The year 2016 is "likely looking to print flat earnings growth -- negative revenue growth roughly offset by some margin expansion and significant share repurchases," J.P. Morgan analysts wrote in a comprehensive note issued Monday to clients. "While buyback activity should continue to synthetically boost earnings growth in this lackluster economic environment, we think margin expansion is near full exhaustion and in 2016 will possibly turn negative for the first time in this recovery. This suggests that we need at least some top-line growth in order to avoid a possible earnings recession. In that vein, we believe the biggest risk equities face is a continuation in the strengthening of the US dollar and the Fed getting ahead of the curve ('policy error')."
J.P. Morgan equity analysts identified the most compelling investment ideas for 2016 in their coverage group across growth, value, income-oriented, short and market-neutral strategies. Below is the list of stocks that made the analysts' top long ideas. Companies that trade below $5 million in average daily volume were excluded from the list. The group is paired with ratings from TheStreet Ratings, TheStreet's proprietary ratings tool, for another perspective. And when you're done check out Goldman Sachs' 35 stocks that will outperform in 2016.
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 equity 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.
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Note: Year-to-date returns are based on Dec. 7 closing prices.
1. Advance Auto Parts Inc. (AAP - Get Report) Industry: Consumer Goods & Services/Automotive Retail
Year-to-date return: -5.1%
Year-to-date return: -5.1%
JPMorgan Rating/Price Target: Overweight/$210
JPMorgan Pick: Value
JPMorgan Analysts Said: We recommend AAP and would buy the shares today given the risk-reward and our view that progress, while slow, is happening. Longer term, as we laid out, the potential of the business could yield a doubling of earnings. Additionally, while AAP makes progress rolling out daily delivery to its heritage stores (~30% by year end), it will progress along the integration and loyalty card rollout while lapping the people and product disruption from 2015 and cutting discrete costs. Tactically, we should get new management in the coming two quarters and we expect the Street to end up well below the 12% target for 2016 (we are at 11.2%, which flows through the reduction to 2015 from prior consensus). We see a -11%, +50% risk-reward.
JPMorgan Pick: Value
JPMorgan Analysts Said: We recommend AAP and would buy the shares today given the risk-reward and our view that progress, while slow, is happening. Longer term, as we laid out, the potential of the business could yield a doubling of earnings. Additionally, while AAP makes progress rolling out daily delivery to its heritage stores (~30% by year end), it will progress along the integration and loyalty card rollout while lapping the people and product disruption from 2015 and cutting discrete costs. Tactically, we should get new management in the coming two quarters and we expect the Street to end up well below the 12% target for 2016 (we are at 11.2%, which flows through the reduction to 2015 from prior consensus). We see a -11%, +50% risk-reward.
TheStreet Said: TheStreet Ratings team rates ADVANCE AUTO PARTS INC as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:
We rate ADVANCE AUTO PARTS INC (AAP) 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, reasonable valuation levels, 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 shows weak operating cash flow.
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 4.6%. 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.
- ADVANCE AUTO PARTS INC' earnings per share from the most recent quarter came in slightly below the year earlier quarter. 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, ADVANCE AUTO PARTS INC increased its bottom line by earning $6.71 versus $5.33 in the prior year. This year, the market expects an improvement in earnings ($7.85 versus $6.71).
- 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. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.19 is very weak and demonstrates a lack of ability to pay short-term obligations.
- 47.67% is the gross profit margin for ADVANCE AUTO PARTS INC which we consider to be strong. Regardless of AAP'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 5.24% trails the industry average.
