sunoco's (SUN) Debt Woes, Market Instability Threaten Growth
Per the Zacks analyst, Sunoco's (SUN) high debt-to-capital ratio, surpassing industry peers for the last five years, and consumer shifts to alternative fuels over climate concerns may impact profits.

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

Eli Lilly and Company (LLY) : Free Stock Analysis Report

Amphenol Corporation (APH) : Free Stock Analysis Report

McDonald's Corporation (MCD) : Free Stock Analysis Report

Berkshire Hathaway Inc. (BRK.B) : Free Stock Analysis Report

PepsiCo, Inc. (PEP) : Free Stock Analysis Report

Broadcom Inc. (AVGO) : Free Stock Analysis Report

Hovnanian Enterprises Inc (HOV) : Free Stock Analysis Report

IDT Corporation (IDT) : Free Stock Analysis Report

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Zacks Investment Research