[cnxvideo id=”508883″ placement=”ros”]With earnings for the first quarter winding down and the second quarter well underway, many of the top companies we follow on Wall Street are making some changes to the lists of their high-conviction stock picks for clients. With the market bursting through yet again to new all-time highs, it makes sense to examine the lists and make some changes as the rest of the year could have additional volatility as the political and geopolitical cycles could prove to be very unpredictable.
In a recent research note, the analysts at Jefferies made a big move by adding a top consumer goods/auto parts company to the firm’s well-respected Franchise Picks list of stocks to buy.
Delphi Automotive PLC (NYSE: DLPH) used to be owned by General Motors and is the newest addition to the Jefferies Franchise Picks portfolio. The company is a global supplier of vehicle electronics, transportation components, integrated systems and modules, and other electronic technology. The company is one of the most geographically diversified suppliers in the world, with a goal of generating an equal portion of sales from North America, Europe, Asia and the rest of the world.
The report cites the 30% growth of advanced driver assistance systems for autonomous vehicles, which provides safety at a moderate cost. The report also noted this:
Delphi is the global Electrical/Electronic Architecture (E/EA) leader with 25% market share (55% annual revs). The growing need for vehicle complexity management (wiring/cabling +50% since 2012) suggests E/EA is nearing an inflection point (and is undervalued). Original equipment manufacturers will be more inclined to rely on the company’s expertise in a segment increasingly intertwined with both complex hardware (cabling, wiring, harnesses etc.) and software (Multi-domain, SoC) needs.
Shareholders are paid a 1.45% dividend. Jefferies raised its price target for the stock to $100 from $86, while the Wall Street consensus target is $86.15. The stock closed Wednesday at $79.25 a share.
[nativounit]
We also screened the Franchise Picks list for the highest dividend-paying stocks in the group.
AbbVie
This stock is one of the top pharmaceutical stocks picks across Wall Street and is the number one global pick at Jefferies. AbbVie Inc. (NYSE: ABBV) is a global, research-based biopharmaceutical company formed in 2013 following separation from Abbott Laboratories. The company develops and markets drugs in areas such as immunology, virology, renal disease, dyslipidemia and neuroscience.
One of the biggest concerns with AbbVie is what eventually might happen with anti-inflammatory therapy Humira, which has some of the largest sales for a drug ever recorded. Last year, the patent board instituted Coherus BioSciences’ Inter Partes Review against the Humira ‘135 patent. The problem with Humira is that biosimilars and generics are itching to enter the market. The Jefferies report said this:
Consensus models almost a “worst case” scenario of a 2018/19 biosimilar entry in the US, where we assume 2022. We see $2 to $4 downside on a discounted cash basis for a worst case mid-2018 launch. We see up to $15 upside if biosimilars are delayed until 2022. The ‘135 dosing patent is not the only barrier to US biosimilars, as many other blocking patents are currently in force. However, if upheld, it implies we are unlikely to see US biosimilars prior to the second half of 2022.
AbbVie shareholders are paid a stellar 3.94% dividend. The whopping $90 Jefferies price target compares with a consensus target of $71. The shares closed on Wednesday at $65.04 apiece.
Boeing
This top aerospace industrial has been on a roll since the election and has broken out to all-time highs. Boeing Co. (NYSE: BA), together with its subsidiaries, designs, develops, manufactures, sells, services and supports commercial jetliners, military aircraft, satellites, missile defense, human space flight and launch systems and services worldwide.
The company operates in five segments: Commercial Airplanes, Boeing Military Aircraft, Network & Space Systems, Global Services & Support, and Boeing Capital.
Boeing reported a 19% rise in first-quarter profit despite declining revenue, and it notched up its forecast for full-year earnings. The company’s core earnings, which exclude some pension and other costs, beat the analysts’ consensus estimate from Thomson Reuters. The falling revenue missed the consensus estimate.
Investors in Boeing are paid a very solid 3.13% dividend. The Jefferies price objective is set at $200. The consensus target price is $181.90, and the shares closed Wednesday at $181.71.
Chevron
This integrated giant is a safer way for investors looking to stay or get long the energy sector, and it has big Permian Basin exposure. Chevron Corp. (NYSE: CVX) is a U.S.-based integrated oil and gas company with worldwide operations in exploration and production, refining and marketing, transportation and petrochemicals.
The company sports a sizable dividend and has a solid place in the sector when it comes to natural gas and liquefied natural gas (LNG). Some on Wall Street estimate the company will have a compound annual growth rate of over 5% for the next five years.
The company is expected to report its first-quarter earnings tomorrow.
Chevron shareholders are paid an outstanding 4.07% dividend. Jefferies has a massive $147 price target, while the consensus price objective is down at $128.14. The shares closed most recently at $106.86.
[recirclink id=389227]
KeyCorp
This smaller large cap bank’s stock makes good sense now, and it made its debut on the Franchise Picks list last fall. KeyCorp (NYSE: KEY) operates as the bank holding company for KeyBank National Association, which provides deposit, lending, cash management and investment services to individuals, small and medium-sized businesses.
The company also provides a broad range of sophisticated corporate and investment banking products, such as merger and acquisition advice, public and private debt and equity, syndications and derivatives to middle market companies in selected industries throughout the United States under the KeyBanc Capital Markets banner.
Jefferies likes the larger regional banks, noting that valuations look very reasonable and cost saving plans are helping to make forward estimates look very achievable. With overall credit remaining solid, earnings and loan, deposit and fee growth all are positive metrics for the bank.
Its investors are paid a 1.82% dividend. The $20 Jefferies price target is in line with the consensus target of $20.04. The stock closed most recently at $18.68 per share.
[wallst_email_signup]
A new addition to the Franchise list portfolio and four additional dividend stocks that Jefferies views as its top high-conviction picks. These dividend paying companies make good sense for aggressive long-term stock portfolios.
Top Gaining Stocks
Top Losing Stocks