- You can view the full analysis from the report here: AAP
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2. AerCap Holdings NV (AER - Get Report) Industry: Industrials/Trading Companies & Distributors
Year-to-date return: 14.6%
Year-to-date return: 14.6%
JPMorgan Rating/Price Target: Overweight/$54
JPMorgan Pick: Value
JPMorgan Analysts Said: AerCap has the largest and most diversified aircraft portfolios of the companies we cover, and when combined with an order book of more than 450 aircraft (40% of existing fleet) and a valuation of ~0.95x 2017e P/B and 6.8x 2017e P/E, the name emerges as the highest quality value-oriented company in the group. Integration with ILFC (merger closed in Dec. 2014) has gone smoothly and provided AER the opportunity to mark-to-market its assets at a more reasonable level - mitigating impairment risk. With 80% of aircraft deliveries through December 2018 already committed to airlines, AER offers investors significant revenue visibility and growth at valuations below its own historical trading as well as at a discount to peer Air Lease (OW). The chief risks include a reduction in global air traffic demand trends, the inability to access the capital markets to finance growth, and impairment charges if further asset value weakness emerges.
JPMorgan Pick: Value
JPMorgan Analysts Said: AerCap has the largest and most diversified aircraft portfolios of the companies we cover, and when combined with an order book of more than 450 aircraft (40% of existing fleet) and a valuation of ~0.95x 2017e P/B and 6.8x 2017e P/E, the name emerges as the highest quality value-oriented company in the group. Integration with ILFC (merger closed in Dec. 2014) has gone smoothly and provided AER the opportunity to mark-to-market its assets at a more reasonable level - mitigating impairment risk. With 80% of aircraft deliveries through December 2018 already committed to airlines, AER offers investors significant revenue visibility and growth at valuations below its own historical trading as well as at a discount to peer Air Lease (OW). The chief risks include a reduction in global air traffic demand trends, the inability to access the capital markets to finance growth, and impairment charges if further asset value weakness emerges.
TheStreet Said: TheStreet Ratings team rates AERCAP HOLDINGS NV as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:
We rate AERCAP HOLDINGS NV (AER) 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, expanding profit margins and notable return on equity. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk and weak operating cash flow.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- AER's revenue growth has slightly outpaced the industry average of 2.4%. Since the same quarter one year prior, revenues slightly increased by 2.0%. 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.
- The gross profit margin for AERCAP HOLDINGS NV is currently very high, coming in at 85.79%. Regardless of AER's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, AER's net profit margin of 22.24% significantly outperformed against the industry.
- 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 Trading Companies & Distributors industry and the overall market on the basis of return on equity, AERCAP HOLDINGS NV has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- The debt-to-equity ratio is very high at 3.64 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company.
- Net operating cash flow has decreased to $796.40 million or 10.01% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- You can view the full analysis from the report here: AER
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3. Agnico Eagle Mines Ltd.(AEM - Get Report) Industry: Materials/Gold
Year-to-date return: 11.8%
Year-to-date return: 11.8%
JPMorgan Rating/Price Target: Overweight/$35
JPMorgan Pick: Growth
JPMorgan Said: Agnico has a rounded portfolio of assets in relatively low risk locations. The company has been reporting success with exploration at its new Amaruq discovery and in the parallel zone at its Kittila mine. We feel this portfolio, together with the company's long history in bull and bear markets, means the company should benefit from an eventual gold price recovery.
JPMorgan Pick: Growth
JPMorgan Said: Agnico has a rounded portfolio of assets in relatively low risk locations. The company has been reporting success with exploration at its new Amaruq discovery and in the parallel zone at its Kittila mine. We feel this portfolio, together with the company's long history in bull and bear markets, means the company should benefit from an eventual gold price recovery.
TheStreet Said: TheStreet Ratings team rates AGNICO EAGLE MINES LTD as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:
We rate AGNICO EAGLE MINES LTD (AEM) 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, expanding profit margins and good cash flow from operations. However, as a counter to these strengths, we find that the growth in the company's earnings per share has not been good.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth greatly exceeded the industry average of 45.4%. Since the same quarter one year prior, revenues slightly increased by 9.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
- 49.96% is the gross profit margin for AGNICO EAGLE MINES LTD which we consider to be strong. It has increased from the same quarter the previous year.
