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Posted July 11, 2025 at 11:00 am
We cover two large cap U.S. names this week, SNX and HPQ. SNX was upgraded two weeks ago. The company was recently awarded Lenovo’s 2025 Global Sustainability Partner of the Year Award for the second consecutive year. HPQ announced a partnership last week with Firestorm Labs, a leader in advanced 3D printing and drone tech, making the firm the sole provider of HPQ’s high-performance 3D printers.
As we head into Q2 earnings, global aggregate EVA Momentum (growth) is 40bps from turning positive, having had 19 months of improvement. The market has very high expectations for an ongoing improvement in EVA growth, with Future Growth Reliance (FGR) moving even higher to the end of June.
The Communication Services sector has slipped from neutral at the beginning of the year to slightly unattractive at the midpoint. Media and Wireless Telecommunications continue to be the most attractive industries within the sector, while Entertainment and Diversified Telecommunications remain the least attractive.
The industry looks attractive in PRVit. Recovery of EVA Fundamentals led by rebounding EVA Drivers is expected to support expected value creation in the industry.
Aggregate economic profitability has contracted back to the lowest levels since 2019. Large cap names within the industry demonstrate strong Risk-Adjusted Profitability but some look relatively weak in the PRVit framework due to unfavorable trade-off between Quality and current Valuation levels.
EVA Momentum (growth) for the industry has faced downward pressure since early 2024, but it has remained positive at a time when EVA growth has been scarce for the Consumer Discretionary aggregate. The industry has outperformed the Consumer Cyclicals sector on a year-to-date basis with EVA Momentum remaining positive.
Large Cap investors looked for growth (indicated by the positive spread in Profitability Trend, P2) and cheap Value (indicated by all three Valuation factors being positive). In Small Cap, only the Vulnerability Risk (R2) factor had a positive spread as investors favored companies with strong balance sheets (lower leverage and higher cash flows).
PRVit spreads were positive in the U.K., AxJ, the Emerging Markets, and Global through the first week of July. Quality did not work in any region. Cheap Value outperformed expensive Value in all regions.
Heading into the Q2 reporting season, global aggregate EBITDAR Margin for our 29k stock coverage is back around all-time highs at the end of June. These are levels last seen between June 2021 and January 2022. Consensus currently has Sales Growth and EBITDAR Margin to continue to expand into 2026.
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Originally Posted on July 10, 2025
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