Benjamin Rains


On today’s episode of Full Court Finance here at Zacks, Ben Rains takes a look at what investors should expect from Apple (AAPL – Free Report) , Amazon (AMZN – Free Report) , and Microsoft’s (MSFT – Free Report) quarterly earnings results that are all due out later this week. Wall Street will be closely watching the three tech giants for more clarity surrounding the coronavirus and to see if they can remain safe-haven investments.

The overall earnings picture has quickly deteriorated as the coronavirus pandemic continues to bring the global economy to as near a halt as many thought possible. For instance, our Zacks estimates project that overall S&P 500 earnings will fall -15.3% in the first quarter, and the outlook appears even worse in Q2 (also read: Previewing Tech Sector Earnings).

That said, energy, transportation, autos, consumer discretionary, and other sectors are projected to take huge hits. Meanwhile, tech sector S&P 500 earnings are only expected to slip -0.7% in the first quarter. This might mean that tech stocks, and certainty the mega-cap powers we discussed today, should play even larger roles in investment portfolios.

Amazon stock has climbed to new highs recently because its business model seems relatively immune from the coronavirus economic downturn. For instance, the e-commerce powerhouse has committed to hiring more people to deal with increased demand, even as millions of jobs are lost elsewhere.

Cloud computing rival Microsoft also looks set to grow as millions of people work from home. The tech firm’s diverse portfolio includes business-communication platforms to challenge the likes of Zoom (ZM – Free Report) and Slack (WORK – Free Report) , and many more offerings that remain vital during these challenging times.

Apple has expanded its portfolio to include a streaming TV platform to compete alongside Netflix (NFLX – Free Report) , Disney (DIS – Free Report) , and others. However, AAPL appears as though it will face setbacks in its key iPhone segment due to lower demand and production setbacks.

Author: Benjamin Rains

Source: Zacks: Big Tech’s First Coronavirus Earnings Test: Buy Apple, Amazon or Microsoft Stock?

The coronavirus has already ended the 11-year bull market and its continued spread around the U.S. and the rest of the world has temporarily put a halt to much economic activity, including the travel and hospitality industries. The Dow, the S&P 500, and the Nasdaq have all fallen over 30% from their mid-February highs and selling and volatility look poised to remain amid increasing uncertainty.

Governments and people have taken measures to “flatten the curve,” which includes many Americans staying confined to their homes. Meanwhile, the Fed on Sunday cut its benchmark rate to near zero and it plans to ramp up bond buying as it tries to boost liquidity.

With this in mind, now likely isn’t time for investors to buy growth-style stocks on the dip. Instead, we found three stocks from the broader tech industry that might be solid longer-term investments, even if we haven’t hit a bottom.

On top of that, their higher dividend yields should help provide much-needed income during the coronavirus downturn.

Seagate Technology PLC (STX – Free Report)

Seagate is a data storage firm, with offerings that range from hard disk drives to solid state drives and more. STX sells storage solutions for both businesses and consumers and STX executives expect to benefit from the “ongoing demand for mass capacity storage.” In February, it topped our Q2 fiscal 2020 earnings estimate and longer-term bottom-line revisions have remained positive amid the economic setbacks, which helps STX earn a Zacks Rank #2 (Buy) right now. Nonetheless, Seagate stock has fallen roughly 30% in 2020.

STX was trading at around $42.50 a share through early afternoon Friday, over $20 off its 52-week highs of around $64 a share that it hit in January. Along with its lower price, STX has consistently traded at a discount against its industry over the last five years. Seagate is currently trading at 1.1X forward 12-month sales, compared to its industry’s 2.2X average, which also comes in well below its own 52-week high of 1.6X. Plus, STX is trading at 7.7X forward 12-month earnings, well below its one-year median of 10.4X and its industry’s 14.3X average.

Seagate currently sports an “A” grade for Value in our Style Scores system and is part of a Computer- Storage Devices industry that rests in the top 7% of our more than 250 Zacks industries. And in keeping with today’s theme, STX’s dividend is currently yielding roughly 6.1% to blow away the S&P 500’s 2.36% average. Plus, its next quarterly dividend of $0.65 a share will be payable on April 8, to shareholders of record as of March 25.