- AEM's debt-to-equity ratio is very low at 0.30 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.97 is somewhat weak and could be cause for future problems.
- AGNICO EAGLE MINES LTD 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 year. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, AGNICO EAGLE MINES LTD turned its bottom line around by earning $0.50 versus -$2.34 in the prior year. For the next year, the market is expecting a contraction of 2.0% in earnings ($0.49 versus $0.50).
- 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 Metals & Mining industry and the overall market on the basis of return on equity, AGNICO EAGLE MINES LTD underperformed against that of the industry average and is significantly less than that of the S&P 500.
- You can view the full analysis from the report here: AEM
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4. Alexandria Real Estate Equities (ARE - Get Report) Industry: Financial Services/Office REITs
Year-to-date return: 1.5%
Year-to-date return: 1.5%
JPMorgan Rating/Price Target: Overweight/$106
JPMorgan Pick: Growth
JPMorgan Said: We think ARE's development pipeline has been de-risked significantly through preleasing. In addition, this pipeline will start to make earnings contributions late in 2016 and add to 2017 growth visibility. As this becomes more apparent, we think it could act as a catalyst for the stock.
JPMorgan Pick: Growth
JPMorgan Said: We think ARE's development pipeline has been de-risked significantly through preleasing. In addition, this pipeline will start to make earnings contributions late in 2016 and add to 2017 growth visibility. As this becomes more apparent, we think it could act as a catalyst for the stock.
TheStreet Said: TheStreet Ratings team rates ALEXANDRIA R E EQUITIES INC as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:
We rate ALEXANDRIA R E EQUITIES INC (ARE) 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, increase in net income and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity 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 6.1%. Since the same quarter one year prior, revenues rose by 18.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Real Estate Investment Trusts (REITs) industry average. The net income increased by 14.2% when compared to the same quarter one year prior, going from $34.60 million to $39.53 million.
- ALEXANDRIA R E EQUITIES INC has improved earnings per share by 17.9% 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, ALEXANDRIA R E EQUITIES INC reported lower earnings of $0.99 versus $1.60 in the prior year. This year, the market expects an improvement in earnings ($1.56 versus $0.99).
- 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. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, ALEXANDRIA R E EQUITIES INC's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has decreased to $95.01 million or 14.12% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- You can view the full analysis from the report here: ARE
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5. Ally Financial Inc. (ALLY - Get Report) Industry: Financial Services/Consumer Finance
Year-to-date return: -16.6%
Year-to-date return: -16.6%
JPMorgan Rating/Price Target: Overweight/$30
JPMorgan Pick: Value
JPMorgan Said: Auto finance company ALLY continues to execute its plan to improve profitability via cost reductions and building its deposit base (reducing overall funding costs). As such, we believe that ROE will continue to trend higher over time (from the mid- to high-single digits to the low double digits). The retirement of the Series G preferred securities should allow ALLY to return capital to shareholders in the back half 2016. Given improving profitability and the prospect of a dividend/buyback, we believe that ALLY's notable discount to regional banks (which trade at 1.6x to 1.7x P/TB versus ALLY's .83x) will narrow. Lastly, we believe price appreciation will be further enhanced by ~10% growth of ALLY's TB/share.
JPMorgan Pick: Value
JPMorgan Said: Auto finance company ALLY continues to execute its plan to improve profitability via cost reductions and building its deposit base (reducing overall funding costs). As such, we believe that ROE will continue to trend higher over time (from the mid- to high-single digits to the low double digits). The retirement of the Series G preferred securities should allow ALLY to return capital to shareholders in the back half 2016. Given improving profitability and the prospect of a dividend/buyback, we believe that ALLY's notable discount to regional banks (which trade at 1.6x to 1.7x P/TB versus ALLY's .83x) will narrow. Lastly, we believe price appreciation will be further enhanced by ~10% growth of ALLY's TB/share.
