NEW YORK (TheStreet) -- Looking for some investment inspiration for the second half of 2015?
How about a list of 21 stocks expected to outperform the S&P -- with many of the stocks having both near (six-months) and longer term (12-to-18 months) catalysts, according to Jefferies (LUK).
The investment firm introduced the Jefferies Franchise Pick List in December 2013 to highlight its "highest conviction Buy-rated stocks" in the U.S., according to the June 12 report.
Jefferies last published performance data on the list in mid-December. At that point, the list overall had outperformed the S&P by 180 basis points.
"The stocks on the list have returned 29% since inception, 1250 basis points above the S&P 500, with the bulk of that outperformance coming in 2015," the report said. "It's been a good first half."
Since December 2014, Jefferies added eight stocks to the list since and removed two stocks.
"We may consider sector balance and factor exposure, but ultimately we're looking to highlight the stocks that our analysts believe are most compelling and where they can point to differentiated work and/or estimates," the report said. "Our stop loss is 15% or 20% relative to the S&P depending on the volatility of the stock. Stocks having 120 day volatility in the bottom quartile of S&P stocks have a 15% stop loss, and the remainder have 20% stop losses."
Below is Jefferies' list of 21 stocks. TheStreet added ratings from TheStreet Ratings for comparison.
TheStreet Ratings, TheStreet's proprietary ratings tool, projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Based on 32 major data points, TheStreet Ratings uses a quantitative approach to rating over 4,300 stocks to predict return potential for the next year. The model is both objective, using elements such as volatility of past operating revenues, financial strength, and company cash flows, and subjective, including expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings.
Buying an S&P 500 stock that TheStreet Ratings rated a "buy" yielded a 16.56% return in 2014 beating the S&P 500 Total Return Index by 304 basis points. Buying a Russell 2000 stock that TheStreet Ratings rated a "buy" yielded a 9.5% return in 2014, beating the Russell 2000 index, including dividends reinvested, by 460 basis points last year.
Note: Research and ratings are as of June 7, 2015. Year-to-date returns are based on June 12, 2015 closing prices.
ABBV data by YCharts
1. AbbVie Inc. (ABBV - Get Report)
Market Cap: $106 billion
Sector: Health Care/Pharmaceuticals
Year-to-date return: 2.5%
Jefferies Price Target: $90
AbbVie Inc. discovers, develops, manufactures, and sells pharmaceutical products worldwide. The company's products include HUMIRA, a biologic therapy administered as a subcutaneous injection to treat autoimmune diseases; VIEKIRA PAK, an all-oral, short-course, interferon-free therapy, with or without ribavirin, for adult patients with genotype 1 chronic hepatitis, including those with compensated cirrhosis.
Jefferies said: [Analyst Jeff Holford] has increased confidence in a delay in Humira biosimilars following his work on the patent estate and recent management commentary. He does not expect biosimilars to arrive before mid-2019 in the US and 2H 2018 outside the US. Further, he estimates that Humira operating margins are currently around 59% but can be improved in the face of biosimilars, owing to the drop-off in royalty stack and lower SG&A costs, forming a long run rate of 77% even after allowing for increased rebates.
TheStreet Rating: Hold, CTheStreet said: "We rate ABBVIE INC (ABBV) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity and good cash flow from operations. However, as a counter to these strengths, we find that the company has favored debt over equity in the management of its balance sheet."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
ATVI data by YCharts
2.Activision Blizzard Inc. (ATVI - Get Report)
Market Cap: $18 billion
Sector: Technology/Home Entertainment Software
Year-to-date return: 26%
Jefferies Price Target: $26
Activision Blizzard, Inc. develops and publishes online, personal computer (PC), video game console, handheld, mobile, and tablet games worldwide.
Jefferies said: [Analysts] Brian Pitz and Brian Fitzgerald like ATVI's product pipeline and believe that strong game sales increasingly lead to longer tailed, annuity - like revenue streams. Call of Duty (COD) was the #1 console game of 2014, selling - through well over $1B (~17MM unit sales) and digital licensing / season pass sales were up double digits Y/Y. Destiny now has 16MM users, up from 9.5MM in November. Engagement is impressive (3 hours/day), suggesting robust go-forward digital license purchases. New free-to-play PC game Heroes of the Storm launched June 2 to mostly positive reviews. The closed beta had 11MM users.
TheStreet Rating: Buy, ATheStreet said: "We rate ACTIVISION BLIZZARD INC (ATVI) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, impressive record of earnings per share growth, increase in net income and attractive valuation levels. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
AMAT data by YCharts
3. Applied Materials Inc. (AMAT - Get Report)
Market Cap: $24 billion
Sector: Technology/Semiconductor Equipment
Year-to-date return: -21.2%
Jefferies Price Target: $28
Applied Materials, Inc. provides manufacturing equipment, services, and software to the semiconductor, flat panel display, solar photovoltaic (PV), and related industries worldwide.
Jefferies said: The [TE Connectivity TEL] merger termination was disappointing to [analyst] Sundeep Bajikar, as part of his thesis was on industry consolidation, but there are still multiple reasons to invest. His proprietary bottom-up analysis suggests WFE CapEx growth in CY16 is likely to be driven by 3D NAND and Foundry, and he expects Dep/Etch growth to outpace WFE growth, with AMAT to benefit. Sundeep also believes AMAT will benefit from larger, higher-res, and flexible screens, DRAM and NAND end markets are likely to be more stable customers going forward, and foundry competition is intensifying with Samsung disrupting TSMC.
TheStreet Rating: Buy, B+TheStreet said: "We rate APPLIED MATERIALS INC (AMAT) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, impressive record of earnings per share growth, compelling growth in net income and reasonable valuation levels. We feel its strengths outweigh the fact that the company shows weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
T data by YCharts
4. AT&T Inc. (T - Get Report)
Market Cap: $179 billion
Sector: Telecom/Integrated Telecommunications Services
Year-to-date return: 3.2%
Jefferies Price Target: $40
AT&T Inc. provides telecommunications services in the United States and internationally. The company operates through two segments, Wireless and Wireline.
Jefferies said: The close of the DTV acquisition should remove lingering dividend concerns, and pro forma for the deal, fully taxed, [analyst Mike McCormack] expects a 63% payout in 2016, versus 105% in 2014. He believes deal synergy estimates are conservative, and also sees upside to Street estimates for Wireless margins (thanks to a less heavy iPhone refresh in 4Q) and ARPU (lapping of Mobile Share Value).
TheStreet Rating: Buy, B+TheStreet said: "We rate AT&T INC (T) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth and expanding profit margins. We feel its strengths outweigh the fact that the company has had somewhat disappointing return on equity."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
BA data by YCharts
5. Boeing Co. (BA - Get Report)
Market Cap: $98 billion
Sector: Industrials/Aerospace & Defense
Year-to-date return: 9.9%
Jefferies Price Target: $185
The Boeing Company, 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.
Jefferies said: [Analyst Howard Rubel's] investment case for Boeing is based on margin improvement driven by capital investment and advances in productivity. Strong cash flow and a visible backlog allows for long-range production planning. Operationally, BA has been focused on reducing the cost of manufacturing through improving its production processes and managing the make versus buy decision. Howard thinks the aircraft market remains healthy with air traffic growth of 6% for '15, which supports his long -range sales forecast.
TheStreet Rating: Buy, BTheStreet said: "We rate BOEING CO (BA) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, increase in stock price during the past year, impressive record of earnings per share growth and compelling growth in net income. We feel its strengths outweigh the fact that the company shows low profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
CBS.A data by YCharts
6. CBS Corp. (CBS - Get Report) (CBS.A)
Market Cap: $28.7 billion
Sector: Consumer Goods & Services/Broadcasting
Year-to-date return: 5.7%
Jefferies Price Target: $68
CBS Corporation operates as a mass media company worldwide. It operates through four segments: Entertainment, Cable Networks, Publishing, and Local Broadcasting.
