With stocks having recovered so much from the late-2018 losses in the first two months of 2019, investors have to be looking for new ideas when deciding how to position their assets and portfolios for 2019 and beyond. One tool that is frequently used for new and previously unknown ideas is outside research reports.
Credit Suisse has updated its list of top picks from all its analysts who cover U.S.-listed stocks. Of the 103 that are currently on the list for 2019, the firm just added seven new #1 Top Outperform picks. These are the first in line of each analyst’s top three picks based on a six to 12 month time horizon.
A short summary of the call has been provided on each, but Credit Suisse does remind its clients here that these should not be viewed as portfolios as they are just a current snapshot of each of the top picks under each sector.
Constellation Brands Inc. (NYSE: STZ) has been suffering, along with other adult-beverage makers, but its shares have fallen enough according to Credit Suisse. With a current $170 or so share price, the firm has a $230 price target and sees it as having predictable high-single-digit growth and free cash flow to spike as Mexican brewery capital spending abates. Also worth note was that the valuation remains well below slower-growth beverage peers, and the firm sees a potential low-growth wine asset divestitures, cannabis legislation for its investment in the United States or internationally, and a new chief executive officer.
Constellation Brands has a 52-week trading range of $150.37 to $236.62 and close to a 1.8% dividend yield.
WPX Energy Inc. (NYSE: WPX) was another newly added #1 Top Outperform Pick. At $12.40 a share on last look, with a reference price on its report of $11.59, Credit Suisse has a $16 price target. WPX has underperformed peers within the exploration and production arena year to date says the report, primarily due to earlier concerns of limited production growth in a low-price environment. Its 2019 guidance should have addressed this, and Credit Suisse’s estimates actually have improved while the stock has lagged. This is called out as valued at a discount to its Permian Basin peers, with differentiated growth and free cash flow, while the multiyear outlook targeted a strong commitment to calls for more capital discipline.
Credit Suisse has a $20 price target on WPX, and its shares have traded in a range of $70.41 to $103.50 over the trailing 52 weeks. WPX does not have a dividend.
Note that five of the seven new #1 Top Outperform Picks came from recent upgrades.
Mr. Cooper Group Inc. (NASDAQ: COOP) is listed as having a higher total upside potential than the other top picks at current valuations. The firm sees cash flow generation of the new Mr. Cooper improving through the use of the deferred tax asset valuation, which should allow for the ability to grow the servicing platform or reduce leverage while its services visibility in 2019 remains high.
Mr. Cooper has a $20 target at Credit Suisse, versus $12.45 a share on last look. The loan services company has only a $1.1 billion market cap and does not pay a dividend.
Constellium N.V. (NYSE: CSTM) is in the metals and mining group, and Credit Suisse’s $20 price target compares with a current share price of $9.00. The firm sees Constellium as having a highly visible growth trajectory and a discount to peers. The firm sees solid growth in its aerospace and defense end markets and also sees auto structure nominations remaining strong through 2020.
Constellium’s 52-week range is $6.26 to $13.35, and it offers no dividend.
Equifax Inc. (NYSE: EFX) was last seen trading close to $111, and Credit Suisse has a $130 price target. The upgrade to the #1 of the top picks did note that there likely will be continued volatility as a result of the data breach that affected more than 140 million users. The report noted that investors should use weakness to tactically accumulate positions in the stock after the company offered achievable 2019 guidance along with what seemed to be a credible path to business normalization.
Barring a recession, Credit Suisse sees a reasonable path to multiple expansion. Equifax has a 52-week range of $88.68 to $138.69.
Emerson Electric Co. (NYSE: EMR) has a $75 price target and Credit Suisse believes that it is set up to win more projects this cycle and believes its order funnel points to double-digit order growth in early 2020 with strong trends in liquefied natural gas (LNG), chemical/refining and upstream projects. Credit Suisse further noted that Emerson should be able to still achieve its $4.50 EPS target for 2021, with strong free cash flow and with subsequent deployment (Avocent, Textron’s Tools business).
Emerson Electric was last seen trading at $67.75, in a 52-week range of $55.39 to $79.70. The dividend yield is 2.9%, and investors will want to count this as one of just 10 companies with 50+ years of consecutive dividend hikes.
FMC Corp. (NYSE: FMC) was last seen at $77.50 a share, and Credit Suisse’s target price is $96. The firm sees it outgrowing CPC markets and further expanding long-term margins, with more benefits from the DuPont asset integration and new molecule purchases. The company’s balance sheet also was said to provide a strong degree of upside optionality, allowing it to focus solely on agricultural opportunities while boosting its earnings per share growth with more stock buybacks.
FMC has a 52-week range of $60.16 to $80.62 and it comes with a 2% dividend yield.
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