Often the top firms we cover at 24/7 Wall St. are positive on a stock and may have it rated at Buy, but when something positive like earnings or other catalysts start to factor in, the analysts may become even more positive and believe a rerating may be in order. That generally applies to the question of what the market’s current valuation should be, in light of new-found data or direction.

In a new report, the analysts at Jefferies feature three compelling value stocks that they feel may be in for a rerating or a new valuation, due to earnings and outside events. All three stocks are rated Buy at Jefferies.

Oracle

This top software stock has traded sideways since last summer and looks to be breaking out. Oracle Corp. (NYSE: ORCL) develops, manufactures, markets, sells, hosts and supports database and middleware software, application software, cloud infrastructure, hardware systems and related services worldwide. It licenses its Oracle Database software to customers, which is designed to enable reliable and secure storage, retrieval and manipulation of various forms of data. Its Oracle Fusion Middleware software aims to build, deploy, secure, access and integrate business applications, as well as automate their business processes.

With shares trading at 15.83 times estimated 2016 earnings, and with a solid free cash flow yield, many analysts also feel that Oracle’s 12C database cycle starts to contribute during calendar 2016, and the stock could very well be poised for what they term a breakout year. After recent investors meetings, some analysts raised fiscal year 2017 cloud margins to 66% from 63% and earnings per share to $2.80. Some also believe that the software giant may be on the verge of a multiyear database product cycle.

The company recently reported solid results, in which license earnings were below estimates, but revenue from the cloud much higher. Jefferies continues to believe fiscal 2016 will be a trough year for company in many ways, and notes that the maturing sales force and selling strategy is beginning to unlock pent-up cloud demand within the company’s sizable customer base. The firm also feels that the expansion into the cloud has masked what the analysts believe is better business momentum than most on Wall Street currently realize.

Oracle investors are paid a 1.55% dividend. Jefferies has $50 price target for the stock, and the Thomson/First Call consensus price objective is $43.50. The stock closed Wednesday at $41.61 per share.
PPG Industries

On the heels of a huge buy this week by Sherwin Williams, this company may get a boost as well. PPG Industries Inc. (NYSE: PPG) manufactures and distributes coatings, specialty materials and glass products. It operates in three segments. The Performance Coatings segment provides coatings products for automotive and commercial transport/fleet repair and refurbishing; light industrial and specialty coatings for signs; coatings, sealants and transparencies for commercial, military, regional jet and general aviation aircraft, and transparent armor for specialty applications; and chemical management services.

The Industrial Coatings segment provides adhesives and sealants for the automotive industry; metal pretreatments and related chemicals for industrial and automotive applications; precipitated silicas for tire, battery separator and other markets; substrates used in radio frequency identification tags and labels, e-passports, drivers licenses and identification cards; organic light emitting diode materials for use in displays and lighting; optical lens materials and photochromic dyes for optical lenses and color-change products.

Lastly, PPG’s Glass segment produces flat and fiberglass for use in commercial and residential construction, wind energy, energy infrastructure, transportation and electronics industries. The Jefferies analysts feel that larger capitalization companies will continue to take market share, and also that consolidation within the industry can lift valuations.

The Jefferies price target is set at $121, while the consensus target is posted at $114.59. The stock closed Monday at $108.89 per share.

WestRock

Last summer saw the merger of two top packaging and container companies that could provide an outstanding opportunity for investors, as the stock has been absolutely mauled since the merger. WestRock Co. (NYSE: WRK) is the completed and merged entity that combined old Rock-Tenn and MeadWestvaco. WestRock has become the second-largest U.S. packaging company, valued at $10.7 billion, trailing only International Paper with a market capitalization of just under $15 billion. WestRock is expected to generate net sales of $15.7 billion and adjusted EBITDA of $2.9 billion. This includes the impact of $300 million in estimated annual synergies to be achieved over three years.

The Jefferies analysts note that the company announced a stock repurchase program last year of 40 million shares, or equal to 15% of the shares outstanding. They also announced a very generous 17% increase in the company dividend. The current dividend will be $1.50 per share, or $0.375 per quarter.

The stock is on the Franchise Picks list at Jefferies despite violating the firm’s 20% down stop-loss, as the analysts feels the stock is ready to rally. WestRock trades with a 10% or so free cash flow yield, and owing to demand resiliency and lower spending, the Jefferies team believes cash flow can hold up even in a tougher economic environment. They also think that the stock could be up 25% to 50% if containerboard prices hold, which they have for the second month in a row.

WestRock investors receive a very tempting 3.76% dividend. The Jefferies price target for the stock is $56, and the consensus target is set at $70.56. Shares closed Monday at $40.11 apiece.

While the market is due for a little selling after five up weeks in a row, these stocks are offering investors good entry points and are unlikely to take a big leg down given their current positives.

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