Jefferies said: [Analyst John Janedis] thinks CBS has several levers to pull that could offer upside to numbers into 2016 and beyond. He thinks the most upside could come from the recently announced Showtime OTT offering, where he estimates that every 1mm subs equates to about $0.13 upside to our model. Additional upside could come from international Showtime licensing deals (Canada).
TheStreet Rating: Buy, B+TheStreet said: "We rate CBS CORP (CBS) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its expanding profit margins, growth in earnings per share, largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel its strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
EPAM data by YCharts
7. EPAM Systems Inc. (EPAM)
Market Cap: $3.4 billion
Sector: Technology/IT Consulting & Other Services
Year-to-date return: 4.6%
Jefferies Price Target: $70
EPAM Systems, Inc. provides software engineering solutions and technology services worldwide.
Jefferies said: [Analyst Jason Kupferberg's] analysis leads him to believe offshore IT services growth in Continental Europe could significantly outpace that in the United States. Market research/channel checks indicate Europe is becoming increasingly open to offshoring, and he concludes EPAM is among the best positioned. Geopolitical tensions especially in Russia and the Ukraine (~25% of headcount is in Ukraine) have created headline risk but Jason hasn't seen an indication that their business has been impacted. Management continued to sound bullish in recent meetings.
TheStreet Rating: Buy, A-TheStreet said: "We rate EPAM SYSTEMS INC (EPAM) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, expanding profit margins and solid stock price performance. We feel its strengths outweigh the fact that the company has had somewhat disappointing return on equity."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
GOOGL data by YCharts
8. Google Inc. (GOOGL) (GOOG)
Market Cap: $369 billion
Sector: Technology/Internet Software & Services
Year-to-date return: 3.2%
Jefferies Price Target: $700
Google Inc., a technology company, builds products and provides services to organize the information.
Jefferies said: [Analysts] Brian Pitz and Brian Fitzgerald's bullish Google view has much to do with their positive stance on YouTube, as they believe the video offering is best positioned as TV ad budgets begin to shift online. In fact, the 7% decline in cost per click in the March quarter was driven by the high growth in YouTube and resulting mix shift - YouTube ads currently cost less than traditional search ads, driving down overall CPC, but core search CPC is actually improving Y/Y.
TheStreet Rating: Buy, BTheStreet said: "We rate GOOGLE INC (GOOGL) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels, expanding profit margins and good cash flow from operations. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
IR data by YCharts
9. Ingersoll-Rand Plc (IR)
Market Cap: $18 billion
Sector: Industrials/Industrial Machinery
Year-to-date return: 10.2%
Jefferies Price Target: $78
Ingersoll-Rand plc, together with its subsidiaries, designs, manufactures, sells, and services a portfolio of industrial and commercial products. It operates through Climate and Industrial segments.
Jefferies said: Though [analyst Steve Volkmann] has largely been cautious on machinery stocks he continues to recommend IR as a relatively defensive name. With little to no exposure to the oil & gas markets the business should benefit from improving trends in North American residential and non-residential construction markets. Order trends continue to outpace revenue guidance (and expectations) with Climate bookings increasing 6% in 1Q while Consensus forecasts call for just 3% top-line growth in the business for 2015. Notably, with high-margin Thermo King bookings up high-single digits in 1Q there is potentially another leg to margin expansion beyond the existing cost reduction programs the company has in place.
TheStreet Rating: Buy, BTheStreet said: "We rate INGERSOLL-RAND PLC (IR) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, good cash flow from operations and solid stock price performance. We feel its strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
INTC data by YCharts
10. Intel Corp. (INTC)
Market Cap: $148 billion
Sector: Technology/Semiconductors
Year-to-date return: -1.4%
Jefferies Price Target: $48
Ingersoll-Rand plc, together with its subsidiaries, designs, manufactures, sells, and services a portfolio of industrial and commercial products. It operates through Climate and Industrial segments.
Jefferies said: Though expensive, [analyst Mark Lipacis] likes the Altera Corp. (ALTR) deal for potential top-line synergies and believes that it signals a shift to a "Data Center" from "PC" play. Although they continue to diversify away from PCs, Mark believes the PC destock seen in 1H15 will yield to a restock by 2H15, bolstering results. He expects that lower mobile losses in 2H15 and the potential for a Tier 1 OEM modem socket in early 2016 would shift sentiment on the stock.
TheStreet Rating: Buy, B+TheStreet said: "We rate INTEL CORP (INTC) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, reasonable valuation levels and solid stock price performance. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
JAH data by YCharts
11. Jarden Corp. (JAH)
Market Cap: $10.2 billion
Sector: Consumer Goods & Services/Housewares & Specialties
Year-to-date return: 11.3%
Jefferies Price Target: $63
Jarden Corporation manufactures, markets, and distributes consumer products worldwide.
Jefferies said: [Analyst Kevin Grundy] looks for 5% organic sales growth in F15, at the high end of their guidance, boosted in 2H15 by the sell-in of "American Home" by Yankee Candle. Building on that sales growth, he sees opportunity for margin expansion, notes that the P/E multiple, at 16x Jefferies' '16 EPS estimate, is at the very low end of consumer staples, and Kevin believes we'll see either M&A or a buyback announcement by year end '15.
TheStreet Rating: Hold, C+TheStreet said: "We rate JARDEN CORP (JAH) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. Among the primary strengths of the company is its solid stock price performance. At the same time, however, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
MNK data by YCharts
12. Mallinckrodt Plc (MNK)
Market Cap: $14.4 billion
Sector: Health Care/Pharmaceuticals
Year-to-date return: 25.2%
Jefferies Price Target: $145
Mallinckrodt public limited company develops, manufactures, markets, and distributes specialty pharmaceutical products and medical imaging agents worldwide. The company operates through two segments, Specialty Pharmaceuticals and Global Medical Imaging.
Jefferies said: Anthony considers them well positioned for M&A -- prepared to execute on a potential $2B-18B transaction but also ripe to be taken out. He likes the Ikaria acquisition with further out accretion potentially surpassing $1 per share, in his view. We think double-digit Acthar growth is sustainable and the company can see revenue tripling from today's ~$1B run-rate, Ofirmev is in position to be used in "multi-modal" pain management that's becoming increasingly adopted, and there are no plans to leave the gConcerta market where volumes have benefitted from KUDCO exiting and Actavis increasing prices.
TheStreet Rating: Hold, CTheStreet said: "We rate MALLINCKRODT PLC (MNK) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and solid stock price performance. However, as a counter to these strengths, we find that the company's return on equity has been disappointing."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
MU data by YCharts
13. Micron Technology Inc. (MU)
Market Cap: $26 billion
Sector: Technology/Semiconductors
Year-to-date return: -28.2%
Jefferies Price Target: $40
Micron Technology, Inc., together with its subsidiaries, provides semiconductor solutions worldwide. The company manufactures and markets dynamic random access memory (DRAM), NAND flash, and NOR flash memory products; and packaging solutions and semiconductor systems.
Jefferies said: MU remains [analyst Sundeep Bajikar's] top Semiconductor pick driven by Moore Stress and industry consolidation. He expects Micron's DRAM cost structure to improve at a faster pace versus the competition, driven by solid advances in spacer based patterning for 20nm, as well as 1Xnm and 1Ynm nodes, which we believe are unlikely to use EUV. DRAM pricing was weaker than expected in Q1, but corrective supply-side actions are likely going forward, this should drive better DRAM pricing, and Sundeep believes that would be a surprise to the market.
TheStreet Rating: Buy, A-TheStreet said: "We rate MICRON TECHNOLOGY INC (MU) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, attractive valuation levels and expanding profit margins. We feel its strengths outweigh the fact that the company shows weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
OC data by YCharts
14. Owens-Corning (OC)
Market Cap: $4.7 billion
Sector: Industrials/Building Products
Year-to-date return: 12.1%
Jefferies Price Target: $51
Owens Corning, together with its subsidiaries, produces and sells glass fiber reinforcements and other materials for composite systems; and residential and commercial building materials worldwide. It operates in three segments: Composites, Insulation, and Roofing.
