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Top Stock Reports for McDonald's, Danaher & S&P Global

Bacaan 6 minit

Tuesday, October 1, 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 McDonald's Corp. (MCD), Danaher Corp. (DHR) and S&P Global Inc. (SPGI), as well as two micro-cap stocks Twin Disc, Inc. (TWIN) and The Cato Corp. (CATO). 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 McDonald's have underperformed the Zacks Retail - Restaurants industry over the year-to-date period (+4.5% vs. +6.2%). The company's prospects are marred due to lower global and U.S. comps. McDonald's comps dropped for the first time in the second quarter of 2024 after increasing for 13 straight quarters.

McDonald experienced negative comparable store sales in its internationally operated markets, reflecting broad-based pressure and more cautious spending by customers.

Furthermore, challenges from the ongoing war in the Middle East and reduced consumer confidence in China are concerning. Persisting labor inflation and stiff competition are additional headwinds to the company. Although higher average checks, menu innovation, a loyalty program, and unit expansion are positives, earnings estimates for 2024 have declined in the past 30 days.

(You can read the full research report on McDonald's here >>>)

Danaher’s shares have outperformed the Zacks Diversified Operations industry over the year-to-date period (+20.6% vs. +3.5%). The company’s stable demand in the clinical and molecular diagnostics businesses is supporting its Diagnostics segment. The segment has been witnessing positive responses toward its new products.

Danaher’s commitment to return value to shareholders is encouraging. Synergies from the Abcam acquisition bolster its growth. Through Danaher’s DBS initiatives, it has been able to reduce the impact of supply-chain constraints and inflationary pressures.

However, the company is plagued by weakness in the Life Sciences and Biotechnology units due to decreased demand across major end markets. An increase in SG&A expenses may affect the margin performance. High debt levels may raise its financial obligations and drain its profitability. Given the company’s international exposure, forex woes are weighing on its top line.

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

Shares of S&P Global have outperformed the Zacks Business - Information Services industry over the past year (+42.0% vs. +32.5%). The company remains well-poised to gain from the growing demand for business information services. Buyouts help innovate, increase differentiated content and develop products. The latest service launches have been aiding the company's growth.

Dividend payments and share buybacks boost investors' confidence and positively impact earnings per share. A current ratio of more than 1 indicates that the company will be easily paying off its short-term obligations.

On the flip side, S&P Global remains vulnerable to proceedings, investigations and inquiries concerning the ratings provided, leading to legal charges, damages or fines. Growth initiatives, higher compensations and incentives raise the company's expenses.

(You can read the full research report on S&P Global here >>>)

Twin Disc's shares have underperformed the Zacks Manufacturing - General Industrial industry over the year-to-date period (-22.1% vs. +13.3%). This microcap company with market capitalization of $176.16 million is facing weak industrial demand, rising operational costs, supply chain vulnerabilities, dependence on volatile oil prices, and currency risks could pressure future performance.

Nevertheless, Twin Disc's strategic acquisition of Katsa Oy enhances its product range in power transmission, key to expanding into hybrid and electric marine and industrial solutions. The purchase strengthens its foothold in Europe, driving long-term growth and cross-selling opportunities. The shift toward high-margin products like advanced marine transmissions lifted gross margins to 28.2% in 2024.

Improved operational efficiency in 2024 boosted free cash flow to $25 million. Diversification efforts increased Asia Pacific sales to 28%, reducing over-reliance on North America and amplifying global reach, with overall revenues rising 6.6% to $295.1 million. Despite robust finances, including low net debt and a strong balance sheet, challenges persist.

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

Shares of Cato Corp’s have underperformed the Zacks Manufacturing - General Industrial industry over the year-to-date period (-22.9% vs. +13.9%). This microcap company with market capitalization of $102.64 million is witnessing challenges persist with an 8% sales decline due to store closures, weak e-commerce performance (less than 5% of total sales) and inflationary pressures affecting consumer spending. Cato’s reliance on physical stores and exposure to economic cycles further heighten risks.