TheStreet Said: TheStreet Ratings team rates ALLY FINANCIAL INC as a Sell with a ratings score of D-. TheStreet Ratings Team has this to say about their recommendation:
We rate ALLY FINANCIAL INC (ALLY) a SELL. This is driven by several weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, generally high debt management risk, disappointing return on equity, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Consumer Finance industry average. The net income has significantly decreased by 36.6% when compared to the same quarter one year ago, falling from $423.00 million to $268.00 million.
- The debt-to-equity ratio is very high at 4.99 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company.
- 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 Consumer Finance industry and the overall market, ALLY FINANCIAL INC's return on equity significantly trails that of both the industry average and the S&P 500.
- ALLY has underperformed the S&P 500 Index, declining 11.99% 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.
- ALLY FINANCIAL INC's earnings per share improvement from the most recent quarter was slightly positive. The company has demonstrated a pattern of positive earnings per share growth over the past year. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, ALLY FINANCIAL INC turned its bottom line around by earning $84.79 versus -$457.00 in the prior year. For the next year, the market is expecting a contraction of 97.6% in earnings ($2.02 versus $84.79).
- You can view the full analysis from the report here: ALLY
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6. Alphabet Inc. (GOOGL) (GOOG) Industry: Technology/Internet Software & Services
Year-to-date return: 45.7%
Year-to-date return: 45.7%
JPMorgan Rating/Price Target: Overweight/$900
JPMorgan Pick: Value
JPMorgan Said: We see GOOGL shares as undervalued as we expect the company to remain a primary beneficiary (along w/FB) in the secular shift to online spending (w/ significant room to go in mobile and video). We think GOOGL mobile ad pricing will continue to close the gap with desktop (though desktop growth remains healthy), and that video engagement and monetization is accelerating given YouTube strength (our $7.6B YouTube estimate in '16 could be conservative). We expect investors will want to own GOOGL into the Alphabet numbers breakout in early '16 when we expect ~$2B-$4B in Other Bets' losses. We see the initiation of a buyback program as appropriately sending the signal that Alphabet will be more shareholder friendly over time, but that it still sees attractive growth opportunities (both internally and M&A).
JPMorgan Pick: Value
JPMorgan Said: We see GOOGL shares as undervalued as we expect the company to remain a primary beneficiary (along w/FB) in the secular shift to online spending (w/ significant room to go in mobile and video). We think GOOGL mobile ad pricing will continue to close the gap with desktop (though desktop growth remains healthy), and that video engagement and monetization is accelerating given YouTube strength (our $7.6B YouTube estimate in '16 could be conservative). We expect investors will want to own GOOGL into the Alphabet numbers breakout in early '16 when we expect ~$2B-$4B in Other Bets' losses. We see the initiation of a buyback program as appropriately sending the signal that Alphabet will be more shareholder friendly over time, but that it still sees attractive growth opportunities (both internally and M&A).
TheStreet Said: TheStreet Ratings team rates ALPHABET INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
We rate ALPHABET INC (GOOG) 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 compelling growth in net income, revenue growth and largely solid financial position with reasonable debt levels by most measures. 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:
- The net income growth from the same quarter one year ago has greatly exceeded that of the S&P 500, but is less than that of the Internet Software & Services industry average. The net income increased by 45.3% when compared to the same quarter one year prior, rising from $2,739.00 million to $3,979.00 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 15.2%. Since the same quarter one year prior, revenues rose by 13.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
- ALPHABET INC has improved earnings per share by 35.2% 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, ALPHABET INC reported lower earnings of $25.08 versus $39.38 in the prior year. This year, the market expects an improvement in earnings ($58.00 versus $25.08).
- Net operating cash flow has remained constant at $6,007.00 million with no significant change when compared to the same quarter last year. This quarter, ALPHABET INC's cash flow growth rate has remained relatively unchanged and is slightly below the industry average.