Jefferies said: [Analyst Phil Ng] expects margin expansion as OC benefits from a pickup in roofing demand coupled with a decline in asphalt prices (35-45% of COGS for roofing, closely correlated to crude prices), noting a 10% decline in asphalt prices translates to 18% increase in earnings. While the spring roofing price increase has seen mixed traction thus far, Phil is encouraged the industry is showing much improved discipline, with TAMKO announcing a second price increase. OC should work as long as the industry holds pricing firm, which will allow the company to capture the cost tailwind from lower asphalt prices and benefit from a recovery in insulation and roofing demand.
TheStreet Rating: Buy, BTheStreet said: "We rate OWENS CORNING (OC) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels and good cash flow from operations. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
PFE data by YCharts
15. Pfizer Inc. (PFE)
Market Cap: $209 billion
Sector: Health Care/Pharmaceuticals
Year-to-date return: 1.3%
Jefferies Price Target: $45
Pfizer Inc., a biopharmaceutical company, discovers, develops, manufactures, and sells healthcare products worldwide.
Jefferies said: Short term drivers include strength in Ibrance, which is shaping up to be one of the fastest oncology product launches ever and where we estimate $5.5B in 2020 sales versus consensus' $3.3B. Additionally, [analyst Jeff Holford] believes the market will start to better appreciate the durable growth at GEP, the separation of GEP by '17 at a minimum, and optionality on further accretive M&A (Shire, Actavis, AstraZeneca and Glaxo are potential targets, in his view).
TheStreet Rating: Buy, A-TheStreet said: "We rate PFIZER INC (PFE) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its solid stock price performance, largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels, expanding profit margins and growth in earnings per share. We feel its strengths outweigh the fact that the company has had somewhat disappointing return on equity."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
PRU data by YCharts
16. Prudential Financial Inc. (PRU)
Market Cap: $40 billion
Sector: Financial Services/Life & Health Insurance
Year-to-date return: -1.3%
Jefferies Price Target: $100
Prudential Financial, Inc. provides insurance, investment management, and other financial products and services to individual and institutional customers in the United States and internationally.
Jefferies said: [Analyst Colin Devine] believes the market has over discounted risks of oversight by the Federal Reserve and possible capital requirements. PRU offers good growth potential and a balanced mix of businesses that can deliver a 14-16% ROE even with low rates or uneven markets. Higher rates provide optionality. A potential SIFI designation comes with risk to capital flexibility, but Colin views those risks as tolerable due to management's ability to work constructively with Federal regulators.
TheStreet Rating: Buy, A-TheStreet said: "We rate PRUDENTIAL FINANCIAL INC (PRU) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth, compelling growth in net income, expanding profit margins and good cash flow from operations. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
RKT data by YCharts
17. Rock-Tenn Co. (RKT)
Market Cap: $8.9 billion
Sector: Materials/Paper Packaging
Year-to-date return: 4.6%
Jefferies Price Target: $84
Rock-Tenn Company manufactures and sells containerboard and paperboard products in the Unites States, Canada, Mexico, Chile, Argentina, and Puerto Rico. The company operates through four segments: Corrugated Packaging, Consumer Packaging, Merchandising Displays, and Recycling.
Jefferies said: With RKT getting regulatory approval for the MWV transaction, it's on track to close on July 1st. [Analyst Phil Ng] believes there's meaningful runway for margin expansion from upside to the synergies and cost takeout initiatives. Based on its strong FCF profile and under-levered BS, Phil believes RKT can buy back 18-23% of the shares outstanding over the next 2 years. The combination will help to improve the industry structure, and he believes boxboard prices are likely to increase and could provide upside to Jefferies' estimates.
TheStreet Rating: Buy, B+TheStreet said: "We rate ROCK-TENN CO (RKT) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, increase in net income, reasonable valuation levels and growth in earnings per share. We feel its strengths outweigh the fact that the company shows weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
PAY data by YCharts
18. Verifone Systems Inc. (PAY)
Market Cap: $4.1 billion
Sector: Technology/Data Processing & Outsourced Services
Year-to-date return: -1.5%
Jefferies Price Target: $43
VeriFone Systems, Inc. designs, markets, and services electronic payment solutions at the point of sale (POS) worldwide.
Jefferies said: The 500+bps gap between Verifone's operating margins and those of competitor Ingenico offer an opportunity, in [analyst Jason Kupferberg's] view, as Verifone is working to expand margins by accelerating the top line (we look for 8.4% growth in '16) and controlling operating expense growth (4.4% in '16 and 3.7% in '17 down from double digits in in '13 and '14). Top line will benefit from a long tailed EMV terminal replacement cycle, and Jason doesn't see a cliff coming next year. He believes the APAC business has bottomed and is poised to show improvement over the next 12 months. Next phase of the turnaround is about achieving normalized earnings power (we think ~$2.50 in EPS), and on this basis the stock remains undervalued.
TheStreet Rating: Hold, CTheStreet said: "We rate VERIFONE SYSTEMS INC (PAY) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and impressive record of earnings per share growth. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
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19. VMware Inc. (VMW)
Market Cap: $37.4 billion
Sector: Technology/Systems Software
Year-to-date return: 7.7%
Jefferies Price Target: $104
VMware, Inc. provides virtualization infrastructure solutions in the United States and internationally.
Jefferies said: The market is focused on the 80%+ of x86 workloads that have been virtualized, believing that the company is running out of growth, but fails to appreciate that a much smaller percentage of CPUs have been virtualized. Additionally, [analyst John DiFucci] thinks there's a good chance VMW can transform themselves into one of the software greats by leveraging success in virtualization into other markets in which they already have a toehold. These markets include End User Computing, Software Defined Networking, Software Defined Storage, and Hybrid Cloud among others.
TheStreet Rating: Hold, C+TheStreet said: "We rate VMWARE INC (VMW) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, weak operating cash flow and a generally disappointing performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
WDC data by YCharts
20. Western Digital Corp. (WDC)
Market Cap: $21.2 billion
Sector: Technology/S&P
Year-to-date return: -15.9%
Jefferies Price Target: $123
Western Digital Corporation, through its subsidiaries, develops, manufactures, and sells data storage solutions that enable consumers, businesses, governments, and other organizations to create, manage, experience, and preserve digital content.
Jefferies said: The stock is down about 17% from last year's highs owing primarily to concerns about PCs and accelerating NAND adoption. [Analyst James Kisner] took advantage of this weakness to add WDC to the Franchise Pick list in mid-April.
TheStreet Rating: Buy, A-TheStreet said: "We rate WESTERN DIGITAL CORP (WDC) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, largely solid financial position with reasonable debt levels by most measures, attractive valuation levels, notable return on equity and increase in stock price during the past year. We feel its strengths outweigh the fact that the company shows weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
WETF data by YCharts
21. WisdomTree Investments Inc. (WETF)
Market Cap: $3 billion
Sector: Financial Services/Asset Management & Custody Banks
Year-to-date return: 4.3%
Jefferies Price Target: $23
WisdomTree Investments, Inc., through its subsidiaries, operates as an exchange-traded funds (ETFs) sponsor and asset manager. It offers ETFs in equities, currency, fixed income, and alternatives asset classes.
Jefferies said: As the only publically traded ETF manager, Wisdom Tree is a pure play on the secular growth in ETFs and well positioned to continue outperforming its peers as investment dollars continue to shift away from active asset managers and towards passive strategies. WETF's diverse product set helps it attract assets under almost all economic conditions. With QE in Europe still in its early stages and QE in Japan ongoing, [analyst Surinder Thind] expects net flows to remain elevated, especially within its suite of currency hedged products (e.g., HEDJ and DXJ). Additionally, with US interest rates set to rise later this year, he expects net flows in the back half of 2015 to be aided by these rising rate (interest rate hedged) products.