Nevertheless, Cato's strong financial position, with $30.8 million in cash and $69.9 million in working capital, enhances its operational stability and ability to invest in future growth. Improved cost control, with a 7% reduction in SG&A expenses, has bolstered profitability, and net income nearly doubled to $11.1 million for the first half of 2024.

The company's disciplined inventory management minimizes markdown risk, preserving margins. Cato’s consistent dividend payments underscore its financial health. Additionally, it is well-positioned to benefit from expected growth in the global apparel market.

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

Other noteworthy reports we are featuring today include KLA Corp. (KLAC), ONEOK, Inc. (OKE) and The Cooper Companies, Inc. (COO).

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

Unit Expansion & Digitization Boost McDonald's (MCD) Prospects

Strong Diagnostics Unit Aids Danaher (DHR), High Debt Ails

Market Scan Buyout Aids S&P Global (SPGI) Amid Rising Costs

Featured Reports

KLA (KLAC) Rides on Strong Wafer Inspection Business

Per the Zacks analyst, KLA is benefiting from the higher volume of wafer manufacturing, more complex designs, larger die and chip size driven by strong AI adoption.

Fee-Based Contracts, Wide-spread Assets Aid ONEOK (OKE)

Per the Zacks analyst, ONEOK benefits from long-term fee-based commitments in its all three segments and midstream assets located in very productive region drives operation.

Strong Demand for Products Aids The Cooper Companies (COO)

Per the Zacks analyst, The Cooper Companies witnessed strong demand for its products across several segments during the first quarter. The trend is likely to continue boosting the company's prospect.

Solid Demand Drives Essex Property (ESS) Despite High Supply

Per the Zacks analyst, a sturdy property base in the West Coast market with healthy demand and technology initiatives are Essex Property's upsides. However, a rising supply of units ail.

Robust Cloud Deal Wins Aid Guidewire's (GWRE) Performance

Per the Zacks Analyst, continued momentum in Guidewire cloud and higher sales in Asia Pacific and EMEA are driving Guidewire's performance. However, rising costs and forex volatility are concerns.

RenaissanceRe (RNR) Rising Premiums & Strategic Buyouts Aid

The Zacks analyst expects rate increases to support RenaissanceRe's premium growth, while strategic acquisitions will bring in high-growth, low-risk assets. Yet, rising costs remain a concern.

Expansion Efforts Aids Cracker Barrel (CBRL), High Costs Ail

Per the Zacks analyst, Cracker Barrel benefits from menu innovation, higher menu pricing, expansion efforts and other sales-building initiatives. However, high costs are a concern.

New Upgrades

Corcept (CORT) Rides on Robust Korlym Sales Performance

Per the Zacks analyst, Corcept's sole drug, Korlym, approved for treating Cushing's syndrome, is driving the top-line. The company is also making good progress with its promising pipeline candidates.

Advanced Energy (AEIS) Rides on Strong Data Center Market

Per the Zacks Analyst AEIS is benefiting from strong demand in data center computing, driven by AI investments.

Strategic Plan & Liquidity Strength Aid Texas Capital (TCBI)

Per Zacks analyst, Texas Capital's progress on its strategic business plan is set to support its top line. Also, a strong liquidity profile and capital position are likely to aid capital distribution.

New Downgrades

High Volatility in Feedstock Costs Ails Phillips 66 (PSX)

Per the Zacks analyst, Phillips 66 is exposed to high volatility in feedstock costs that may squeeze its profit margins. Further, rising input costs due to high crude prices add to the concern.

Cash Flow Challenges, High Debt Exposure Ail SM Energy (SM)

Per the Zacks analyst, SM Energy has been facing challenges in converting operating profits to free cash flow efficiently within a specified timeframe. High debt exposure is an added concern.

Soft Comps Performance to Hurt Five Below's (FIVE) Top Line

Per the Zacks analyst, Five Below is grappling with soft comparable sales performance. The metric slid 5.7% in Q2. Management expects comps to decline mid-single-digit decline in third-quarter.

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