Investing

Merrill Lynch Raises Price Targets on 4 Top Momentum Growth Stocks

Lee Jackson

Published: July 14, 2016 10:05 am

Last Updated: January 13, 2020 5:44 am

With the market busting through a top that has been in place since February of 2015, some of the more bullish voices on Wall Street think it’s possible we could see a big breakout. While that is indeed possible, earnings have to start coming in strong, not only for the second quarter, but for the rest of the year. In addition, guidance from companies will need to be very positive to keep the momentum in place.

In a recent research report, Merrill Lynch does what many of the top firms will be forced to do with a rising market. The firm is raising the price targets on some of the top stocks its covers, as the recent rally has pushed some right up near current price target levels. This week it raises the price targets on four top momentum growth companies, all of which are outstanding buys for aggressive accounts.

ADP

This is a conservative information technology company. Automatic Data Processing Inc. (NASDAQ: ADP) is one of the world’s largest providers of business outsourcing and human capital management solutions. It offers a wide range of human resource, payroll, talent management, tax and benefits administration solutions from a single source, and it helps clients comply with regulatory and legislative changes, such as the Affordable Care Act (ACA).

The company has been primarily benefiting from continued strength in its PEO services and growth in its newer platforms like RUN, Workforce Now and Vantage. In addition, it has a sizable market share in the payroll processing business. Apart from the core payroll processing business, ADP is also expected to benefit from new higher-growth services like tax filing, retirement, pre-employment, insurance and others.

ADP investors are paid a 2.23% dividend. Merrill Lynch raised its price target to $100 from $95. The Thomson/First Call consensus target price is much lower at $90, but the stock closed most recently at $95.14.

American Tower

This top company printed an all-time high last November and has almost traded back to it, after being down to sideways for almost a year. American Tower Corp. (NYSE: AMT) is one of the largest global real estate investment trusts (REITs), as well as a leading independent owner, operator and developer of multi-tenant communications real estate with a portfolio of approximately 97,000 communications sites. It is on track to own and operate 100,000 cell towers by the end of 2015, in both U.S. and international operations. It is also reported that the company is already processing about 900 applications in its pipeline to add additional carriers to the newly acquired Verizon towers.

In 2012, the company made a very smart move to convert from a corporation to a REIT, which requires it to pay at least 90% of its profits as dividends. With the company’s top and bottom lines growing so quickly, American Tower has been able to increase its payout by more than 20% annually ever since. With the bulk of the company’s towers out of dense urban areas, macro remains the asset of choice for this top company.

American Tower investors are paid a 1.83% distribution. The Merrill Lynch price target was raised to $131 from $112, The consensus target is $117, and the shares closed most recently at $116.01.
Crown Castle International

This is another top tower company that offers incredible growth and income possibilities and is structured as a REIT also. Crown Castle International Corp. (NYSE: CCI) provides wireless carriers with the infrastructure they need to keep people connected and businesses running. With approximately 40,000 towers and 15,000 small cell nodes supported by approximately 16,000 miles of fiber, Crown Castle is the nation’s largest provider of shared wireless infrastructure with a significant presence in the top 100 U.S. markets.

First-quarter earnings came in better than expected, while revenue was up 3.8% year over year but in line with expectations. The company said organic site rental revenues rose 8% year over year, and management increased the midpoint of the full 2016 outlook for adjusted funds from operations (AFFO) by 9% to $4.70 per share. The company also recently acquired Tower Development for $461 million in cash in a transaction that should be immediately accretive to AFFO per share.

Crown Castle’s shareholders are paid a solid 3.56% distribution. The $92 Merrill Lynch price target was lifted to $107. The consensus estimate is posted at $97. The shares closed Wednesday at $99.80.

Kraft Heinz

This top consumer staple stock makes good sense for nervous investors and is one of the Merrill Lynch top 10 ideas for 2016. Kraft Heinz Co. (NYSE: KHC) is the third-largest food and beverage company in North America and the fifth largest in the world, with eight $1 billion brands. A globally trusted producer of delicious foods, Kraft Heinz provides high quality, great taste and nutrition for all eating occasions, whether at home in restaurants or on the go.

The company’s iconic brands include Kraft, Heinz, ABC, Capri Sun, Classico, Jell-O, Kool-Aid, Lunchables, Maxwell House, Ore-Ida, Oscar Mayer, Philadelphia, Planters, Plasmon, Quero, Weight Watchers Smart Ones and Velveeta.

Consumer staples are expected to continue to do well this year, and Kraft Heinz is one of the top companies in the sector. The company reported very solid first-quarter earnings, and analysts across Wall Street are generally bullish on the potential for solid earnings continuing through 2016.

Kraft Heinz shareholders receive a tasty 2.6% dividend. Merrill Lynch raised its price target is to $96 from $90, well above the consensus target of $90.29. The stock closed most recently at $89.02.

While higher targets are always a positive sign, investors want to make sure they aren’t chasing stocks at these levels. It may make sense to buy partial positions now and see how earnings season goes.