TheStreet Rating: Buy, BTheStreet said: "We rate WISDOMTREE INVESTMENTS INC (WETF) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance, good cash flow from operations, expanding profit margins and notable return on equity. We feel its strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
How about a list of 21 stocks expected to outperform the S&P -- with many of the stocks having both near (six-months) and longer term (12-to-18 months) catalysts, according to Jefferies (LUK).
Jefferies last published performance data on the list in mid-December. At that point, the list overall had outperformed the S&P by 180 basis points.
"The stocks on the list have returned 29% since inception, 1250 basis points above the S&P 500, with the bulk of that outperformance coming in 2015," the report said. "It's been a good first half."
Since December 2014, Jefferies added eight stocks to the list since and removed two stocks.
"We may consider sector balance and factor exposure, but ultimately we're looking to highlight the stocks that our analysts believe are most compelling and where they can point to differentiated work and/or estimates," the report said. "Our stop loss is 15% or 20% relative to the S&P depending on the volatility of the stock. Stocks having 120 day volatility in the bottom quartile of S&P stocks have a 15% stop loss, and the remainder have 20% stop losses."
Below is Jefferies' list of 21 stocks. TheStreet added ratings from TheStreet Ratings for comparison.
TheStreet Ratings, TheStreet's proprietary ratings tool, projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Based on 32 major data points, TheStreet Ratings uses a quantitative approach to rating over 4,300 stocks to predict return potential for the next year. The model is both objective, using elements such as volatility of past operating revenues, financial strength, and company cash flows, and subjective, including expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings.
Buying an S&P 500 stock that TheStreet Ratings rated a "buy" yielded a 16.56% return in 2014 beating the S&P 500 Total Return Index by 304 basis points. Buying a Russell 2000 stock that TheStreet Ratings rated a "buy" yielded a 9.5% return in 2014, beating the Russell 2000 index, including dividends reinvested, by 460 basis points last year.
Note: Research and ratings are as of June 7, 2015. Year-to-date returns are based on June 12, 2015 closing prices.
ABBV data by YCharts 1. AbbVie Inc. (ABBV - Get Report)
Market Cap: $106 billion
Sector: Health Care/Pharmaceuticals
Year-to-date return: 2.5%
Jefferies Price Target: $90
AbbVie Inc. discovers, develops, manufactures, and sells pharmaceutical products worldwide. The company's products include HUMIRA, a biologic therapy administered as a subcutaneous injection to treat autoimmune diseases; VIEKIRA PAK, an all-oral, short-course, interferon-free therapy, with or without ribavirin, for adult patients with genotype 1 chronic hepatitis, including those with compensated cirrhosis.
Jefferies said: [Analyst Jeff Holford] has increased confidence in a delay in Humira biosimilars following his work on the patent estate and recent management commentary. He does not expect biosimilars to arrive before mid-2019 in the US and 2H 2018 outside the US. Further, he estimates that Humira operating margins are currently around 59% but can be improved in the face of biosimilars, owing to the drop-off in royalty stack and lower SG&A costs, forming a long run rate of 77% even after allowing for increased rebates.
TheStreet Rating: Hold, CTheStreet said: "We rate ABBVIE INC (ABBV) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity and good cash flow from operations. However, as a counter to these strengths, we find that the company has favored debt over equity in the management of its balance sheet."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- ABBV's revenue growth has slightly outpaced the industry average of 1.9%. Since the same quarter one year prior, revenues rose by 10.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Pharmaceuticals industry and the overall market, ABBVIE INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
- The stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. We feel that the combination of its price rise over the last year and its current price-to-earnings ratio relative to its industry tend to reduce its upside potential.
- The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Pharmaceuticals industry average, but is greater than that of the S&P 500. The net income increased by 4.3% when compared to the same quarter one year prior, going from $980.00 million to $1,022.00 million.
- The debt-to-equity ratio is very high at 11.09 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Even though the debt-to-equity ratio is weak, ABBV's quick ratio is somewhat strong at 1.11, demonstrating the ability to handle short-term liquidity needs.
- You can view the full analysis from the report here: ABBV Ratings Report
ATVI data by YCharts 2.Activision Blizzard Inc. (ATVI - Get Report)
Market Cap: $18 billion
Sector: Technology/Home Entertainment Software
Year-to-date return: 26%
Jefferies Price Target: $26
Activision Blizzard, Inc. develops and publishes online, personal computer (PC), video game console, handheld, mobile, and tablet games worldwide.
Jefferies said: [Analysts] Brian Pitz and Brian Fitzgerald like ATVI's product pipeline and believe that strong game sales increasingly lead to longer tailed, annuity - like revenue streams. Call of Duty (COD) was the #1 console game of 2014, selling - through well over $1B (~17MM unit sales) and digital licensing / season pass sales were up double digits Y/Y. Destiny now has 16MM users, up from 9.5MM in November. Engagement is impressive (3 hours/day), suggesting robust go-forward digital license purchases. New free-to-play PC game Heroes of the Storm launched June 2 to mostly positive reviews. The closed beta had 11MM users.
TheStreet Rating: Buy, ATheStreet said: "We rate ACTIVISION BLIZZARD INC (ATVI) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, impressive record of earnings per share growth, increase in net income and attractive valuation levels. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 5.0%. Since the same quarter one year prior, revenues rose by 15.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- ACTIVISION BLIZZARD INC has improved earnings per share by 32.5% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, ACTIVISION BLIZZARD INC increased its bottom line by earning $1.14 versus $0.95 in the prior year. This year, the market expects an improvement in earnings ($1.24 versus $1.14).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Software industry. The net income increased by 34.5% when compared to the same quarter one year prior, rising from $293.00 million to $394.00 million.
- You can view the full analysis from the report here: ATVI Ratings Report
AMAT data by YCharts 3. Applied Materials Inc. (AMAT - Get Report)
Market Cap: $24 billion
Sector: Technology/Semiconductor Equipment
Year-to-date return: -21.2%
Jefferies Price Target: $28
Applied Materials, Inc. provides manufacturing equipment, services, and software to the semiconductor, flat panel display, solar photovoltaic (PV), and related industries worldwide.
Jefferies said: The [TE Connectivity TEL] merger termination was disappointing to [analyst] Sundeep Bajikar, as part of his thesis was on industry consolidation, but there are still multiple reasons to invest. His proprietary bottom-up analysis suggests WFE CapEx growth in CY16 is likely to be driven by 3D NAND and Foundry, and he expects Dep/Etch growth to outpace WFE growth, with AMAT to benefit. Sundeep also believes AMAT will benefit from larger, higher-res, and flexible screens, DRAM and NAND end markets are likely to be more stable customers going forward, and foundry competition is intensifying with Samsung disrupting TSMC.
TheStreet Rating: Buy, B+TheStreet said: "We rate APPLIED MATERIALS INC (AMAT) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, impressive record of earnings per share growth, compelling growth in net income and reasonable valuation levels. We feel its strengths outweigh the fact that the company shows weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- AMAT's revenue growth has slightly outpaced the industry average of 0.6%. Since the same quarter one year prior, revenues slightly increased by 3.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- AMAT's debt-to-equity ratio is very low at 0.23 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, AMAT has a quick ratio of 1.87, which demonstrates the ability of the company to cover short-term liquidity needs.
- APPLIED MATERIALS INC has improved earnings per share by 38.1% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, APPLIED MATERIALS INC increased its bottom line by earning $0.87 versus $0.21 in the prior year. This year, the market expects an improvement in earnings ($1.22 versus $0.87).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Semiconductors & Semiconductor Equipment industry. The net income increased by 38.9% when compared to the same quarter one year prior, rising from $262.00 million to $364.00 million.
