While the Merrill Lynch team acknowledges that the top 10 U.S. ideas are based on their prevailing view that the chosen companies could have the most significant market and business related catalysts over the next three months, they still are not going very far out on the risk limb. We picked four to buy that offer nice diversification.
Disney
This top consumer media company got absolutely hammered after earnings that were less than expected prompted a big fear that consumers are “cutting the cable cord.” Walt Disney Co. (NYSE: DIS) is on the Merrill Lynch US1 list. The movie studio business is poised to improve, as with accelerating theme park business, and the network programming continues to drive viewership with extensive sports programming. Most importantly, Disney produces tons of content that will keep it a long-term media alternative, and recently announced that Star Wars-themed lands will be coming to Disneyland and Disney’s Hollywood Studios at Walt Disney World Resort in Orlando, Fla.
The Disney Media Networks segment operates broadcast and cable television networks, domestic television stations, and radio networks and stations, and it is involved in television production and television distribution operations. Its cable networks include ESPN, Disney Channels and ABC Family, as well as UTV/Bindass and Hungama. Disney is also one of 24/7 Wall St. top 10 stocks to own for the next decade.
Disney shareholders are paid a 1.33% dividend. The Merrill Lynch price target for the stock is $130, and the Thomson Reuters consensus target is $118.57. Shares closed most recently at $102.67.
ALSO READ: 4 Blue Chip High-Dividend Energy Stocks on Sale After Market Sell-Off
Eli Lilly
This stock checks in high on the global pharmaceutical lists at many top Wall Street firms, and it is on the Merrill Lynch US 1 list. Eli Lilly and Co. (NYSE: LLY) is still somewhat surprisingly out of consensus with portfolio managers at mutual fund and hedge funds. It also has more Neutral ratings than Buy ratings on Wall Street.
The company reported second-quarter earnings that were above consensus estimates, but revenues declined, reflecting generic competition for Cymbalta and Evista in the United States, as well as some negative currency movement. However, revenues surpassed consensus expectations.
Its new cancer drug Cyramza won FDA approval for label expansion recently. It treats patients suffering from metastatic colorectal cancer. This was the fourth Cyramza approval in a one year period; it already has approval to treat advanced or metastatic gastric or gastroesophageal junction adenocarcinoma and metastatic non-small cell lung cancer. Cyramza has so far generated sales of $67.5 million.
ALSO READ: September Worst Month in History for Energy MLPs: 3 to Buy Right Now
The Merrill Lynch team and other analysts on Wall Street love the company’s product pipeline and point to Eli Lilly’s Solanezumab drug for Alzheimer’s Phase 3 data, which had positive clinical results reported in late July, and CV data on Jardiance, the company’s drug for diabetes, which recently posted very positive clinical results. The recent Phase 3 data on Evacetrapib was very solid and just another positive for the company
Shareholders are paid a solid 2.28% dividend. The Merrill Lynch price target is $108, and the consensus target is $95.39. Shares closed Thursday at $85.18.
McDonald’s
The fast-food giant has seen tough times over the past year, and may be ready to turn the corner. McDonald’s Corp. (NYSE: MCD) is the world’s leading global foodservice retailer with over 36,000 locations serving approximately 69 million customers in over 100 countries each day. More than 80% of McDonald’s restaurants worldwide are owned and operated by independent local business. The stock recently got a nice upgrade from a top Wall Street firm, and the huge moves to change the menu seem to be gaining some traction.
The new CEO Steve Easterbrook is starting to turn things around. He did very well for McDonald’s in Europe and has been improving the overall marketing strategy before taking the CEO slot. The company has made significant operational changes to improve efficiency and the customer experience, which was lagging competitors. Gas is cheap, so snaking through the drive-thru isn’t as painful as it used to be. The economy is improving, so job growth is back and more commuters are on the road to drive past a McDonald’s.
ALSO READ: Groundbreaking Technology Innovation Could Be Huge for 5 Top Tech Stocks
McDonald’s investors are paid a solid 3.46% dividend. The $112 Merrill Lynch price target is higher than the consensus target of $103.89. Shares closed Thursday at $98.78.
Raytheon
This company has a diversified mix of business and posted solid second-quarter numbers. Raytheon Corp. (NYSE: RTN) is an industry leader in defense, government electronics, space, information technology and technical services.
The company is not only likely to benefit from domestic defense purchasing, but the company has posted large contract sales to the Saudi’s over the past two years. Last year Raytheon purchased privately held cybersecurity company Blackbird Technologies for about $420 million. The acquisition will help expand its surveillance and cybersecurity services to clients. Raytheon provides state-of-the-art electronics, mission systems integration and other capabilities in the areas of sensing; effects; and command, control, communications and intelligence systems, as well as cybersecurity and a broad range of mission support services.
Raytheon investors are paid a 2.5% dividend. The Merrill Lynch price target is $120, while the consensus target is $120.56. The shares closed Thursday at $108.71.
ALSO READ: 4 Stocks to Buy Set to Beat Current Earnings Estimates
All these companies are perfect for long-term growth portfolios. They pay solid dividends, are growing their businesses both organically and through acquisitions, and are returning capital to shareholders. These total return stocks make good sense in a volatile market.
Top Gaining Stocks
Top Losing Stocks