- 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. Compared to other companies in the Internet Software & Services industry and the overall market, ALPHABET INC's return on equity exceeds that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: GOOG
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7. Aon Plc (AON) Industry: Financial Services/Insurance Brokers
Year-to-date return: 2%
Year-to-date return: 2%
JPMorgan Rating/Price Target: Overweight/$113
JPMorgan Pick: Growth
JPMorgan Said: AON could benefit from accelerating free cash flow and investors pay little for optionality on private health exchanges. Aon expects free cash flow to increase 50% to $2.3bn ($8.65/shr) by YE17, reflecting growth in the core business and a declining use of cash, which is likely above consensus. On private health exchanges, we believe there is little left in AON shares, and there could be substantial upside if they were to become the new distribution model for health insurance. In Insurance Brokerage, AON is confident it can continue to grow organically even if P&C prices decline, driven by geographical expansion and growth in global GDP. Also, roughly one-quarter of the company's Brokerage revenues are fee-based and not tied to changes in P&C prices.
JPMorgan Pick: Growth
JPMorgan Said: AON could benefit from accelerating free cash flow and investors pay little for optionality on private health exchanges. Aon expects free cash flow to increase 50% to $2.3bn ($8.65/shr) by YE17, reflecting growth in the core business and a declining use of cash, which is likely above consensus. On private health exchanges, we believe there is little left in AON shares, and there could be substantial upside if they were to become the new distribution model for health insurance. In Insurance Brokerage, AON is confident it can continue to grow organically even if P&C prices decline, driven by geographical expansion and growth in global GDP. Also, roughly one-quarter of the company's Brokerage revenues are fee-based and not tied to changes in P&C prices.
TheStreet Said: TheStreet Ratings team rates AON PLC as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:
We rate AON PLC (AON) 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 notable return on equity and good cash flow from operations. We feel its strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- 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. In comparison to the other companies in the Insurance industry and the overall market, AON PLC's return on equity significantly exceeds that of the industry average and is above that of the S&P 500.
- Net operating cash flow has increased to $710.00 million or 29.09% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -13.77%.
- AON PLC reported flat earnings per share in the most recent quarter. 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, AON PLC increased its bottom line by earning $4.67 versus $3.54 in the prior year. This year, the market expects an improvement in earnings ($6.02 versus $4.67).
- Despite the weak revenue results, AON has outperformed against the industry average of 15.7%. Since the same quarter one year prior, revenues slightly dropped by 4.8%. Weakness in the company's revenue seems to not be hurting the bottom line, shown by stable earnings per share.
- The change in net income from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Insurance industry average. The net income has decreased by 4.5% when compared to the same quarter one year ago, dropping from $309.00 million to $295.00 million.
- You can view the full analysis from the report here: AON
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8. Boston Scientific Corp. (BSX) Industry: Health Care/Health Care Equipment
Year-to-date return: 40%
Year-to-date return: 40%
JPMorgan Rating/Price Target: Overweight/$22
JPMorgan Pick: Growth
JPMorgan Said: Boston is a new product driven top and bottom-line acceleration story. We see organic revenue growth accelerating to 5-6% in 2016 with operating margins improving more than 100bps, all enabling mid-teens EPS growth despite the headwind from currency. The stock trades at just 15.4x our 2017 Cash EPS estimate and has a FCF yield of 6.6%.
JPMorgan Pick: Growth
JPMorgan Said: Boston is a new product driven top and bottom-line acceleration story. We see organic revenue growth accelerating to 5-6% in 2016 with operating margins improving more than 100bps, all enabling mid-teens EPS growth despite the headwind from currency. The stock trades at just 15.4x our 2017 Cash EPS estimate and has a FCF yield of 6.6%.