- You can view the full analysis from the report here: AMAT Ratings Report
T data by YCharts4. AT&T Inc. (T - Get Report)
Market Cap: $179 billion
Sector: Telecom/Integrated Telecommunications Services
Year-to-date return: 3.2%
Jefferies Price Target: $40
AT&T Inc. provides telecommunications services in the United States and internationally. The company operates through two segments, Wireless and Wireline.
Jefferies said: The close of the DTV acquisition should remove lingering dividend concerns, and pro forma for the deal, fully taxed, [analyst Mike McCormack] expects a 63% payout in 2016, versus 105% in 2014. He believes deal synergy estimates are conservative, and also sees upside to Street estimates for Wireless margins (thanks to a less heavy iPhone refresh in 4Q) and ARPU (lapping of Mobile Share Value).
TheStreet Rating: Buy, B+TheStreet said: "We rate AT&T INC (T) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth and expanding profit margins. We feel its strengths outweigh the fact that the company has had somewhat disappointing return on equity."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- T's revenue growth has slightly outpaced the industry average of 2.2%. Since the same quarter one year prior, revenues slightly increased by 0.3%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- The gross profit margin for AT&T INC is rather high; currently it is at 55.24%. Regardless of T's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 9.82% trails the industry average.
- AT&T INC's earnings per share declined by 12.9% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, AT&T INC reported lower earnings of $1.19 versus $3.41 in the prior year. This year, the market expects an improvement in earnings ($2.53 versus $1.19).
- The change in net income from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Diversified Telecommunication Services industry average. The net income has decreased by 12.4% when compared to the same quarter one year ago, dropping from $3,652.00 million to $3,200.00 million.
- Even though the current debt-to-equity ratio is 1.12, it is still below the industry average, suggesting that this level of debt is acceptable within the Diversified Telecommunication Services industry. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 0.48 is very low and demonstrates very weak liquidity.
- You can view the full analysis from the report here: T Ratings Report
BA data by YCharts 5. Boeing Co. (BA - Get Report)
Market Cap: $98 billion
Sector: Industrials/Aerospace & Defense
Year-to-date return: 9.9%
Jefferies Price Target: $185
The Boeing Company, 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.
Jefferies said: [Analyst Howard Rubel's] investment case for Boeing is based on margin improvement driven by capital investment and advances in productivity. Strong cash flow and a visible backlog allows for long-range production planning. Operationally, BA has been focused on reducing the cost of manufacturing through improving its production processes and managing the make versus buy decision. Howard thinks the aircraft market remains healthy with air traffic growth of 6% for '15, which supports his long -range sales forecast.
TheStreet Rating: Buy, BTheStreet said: "We rate BOEING CO (BA) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, increase in stock price during the past year, impressive record of earnings per share growth and compelling growth in net income. We feel its strengths outweigh the fact that the company shows low profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- BA's revenue growth has slightly outpaced the industry average of 3.4%. Since the same quarter one year prior, revenues slightly increased by 8.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
- BOEING CO has improved earnings per share by 46.1% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, BOEING CO increased its bottom line by earning $7.40 versus $5.97 in the prior year. This year, the market expects an improvement in earnings ($8.53 versus $7.40).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Aerospace & Defense industry. The net income increased by 38.4% when compared to the same quarter one year prior, rising from $965.00 million to $1,336.00 million.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Aerospace & Defense industry and the overall market, BOEING CO's return on equity significantly exceeds that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: BA Ratings Report
CBS.A data by YCharts6. CBS Corp. (CBS - Get Report) (CBS.A)
Market Cap: $28.7 billion
Sector: Consumer Goods & Services/Broadcasting
Year-to-date return: 5.7%
Jefferies Price Target: $68
CBS Corporation operates as a mass media company worldwide. It operates through four segments: Entertainment, Cable Networks, Publishing, and Local Broadcasting.
Jefferies said: [Analyst John Janedis] thinks CBS has several levers to pull that could offer upside to numbers into 2016 and beyond. He thinks the most upside could come from the recently announced Showtime OTT offering, where he estimates that every 1mm subs equates to about $0.13 upside to our model. Additional upside could come from international Showtime licensing deals (Canada).
TheStreet Rating: Buy, B+TheStreet said: "We rate CBS CORP (CBS) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its expanding profit margins, growth in earnings per share, largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel its strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- 38.80% is the gross profit margin for CBS CORP which we consider to be strong. Regardless of CBS's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 11.25% trails the industry average.
- CBS CORP's earnings per share improvement from the most recent quarter was slightly positive. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, CBS CORP reported lower earnings of $2.39 versus $2.79 in the prior year. This year, the market expects an improvement in earnings ($3.56 versus $2.39).
- CBS, with its decline in revenue, slightly underperformed the industry average of 3.8%. Since the same quarter one year prior, revenues slightly dropped by 2.0%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- Even though the current debt-to-equity ratio is 1.21, it is still below the industry average, suggesting that this level of debt is acceptable within the Media industry. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 1.17 is sturdy.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. In comparison to the other companies in the Media industry and the overall market, CBS CORP's return on equity significantly exceeds that of the industry average and is above that of the S&P 500.
- You can view the full analysis from the report here: CBS Ratings Report
EPAM data by YCharts 7. EPAM Systems Inc. (EPAM)
Market Cap: $3.4 billion
Sector: Technology/IT Consulting & Other Services
Year-to-date return: 4.6%
Jefferies Price Target: $70
EPAM Systems, Inc. provides software engineering solutions and technology services worldwide.
Jefferies said: [Analyst Jason Kupferberg's] analysis leads him to believe offshore IT services growth in Continental Europe could significantly outpace that in the United States. Market research/channel checks indicate Europe is becoming increasingly open to offshoring, and he concludes EPAM is among the best positioned. Geopolitical tensions especially in Russia and the Ukraine (~25% of headcount is in Ukraine) have created headline risk but Jason hasn't seen an indication that their business has been impacted. Management continued to sound bullish in recent meetings.
TheStreet Rating: Buy, A-TheStreet said: "We rate EPAM SYSTEMS INC (EPAM) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, expanding profit margins and solid stock price performance. We feel its strengths outweigh the fact that the company has had somewhat disappointing return on equity."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth greatly exceeded the industry average of 22.5%. Since the same quarter one year prior, revenues rose by 24.7%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- EPAM has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 3.53, which clearly demonstrates the ability to cover short-term cash needs.
- 37.07% is the gross profit margin for EPAM SYSTEMS INC which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 7.35% trails the industry average.
- Compared to its closing price of one year ago, EPAM's share price has jumped by 67.29%, exceeding the performance of the broader market during that same time frame. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
- EPAM SYSTEMS INC's earnings per share declined by 17.1% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, EPAM SYSTEMS INC increased its bottom line by earning $1.40 versus $1.28 in the prior year. This year, the market expects an improvement in earnings ($2.66 versus $1.40).
- You can view the full analysis from the report here: EPAM Ratings Report
GOOGL data by YCharts 8. Google Inc. (GOOGL) (GOOG)
Market Cap: $369 billion
Sector: Technology/Internet Software & Services
Year-to-date return: 3.2%
Jefferies Price Target: $700
Google Inc., a technology company, builds products and provides services to organize the information.
Jefferies said: [Analysts] Brian Pitz and Brian Fitzgerald's bullish Google view has much to do with their positive stance on YouTube, as they believe the video offering is best positioned as TV ad budgets begin to shift online. In fact, the 7% decline in cost per click in the March quarter was driven by the high growth in YouTube and resulting mix shift - YouTube ads currently cost less than traditional search ads, driving down overall CPC, but core search CPC is actually improving Y/Y.
TheStreet Rating: Buy, BTheStreet said: "We rate GOOGLE INC (GOOGL) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels, expanding profit margins and good cash flow from operations. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- GOOGL's revenue growth has slightly outpaced the industry average of 5.7%. Since the same quarter one year prior, revenues rose by 11.9%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Although GOOGL's debt-to-equity ratio of 0.05 is very low, it is currently higher than that of the industry average. Along with this, the company maintains a quick ratio of 5.28, which clearly demonstrates the ability to cover short-term cash needs.