IBM (IBM – Free Report)

IBM further demonstrated its commitment to its cloud computing transition when the historic tech giant in late January announced that Ginni Rometty would step down as CEO. IBM’s new CEO, Arvind Krishna, has already played a key role in turning the company’s focus to artificial intelligence, the cloud and quantum computing. IBM also topped our quarterly earnings estimates and posted surprise Q4 revenue growth, after five straight quarters of declining sales—driven by cloud revenue, which surged 21% to account for over 30% of total sales.

Shares of IBM have fallen as part of the broader market selloff and are now down 30% in 2020. The stock currently sits at around $97 a share, after trading as high as $157 a share in early February. Investors should note that IBM stock hasn’t traded at these prices in over a decade. As one might hope, this has also put IBM’s valuation at 10-year lows, trading at 7.4X forward 12-months Zacks earnings estimate. This comes in well below its highly-ranked industry’s 14.3X average and its own one-year median of 10.2X, which helps the stock hold a “B” grade for Value.

Looking ahead, IBM’s revenue and earnings are projected to climb in fiscal 2020 and 2021, with bigger growth expected on the bottom line. Meanwhile, IBM’s longer-term earnings revisions activity helps it earn a Zacks Rank #2 (Buy) right now. Lastly, IBM’s 6.68% dividend yield easily tops Qualcomm’s (QCOM – Free Report) 3.85% and Oracle’s (ORCL – Free Report) 2.08%, and the firm has a history of raising its payout.

Verizon (VZ – Free Report)

Verizon is a communication powerhouse that competes alongside rival AT&T (T – Free Report) for dominance in the wireless market. VZ, like its main rival, has focused on various cost-cutting measures even as it ramps up its 5G push, which requires a large amount of capital spending. Looking back, the company closed the year on a high note, after it recorded its most Q4 wireless adds in six years.

Verizon’s earnings estimate revision activity has been mixed amid the market uncertainty, which helps it hold a Zacks Rank #3 (Hold). VZ does rock a “B” grade for Growth in our Style Scores system and its earnings and sales are both projected to expand in fiscal 2020 and 2021. Verizon is also part of an industry that rests in the top 17% of our more than 250 Zacks industries.

VZ is currently trading at a discount compared to its industry at 10.7X forward earnings, against the Wireless National’s 11X average. Verizon stock has fallen 11% in the last month and 16% in 2020 to hover just above its 52-week lows. Despite not falling as much as the broader market, which might have made its dividend appear even more attractive, VZ’s yield rests at 4.78%. This marks an impressive premium against the 10-year U.S. Treasury’s 0.95%, the S&P 500’s average yield of 2.36%, and Apple’s (AAPL – Free Report) 1.26%.

Looking for Stocks with Skyrocketing Upside?

Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.

Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.

Author: Benjamin Rains

Source: Zacks: 3 High-Yield Tech Stocks to Buy to Help Ride Out Coronavirus Storm

The Dow, S&P 500, and Nasdaq all climbed Monday to help them bounce back from a tough Friday and a rough week. Clearly, coronavirus worries seem set to linger over global markets as investors wait for clarity about the spread and potential impact on economic growth.

Despite coronavirus fears, U.S. markets could be poised to expand this year, given the strong backdrop. Fourth quarter earnings season has been solid so far, driven by giants such as Apple (AAPL – Free Report) and Amazon (AMZN – Free Report) . And overall corporate earnings were already projected to bounce back in 2020.

Plus, the Fed recently maintained low interest rates, U.S. unemployment rests near 50-year lows, and the U.S. economy is expected to expand by at least 2% in 2020.

With all that said, we found three dividend-paying stocks that investors might want to buy to help combat coronavirus-based market pullback fears…

Coca-Cola (KO – Free Report)

Coca-Cola topped our quarterly earnings and revenue estimates last week, with Q4 sales up 16% and fiscal 2019 revenue up 9%. The historic beverage giant has spent the last several years focusing on expanding beyond sugary drinks to adapt to changing consumer habits. Coca-Cola’s portfolio now includes potential Starbucks (SBUX – Free Report) rival Costa Coffee, investment in upstart Gatorade challenger BodyArmor, a new Coke-branded energy drink, and more.