TheStreet Said: TheStreet Ratings team rates BOSTON SCIENTIFIC CORP as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
We rate BOSTON SCIENTIFIC CORP (BSX) 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 solid stock price performance, revenue growth and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and feeble growth in the company's earnings per share.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Compared to its closing price of one year ago, BSX's share price has jumped by 38.34%, exceeding the performance of the broader market during that same time frame. Although BSX had significant growth over the past year, our hold rating indicates that we do not recommend additional investment in this stock at the current time.
- BSX's revenue growth trails the industry average of 29.7%. Since the same quarter one year prior, revenues slightly increased by 2.3%. 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 BOSTON SCIENTIFIC CORP is currently very high, coming in at 75.16%. 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 -10.48% is in-line with the industry average.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Health Care Equipment & Supplies industry. The net income has significantly decreased by 560.5% when compared to the same quarter one year ago, falling from $43.00 million to -$198.00 million.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Health Care Equipment & Supplies industry and the overall market, BOSTON SCIENTIFIC CORP'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: BSX
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9. Bristol-Myers Squibb Co. (BMY) Industry: Health Care/Pharmaceuticals
Year-to-date return: 16.6%
Year-to-date return: 16.6%
JPMorgan Rating/Price Target: Overweight/$80
JPMorgan Pick: Growth
JPMorgan Said: We believe PD-1/immuno-oncology (I/O) represents the most significant pipeline opportunity in pharma, and see the I/O space as a $30+ bn category. We view Bristol as a clear leader in the market from both a time-to-market and breadth of clinical program perspective. While we believe BMY shares already reflect ~$8bn in peak I/O sales, we see the potential for further upside to this figure (and BMY shares) from a number of important updates, with every $1bn in peak immuno-oncology sales translating to roughly $3/share of NPV for BMY shares. Heading into 2016 with Opdivo approved in melanoma, sq/ non-sq NSCLC and mRCC, we see BMY as a commercial story given the steep ramp in Opdivo sales and will be closely watching its commercialization across these indications. Key data points to watch for in 2016 include Phase III data from -026 (frontline NSCLC) which could support a filing in this large setting, topline data in glioblastoma and HNSCC and first monotherapy and combo data for new I/O molecules (e.g. LAG-3, anti-KIR, CD-137) later in the year.
JPMorgan Pick: Growth
JPMorgan Said: We believe PD-1/immuno-oncology (I/O) represents the most significant pipeline opportunity in pharma, and see the I/O space as a $30+ bn category. We view Bristol as a clear leader in the market from both a time-to-market and breadth of clinical program perspective. While we believe BMY shares already reflect ~$8bn in peak I/O sales, we see the potential for further upside to this figure (and BMY shares) from a number of important updates, with every $1bn in peak immuno-oncology sales translating to roughly $3/share of NPV for BMY shares. Heading into 2016 with Opdivo approved in melanoma, sq/ non-sq NSCLC and mRCC, we see BMY as a commercial story given the steep ramp in Opdivo sales and will be closely watching its commercialization across these indications. Key data points to watch for in 2016 include Phase III data from -026 (frontline NSCLC) which could support a filing in this large setting, topline data in glioblastoma and HNSCC and first monotherapy and combo data for new I/O molecules (e.g. LAG-3, anti-KIR, CD-137) later in the year.
TheStreet Said: TheStreet Ratings team rates BRISTOL-MYERS SQUIBB CO as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
We rate BRISTOL-MYERS SQUIBB CO (BMY) 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, expanding profit margins 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:
- BMY's revenue growth has slightly outpaced the industry average of 3.3%. Since the same quarter one year prior, revenues slightly increased by 3.8%. 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 current debt-to-equity ratio, 0.48, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.14, which illustrates the ability to avoid short-term cash problems.
- BRISTOL-MYERS SQUIBB CO' earnings per share from the most recent quarter came in slightly below the year earlier quarter. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, BRISTOL-MYERS SQUIBB CO reported lower earnings of $1.20 versus $1.55 in the prior year. This year, the market expects an improvement in earnings ($1.90 versus $1.20).