- The gross profit margin for GOOGLE INC is rather high; currently it is at 69.99%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 20.77% is above that of the industry average.
- Net operating cash flow has significantly increased by 50.69% to $6,617.00 million when compared to the same quarter last year. In addition, GOOGLE INC has also modestly surpassed the industry average cash flow growth rate of 41.25%.
- You can view the full analysis from the report here: GOOGL Ratings Report
IR data by YCharts 9. Ingersoll-Rand Plc (IR)
Market Cap: $18 billion
Sector: Industrials/Industrial Machinery
Year-to-date return: 10.2%
Jefferies Price Target: $78
Ingersoll-Rand plc, together with its subsidiaries, designs, manufactures, sells, and services a portfolio of industrial and commercial products. It operates through Climate and Industrial segments.
Jefferies said: Though [analyst Steve Volkmann] has largely been cautious on machinery stocks he continues to recommend IR as a relatively defensive name. With little to no exposure to the oil & gas markets the business should benefit from improving trends in North American residential and non-residential construction markets. Order trends continue to outpace revenue guidance (and expectations) with Climate bookings increasing 6% in 1Q while Consensus forecasts call for just 3% top-line growth in the business for 2015. Notably, with high-margin Thermo King bookings up high-single digits in 1Q there is potentially another leg to margin expansion beyond the existing cost reduction programs the company has in place.
TheStreet Rating: Buy, BTheStreet said: "We rate INGERSOLL-RAND PLC (IR) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, good cash flow from operations and solid stock price performance. We feel its strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 11.3%. Since the same quarter one year prior, revenues slightly increased by 6.0%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Machinery industry and the overall market on the basis of return on equity, INGERSOLL-RAND PLC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- INGERSOLL-RAND PLC's earnings per share declined by 18.5% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, INGERSOLL-RAND PLC increased its bottom line by earning $3.29 versus $2.08 in the prior year. This year, the market expects an improvement in earnings ($3.80 versus $3.29).
- Net operating cash flow has remained constant at -$125.20 million with no significant change when compared to the same quarter last year. Along with maintaining stable cash flow from operations, the firm exceeded the industry average cash flow growth rate of -21.34%.
- You can view the full analysis from the report here: IR Ratings Report
INTC data by YCharts10. Intel Corp. (INTC)
Market Cap: $148 billion
Sector: Technology/Semiconductors
Year-to-date return: -1.4%
Jefferies Price Target: $48
Ingersoll-Rand plc, together with its subsidiaries, designs, manufactures, sells, and services a portfolio of industrial and commercial products. It operates through Climate and Industrial segments.
Jefferies said: Though expensive, [analyst Mark Lipacis] likes the Altera Corp. (ALTR) deal for potential top-line synergies and believes that it signals a shift to a "Data Center" from "PC" play. Although they continue to diversify away from PCs, Mark believes the PC destock seen in 1H15 will yield to a restock by 2H15, bolstering results. He expects that lower mobile losses in 2H15 and the potential for a Tier 1 OEM modem socket in early 2016 would shift sentiment on the stock.
TheStreet Rating: Buy, B+TheStreet said: "We rate INTEL CORP (INTC) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, reasonable valuation levels and solid stock price performance. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Despite its growing revenue, the company underperformed as compared with the industry average of 0.6%. Since the same quarter one year prior, revenues slightly increased by 0.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- INTC's debt-to-equity ratio is very low at 0.24 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.18, which illustrates the ability to avoid short-term cash problems.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, INTEL CORP's return on equity exceeds that of both the industry average and the S&P 500.
- The stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- You can view the full analysis from the report here: INTC Ratings Report
JAH data by YCharts 11. Jarden Corp. (JAH)
Market Cap: $10.2 billion
Sector: Consumer Goods & Services/Housewares & Specialties
Year-to-date return: 11.3%
Jefferies Price Target: $63
Jarden Corporation manufactures, markets, and distributes consumer products worldwide.
Jefferies said: [Analyst Kevin Grundy] looks for 5% organic sales growth in F15, at the high end of their guidance, boosted in 2H15 by the sell-in of "American Home" by Yankee Candle. Building on that sales growth, he sees opportunity for margin expansion, notes that the P/E multiple, at 16x Jefferies' '16 EPS estimate, is at the very low end of consumer staples, and Kevin believes we'll see either M&A or a buyback announcement by year end '15.
TheStreet Rating: Hold, C+TheStreet said: "We rate JARDEN CORP (JAH) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. Among the primary strengths of the company is its solid stock price performance. At the same time, however, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Compared to its closing price of one year ago, JAH's share price has jumped by 39.10%, exceeding the performance of the broader market during that same time frame. Setting our sights on the months ahead, however, we feel that the stock's sharp appreciation over the last year has driven it to a price level which is now relatively expensive compared to the rest of its industry. The implication is that its reduced upside potential is not good enough to warrant further investment at this time.
- JARDEN CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, JARDEN CORP increased its bottom line by earning $1.29 versus $1.21 in the prior year. This year, the market expects an improvement in earnings ($2.80 versus $1.29).
- JAH, with its decline in revenue, slightly underperformed the industry average of 7.7%. Since the same quarter one year prior, revenues slightly dropped by 0.0%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. In comparison to the other companies in the Household Durables industry and the overall market, JARDEN CORP's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- The gross profit margin for JARDEN CORP is currently lower than what is desirable, coming in at 31.65%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -3.20% trails that of the industry average.
- You can view the full analysis from the report here: JAH Ratings Report
MNK data by YCharts 12. Mallinckrodt Plc (MNK)
Market Cap: $14.4 billion
Sector: Health Care/Pharmaceuticals
Year-to-date return: 25.2%
Jefferies Price Target: $145
Mallinckrodt public limited company develops, manufactures, markets, and distributes specialty pharmaceutical products and medical imaging agents worldwide. The company operates through two segments, Specialty Pharmaceuticals and Global Medical Imaging.
Jefferies said: Anthony considers them well positioned for M&A -- prepared to execute on a potential $2B-18B transaction but also ripe to be taken out. He likes the Ikaria acquisition with further out accretion potentially surpassing $1 per share, in his view. We think double-digit Acthar growth is sustainable and the company can see revenue tripling from today's ~$1B run-rate, Ofirmev is in position to be used in "multi-modal" pain management that's becoming increasingly adopted, and there are no plans to leave the gConcerta market where volumes have benefitted from KUDCO exiting and Actavis increasing prices.
TheStreet Rating: Hold, CTheStreet said: "We rate MALLINCKRODT PLC (MNK) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and solid stock price performance. However, as a counter to these strengths, we find that the company's return on equity has been disappointing."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- MNK's very impressive revenue growth greatly exceeded the industry average of 1.9%. Since the same quarter one year prior, revenues leaped by 63.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The debt-to-equity ratio is somewhat low, currently at 0.77, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. To add to this, MNK has a quick ratio of 2.08, which demonstrates the ability of the company to cover short-term liquidity needs.
- The gross profit margin for MALLINCKRODT PLC is currently very high, coming in at 70.72%. It has increased significantly from the same period last year. Despite the strong results of the gross profit margin, MNK's net profit margin of 10.83% significantly trails the industry average.
- MALLINCKRODT PLC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, MALLINCKRODT PLC swung to a loss, reporting -$3.57 versus $0.06 in the prior year. This year, the market expects an improvement in earnings ($7.41 versus -$3.57).
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Pharmaceuticals industry and the overall market, MALLINCKRODT PLC's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: MNK Ratings Report
MU data by YCharts 13. Micron Technology Inc. (MU)
Market Cap: $26 billion
Sector: Technology/Semiconductors
Year-to-date return: -28.2%
Jefferies Price Target: $40
Micron Technology, Inc., together with its subsidiaries, provides semiconductor solutions worldwide. The company manufactures and markets dynamic random access memory (DRAM), NAND flash, and NOR flash memory products; and packaging solutions and semiconductor systems.