The Atlanta-headquartered firm also bought Topo Chico in 2017 to help give it exposure to the growing seltzer water craze. Plus, it is set to launch its own sparkling water brand AHA in March 2020. And KO’s transition has seemed to pay off so far. Last week, KO executives said they were confident about hitting their 2020 targets and analysts have upped their earnings estimates for fiscal 2020 and 2021 since then. This helps KO earn a Zack Rank #2 (Buy) at the moment.

Coca-Cola also holds a “B” grade for Growth in our Style Scores system and its industry rests in the top 26% of our more than 250 Zacks industries. Our estimates call for KO’s sales to climb 4.7% in 2020 and another 4.4% in 2021. Coca-Cola’s adjusted earnings are projected to pop 7.1% and 7.4%, respectively, during this same stretch. Meanwhile, KO shares have climbed 10% in the past three months and over 30% in the last two years to top the S&P 500’s 21% expansion. This run helps make Coca-Cola’s 2.74% dividend yield, which tops rival PepsiCo, Inc. (PEP – Free Report) and the 10-year U.S. Treasury’s 1.5%, all the more impressive. And KO has consistently raised its quarterly payout.

IBM (IBM – Free Report)

IBM topped our quarterly earnings estimates in January and reported surprise Q4 revenue growth, which came after it had posted five straight quarters of declining sales. Analysts upped their longer-term earnings estimates for IBM since its report, which helps it earn a Zacks Rank #2 (Buy). Shares of IBM are now up 9% in the last month and 6% since its January 21 release. This recent positivity might help IBM rebound after a rough couple of years, with the stock now up 8% in the past 12 months.

Our estimates call for the company’s adjusted fiscal 2020 EPS figure to pop 4%, with 2021 projected to climb 6.2% higher. The company also rocks an “A” grade for Value in our Style Scores system and trades at a solid discount against its industry’s average in terms of forward 12-month Zacks earnings estimates (10.7X vs. 18.3X). Plus, IBM’s dividend yield sits at 4.51%. This payout easily tops Qualcomm’s (QCOM – Free Report) 2.91% yield, Cisco’s (CSCO – Free Report) 3.05%, and Intel’s INTC 1.97%.

IBM’s cloud computing revenue surged 21% last quarter to account for over 30% of total sales. Looking ahead, the historic tech giant hopes to compete alongside industry powers like Microsoft (MSFT – Free Report) , as it continues to invest in “higher-value growth areas.” Alongside cloud, Red Hat’s revenue soared 24% in Q4 to help justify why IBM acquired the open-source software firm for $34 billion. And the firm has already reduced its debt by $10 billion since closing the Red Hat acquisition in July 2019.

Pfizer Inc. (PFE – Free Report)

Pfizer is one of the largest pharmaceutical firms in the world, but it’s trying to transform into a smaller operation aimed at big growth. PFE plans to achieve this by focusing more on patent-protected drugs for diseases such as cancer, which often offer more growth upside. “2020 is expected to be an exciting year for Pfizer with the close of the Upjohn-Mylan transaction anticipated by mid-year, leaving New Pfizer positioned to deliver revenue and Adjusted diluted EPS growth that is expected to be among the industry leaders,” CEO Albert Bourla said in prepared Q4 remarks.

“New Pfizer will be a smaller, science-based company with a singular focus on innovation while also continuing to allocate significant capital directly to shareholders, primarily through dividends.” Pfizer’s patent-protected medicine sales popped 7% in the fourth quarter. And the company’s strong fiscal 2020 and 2021 earnings revision activity helps it earn a Zacks Rank #1 (Strong Buy) right now. PFE also holds an “A” grade for Value and a “B” for Growth.

Shares of PFE are down 11% in the last year, as investors try to make sense of the transition. Peeking back, the stock is up 16% in the past three years, which tops the Drug Market’s 1% average climb. Plus, Pfizer returned $16.9 billion to shareholders during fiscal 2019, mostly through buyback and dividends. And Pfizer’s 4.08% dividend yield tops Eli Lilly’s (LLY – Free Report) 1.85% and Bristol-Myers Squibb’s (BMY – Free Report) 2.86%.

Looking for Stocks with Skyrocketing Upside?

Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.

Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.

Author: Benjamin Rains

Source: Zacks: 3 Dividend-Paying Stocks for Investors to Buy to Fight Off Market Uncertainty

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