Jefferies said: MU remains [analyst Sundeep Bajikar's] top Semiconductor pick driven by Moore Stress and industry consolidation. He expects Micron's DRAM cost structure to improve at a faster pace versus the competition, driven by solid advances in spacer based patterning for 20nm, as well as 1Xnm and 1Ynm nodes, which we believe are unlikely to use EUV. DRAM pricing was weaker than expected in Q1, but corrective supply-side actions are likely going forward, this should drive better DRAM pricing, and Sundeep believes that would be a surprise to the market.
TheStreet Rating: Buy, A-TheStreet said: "We rate MICRON TECHNOLOGY INC (MU) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, attractive valuation levels and expanding profit margins. We feel its strengths outweigh the fact that the company shows weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- MU's revenue growth has slightly outpaced the industry average of 0.7%. Since the same quarter one year prior, revenues slightly increased by 1.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The current debt-to-equity ratio, 0.54, is low and is below the industry average, implying that there has been successful management of debt levels. To add to this, MU has a quick ratio of 1.76, which demonstrates the ability of the company to cover short-term liquidity needs.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, MICRON TECHNOLOGY INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
- 49.11% is the gross profit margin for MICRON TECHNOLOGY INC which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 22.41% is above that of the industry average.
- You can view the full analysis from the report here: MU Ratings Report
OC data by YCharts 14. Owens-Corning (OC)
Market Cap: $4.7 billion
Sector: Industrials/Building Products
Year-to-date return: 12.1%
Jefferies Price Target: $51
Owens Corning, together with its subsidiaries, produces and sells glass fiber reinforcements and other materials for composite systems; and residential and commercial building materials worldwide. It operates in three segments: Composites, Insulation, and Roofing.
Jefferies said: [Analyst Phil Ng] expects margin expansion as OC benefits from a pickup in roofing demand coupled with a decline in asphalt prices (35-45% of COGS for roofing, closely correlated to crude prices), noting a 10% decline in asphalt prices translates to 18% increase in earnings. While the spring roofing price increase has seen mixed traction thus far, Phil is encouraged the industry is showing much improved discipline, with TAMKO announcing a second price increase. OC should work as long as the industry holds pricing firm, which will allow the company to capture the cost tailwind from lower asphalt prices and benefit from a recovery in insulation and roofing demand.
TheStreet Rating: Buy, BTheStreet said: "We rate OWENS CORNING (OC) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels and good cash flow from operations. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The debt-to-equity ratio is somewhat low, currently at 0.63, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.01, which illustrates the ability to avoid short-term cash problems.
- Net operating cash flow has increased to -$149.00 million or 45.22% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 33.31%.
- OWENS CORNING has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, OWENS CORNING increased its bottom line by earning $1.91 versus $1.71 in the prior year. This year, the market expects an improvement in earnings ($2.14 versus $1.91).
- OC, with its decline in revenue, slightly underperformed the industry average of 0.3%. Since the same quarter one year prior, revenues slightly dropped by 5.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- You can view the full analysis from the report here: OC Ratings Report
PFE data by YCharts 15. Pfizer Inc. (PFE)
Market Cap: $209 billion
Sector: Health Care/Pharmaceuticals
Year-to-date return: 1.3%
Jefferies Price Target: $45
Pfizer Inc., a biopharmaceutical company, discovers, develops, manufactures, and sells healthcare products worldwide.
Jefferies said: Short term drivers include strength in Ibrance, which is shaping up to be one of the fastest oncology product launches ever and where we estimate $5.5B in 2020 sales versus consensus' $3.3B. Additionally, [analyst Jeff Holford] believes the market will start to better appreciate the durable growth at GEP, the separation of GEP by '17 at a minimum, and optionality on further accretive M&A (Shire, Actavis, AstraZeneca and Glaxo are potential targets, in his view).
TheStreet Rating: Buy, A-TheStreet said: "We rate PFIZER INC (PFE) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its solid stock price performance, largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels, expanding profit margins and growth in earnings per share. We feel its strengths outweigh the fact that the company has had somewhat disappointing return on equity."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- The current debt-to-equity ratio, 0.53, is low and is below the industry average, implying that there has been successful management of debt levels. To add to this, PFE has a quick ratio of 1.81, which demonstrates the ability of the company to cover short-term liquidity needs.
- The gross profit margin for PFIZER INC is currently very high, coming in at 86.14%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, PFE's net profit margin of 21.87% significantly trails the industry average.
- PFIZER INC has improved earnings per share by 8.6% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, PFIZER INC reported lower earnings of $1.42 versus $1.65 in the prior year. This year, the market expects an improvement in earnings ($2.04 versus $1.42).
- You can view the full analysis from the report here: PFE Ratings Report
PRU data by YCharts 16. Prudential Financial Inc. (PRU)
Market Cap: $40 billion
Sector: Financial Services/Life & Health Insurance
Year-to-date return: -1.3%
Jefferies Price Target: $100
Prudential Financial, Inc. provides insurance, investment management, and other financial products and services to individual and institutional customers in the United States and internationally.
Jefferies said: [Analyst Colin Devine] believes the market has over discounted risks of oversight by the Federal Reserve and possible capital requirements. PRU offers good growth potential and a balanced mix of businesses that can deliver a 14-16% ROE even with low rates or uneven markets. Higher rates provide optionality. A potential SIFI designation comes with risk to capital flexibility, but Colin views those risks as tolerable due to management's ability to work constructively with Federal regulators.
TheStreet Rating: Buy, A-TheStreet said: "We rate PRUDENTIAL FINANCIAL INC (PRU) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth, compelling growth in net income, expanding profit margins and good cash flow from operations. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth greatly exceeded the industry average of 9.4%. Since the same quarter one year prior, revenues rose by 21.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
- PRUDENTIAL FINANCIAL INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, PRUDENTIAL FINANCIAL INC turned its bottom line around by earning $3.08 versus -$1.61 in the prior year. This year, the market expects an improvement in earnings ($10.15 versus $3.08).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Insurance industry. The net income increased by 64.5% when compared to the same quarter one year prior, rising from $1,238.00 million to $2,036.00 million.
- 35.43% is the gross profit margin for PRUDENTIAL FINANCIAL INC which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 13.09% is above that of the industry average.
- Net operating cash flow has significantly increased by 179.33% to $5,528.00 million when compared to the same quarter last year. In addition, PRUDENTIAL FINANCIAL INC has also vastly surpassed the industry average cash flow growth rate of 21.99%.
- You can view the full analysis from the report here: PRU Ratings Report
RKT data by YCharts 17. Rock-Tenn Co. (RKT)
Market Cap: $8.9 billion
Sector: Materials/Paper Packaging
Year-to-date return: 4.6%
Jefferies Price Target: $84
Rock-Tenn Company manufactures and sells containerboard and paperboard products in the Unites States, Canada, Mexico, Chile, Argentina, and Puerto Rico. The company operates through four segments: Corrugated Packaging, Consumer Packaging, Merchandising Displays, and Recycling.
Jefferies said: With RKT getting regulatory approval for the MWV transaction, it's on track to close on July 1st. [Analyst Phil Ng] believes there's meaningful runway for margin expansion from upside to the synergies and cost takeout initiatives. Based on its strong FCF profile and under-levered BS, Phil believes RKT can buy back 18-23% of the shares outstanding over the next 2 years. The combination will help to improve the industry structure, and he believes boxboard prices are likely to increase and could provide upside to Jefferies' estimates.
TheStreet Rating: Buy, B+TheStreet said: "We rate ROCK-TENN CO (RKT) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, increase in net income, reasonable valuation levels and growth in earnings per share. We feel its strengths outweigh the fact that the company shows weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- RKT's revenue growth has slightly outpaced the industry average of 0.4%. Since the same quarter one year prior, revenues slightly increased by 2.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Powered by its strong earnings growth of 36.28% and other important driving factors, this stock has surged by 26.29% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, RKT should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Containers & Packaging industry. The net income increased by 32.6% when compared to the same quarter one year prior, rising from $82.80 million to $109.80 million.
- ROCK-TENN CO has improved earnings per share by 36.3% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, ROCK-TENN CO reported lower earnings of $3.29 versus $4.97 in the prior year. This year, the market expects an improvement in earnings ($4.09 versus $3.29).
- You can view the full analysis from the report here: RKT Ratings Report
PAY data by YCharts 18. Verifone Systems Inc. (PAY)
Market Cap: $4.1 billion
Sector: Technology/Data Processing & Outsourced Services
Year-to-date return: -1.5%
Jefferies Price Target: $43
VeriFone Systems, Inc. designs, markets, and services electronic payment solutions at the point of sale (POS) worldwide.
Jefferies said: The 500+bps gap between Verifone's operating margins and those of competitor Ingenico offer an opportunity, in [analyst Jason Kupferberg's] view, as Verifone is working to expand margins by accelerating the top line (we look for 8.4% growth in '16) and controlling operating expense growth (4.4% in '16 and 3.7% in '17 down from double digits in in '13 and '14). Top line will benefit from a long tailed EMV terminal replacement cycle, and Jason doesn't see a cliff coming next year. He believes the APAC business has bottomed and is poised to show improvement over the next 12 months. Next phase of the turnaround is about achieving normalized earnings power (we think ~$2.50 in EPS), and on this basis the stock remains undervalued.
TheStreet Rating: Hold, CTheStreet said: "We rate VERIFONE SYSTEMS INC (PAY) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and impressive record of earnings per share growth. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 22.5%. Since the same quarter one year prior, revenues slightly increased by 5.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The debt-to-equity ratio is somewhat low, currently at 0.91, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.25, which illustrates the ability to avoid short-term cash problems.
- 45.96% is the gross profit margin for VERIFONE SYSTEMS INC which we consider to be strong. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, PAY's net profit margin of 3.58% significantly trails the industry average.
- Net operating cash flow has declined marginally to $56.33 million or 0.36% when compared to the same quarter last year. Despite a decrease in cash flow VERIFONE SYSTEMS INC is still fairing well by exceeding its industry average cash flow growth rate of -11.72%.
- In its most recent trading session, PAY has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
- You can view the full analysis from the report here: PAY Ratings Report
VMW data by YCharts 19. VMware Inc. (VMW)
Market Cap: $37.4 billion
Sector: Technology/Systems Software
Year-to-date return: 7.7%
Jefferies Price Target: $104
VMware, Inc. provides virtualization infrastructure solutions in the United States and internationally.
Jefferies said: The market is focused on the 80%+ of x86 workloads that have been virtualized, believing that the company is running out of growth, but fails to appreciate that a much smaller percentage of CPUs have been virtualized. Additionally, [analyst John DiFucci] thinks there's a good chance VMW can transform themselves into one of the software greats by leveraging success in virtualization into other markets in which they already have a toehold. These markets include End User Computing, Software Defined Networking, Software Defined Storage, and Hybrid Cloud among others.
TheStreet Rating: Hold, C+TheStreet said: "We rate VMWARE INC (VMW) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, weak operating cash flow and a generally disappointing performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 5.0%. Since the same quarter one year prior, revenues rose by 11.1%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- VMW's debt-to-equity ratio is very low at 0.20 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, VMW has a quick ratio of 2.18, which demonstrates the ability of the company to cover short-term liquidity needs.
- The gross profit margin for VMWARE INC is currently very high, coming in at 88.95%. Regardless of VMW's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 12.97% trails the industry average.
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, VMW has underperformed the S&P 500 Index, declining 7.38% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. When compared to other companies in the Software industry and the overall market, VMWARE INC's return on equity is below that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: VMW Ratings Report
WDC data by YCharts 20. Western Digital Corp. (WDC)
Market Cap: $21.2 billion
Sector: Technology/S&P
Year-to-date return: -15.9%
Jefferies Price Target: $123
Western Digital Corporation, through its subsidiaries, develops, manufactures, and sells data storage solutions that enable consumers, businesses, governments, and other organizations to create, manage, experience, and preserve digital content.
Jefferies said: The stock is down about 17% from last year's highs owing primarily to concerns about PCs and accelerating NAND adoption. [Analyst James Kisner] took advantage of this weakness to add WDC to the Franchise Pick list in mid-April.
TheStreet Rating: Buy, A-TheStreet said: "We rate WESTERN DIGITAL CORP (WDC) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, largely solid financial position with reasonable debt levels by most measures, attractive valuation levels, notable return on equity and increase in stock price during the past year. We feel its strengths outweigh the fact that the company shows weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- WESTERN DIGITAL CORP has improved earnings per share by 5.2% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, WESTERN DIGITAL CORP increased its bottom line by earning $6.69 versus $3.90 in the prior year. This year, the market expects an improvement in earnings ($7.82 versus $6.69).
- Although WDC's debt-to-equity ratio of 0.25 is very low, it is currently higher than that of the industry average. To add to this, WDC has a quick ratio of 2.09, which demonstrates the ability of the company to cover short-term liquidity needs.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Computers & Peripherals industry and the overall market on the basis of return on equity, WESTERN DIGITAL CORP has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- After a year of stock price fluctuations, the net result is that WDC's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
- You can view the full analysis from the report here: WDC Ratings Report
WETF data by YCharts 21. WisdomTree Investments Inc. (WETF)
Market Cap: $3 billion
Sector: Financial Services/Asset Management & Custody Banks
Year-to-date return: 4.3%
Jefferies Price Target: $23
WisdomTree Investments, Inc., through its subsidiaries, operates as an exchange-traded funds (ETFs) sponsor and asset manager. It offers ETFs in equities, currency, fixed income, and alternatives asset classes.
Jefferies said: As the only publically traded ETF manager, Wisdom Tree is a pure play on the secular growth in ETFs and well positioned to continue outperforming its peers as investment dollars continue to shift away from active asset managers and towards passive strategies. WETF's diverse product set helps it attract assets under almost all economic conditions. With QE in Europe still in its early stages and QE in Japan ongoing, [analyst Surinder Thind] expects net flows to remain elevated, especially within its suite of currency hedged products (e.g., HEDJ and DXJ). Additionally, with US interest rates set to rise later this year, he expects net flows in the back half of 2015 to be aided by these rising rate (interest rate hedged) products.
TheStreet Rating: Buy, BTheStreet said: "We rate WISDOMTREE INVESTMENTS INC (WETF) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance, good cash flow from operations, expanding profit margins and notable return on equity. We feel its strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth greatly exceeded the industry average of 5.7%. Since the same quarter one year prior, revenues rose by 40.1%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Compared to its closing price of one year ago, WETF's share price has jumped by 101.59%, exceeding the performance of the broader market during that same time frame. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
- WISDOMTREE INVESTMENTS INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, WISDOMTREE INVESTMENTS INC increased its bottom line by earning $0.45 versus $0.38 in the prior year. This year, the market expects an improvement in earnings ($0.65 versus $0.45).
- Net operating cash flow has significantly increased by 79.53% to $16.94 million when compared to the same quarter last year. Despite an increase in cash flow of 79.53%, WISDOMTREE INVESTMENTS INC is still growing at a significantly lower rate than the industry average of 191.13%.
- 35.74% is the gross profit margin for WISDOMTREE INVESTMENTS INC which we consider to be strong. Regardless of WETF's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 20.05% trails the industry average.
- You can view the full analysis from the report here: WETF Ratings Report
Sundeep Bajikar is a great technology analyst. I really like his insights, especially on AAPL
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