- The gross profit margin for BRISTOL-MYERS SQUIBB CO is currently very high, coming in at 77.81%. Regardless of BMY's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, BMY's net profit margin of 17.35% is significantly lower than the industry average.
- 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, despite the company's weak earnings results. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- You can view the full analysis from the report here: BMY
CPE data by YCharts
10. Callon Petroleum Co. (CPE) Industry: Energy/Oil & Gas Exploration & Production
Year-to-date return: 55%
Year-to-date return: 55%
JPMorgan Rating/Price Target: Overweight/$11
JPMorgan Pick: Value
JPMorgan Said: CPE retains a core position of ~18,000 net acres in one of the top U.S. oil assets - the Midland Basin - where an amalgamation of favorable geologic characteristics (depth, pressure, and thermal maturity) continues to drive industry-leading results. In our view, despite advancing ~74% YTD (vs a ~26% decline for the EPX), CPE continues to trade at an unwarranted discount to Midland Basin peers (RSPP, PE, FANG, LPI and PXD) based on our 2017 EV/EBITDA estimate (8.4x vs 9.5x for the group), while also trading at just ~86% of our NYMEX NAV. In our view, CPE remains poised to close the valuation gap on continued horizontal execution which likely drives ~24% y/y production growth in 2016 - from a cash flow neutral program - underpinned by a two-rig Central Midland program that remains focused primarily on Lower Spraberry development, the highest returning zone in the portfolio (~39% IRR on the strip).
JPMorgan Pick: Value
JPMorgan Said: CPE retains a core position of ~18,000 net acres in one of the top U.S. oil assets - the Midland Basin - where an amalgamation of favorable geologic characteristics (depth, pressure, and thermal maturity) continues to drive industry-leading results. In our view, despite advancing ~74% YTD (vs a ~26% decline for the EPX), CPE continues to trade at an unwarranted discount to Midland Basin peers (RSPP, PE, FANG, LPI and PXD) based on our 2017 EV/EBITDA estimate (8.4x vs 9.5x for the group), while also trading at just ~86% of our NYMEX NAV. In our view, CPE remains poised to close the valuation gap on continued horizontal execution which likely drives ~24% y/y production growth in 2016 - from a cash flow neutral program - underpinned by a two-rig Central Midland program that remains focused primarily on Lower Spraberry development, the highest returning zone in the portfolio (~39% IRR on the strip).
TheStreet Said: TheStreet Ratings team rates CALLON PETROLEUM CO/DE as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
We rate CALLON PETROLEUM CO/DE (CPE) 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 solid stock price performance and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally higher debt management risk and disappointing return on equity.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Compared to its closing price of one year ago, CPE's share price has jumped by 77.86%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
- Net operating cash flow has increased to $25.55 million or 15.59% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -26.27%.
- Despite the weak revenue results, CPE has outperformed against the industry average of 36.8%. Since the same quarter one year prior, revenues fell by 13.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The debt-to-equity ratio of 1.09 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with this, the company manages to maintain a quick ratio of 0.45, which clearly demonstrates the inability to cover short-term cash needs.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, CALLON PETROLEUM CO/DE'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: CPE
SCHW data by YCharts
11. Charles Schwab (SCHW) Industry: Financial Services/Investment Banking & Brokerage
Year-to-date return: 12.9%
Year-to-date return: 12.9%
JPMorgan Rating/Price Target: Overweight/$40
JPMorgan Pick: Growth
JPMorgan Said: We see Schwab as particularly well positioned for earnings growth in a rising interest rate environment given its money market fund franchise and a rapidly growing bank. Schwab's core business generated EPS of ~$1 in 2015, meaningfully under-earning its potential. The near-term catalyst is rising short term rates driving a recovery of money market fund fee waivers. Longer term, Schwab benefits from a recovery in NIM. Our analysis suggests higher rates could add ~$0.35 to EPS when Fed Funds hits 75bps and if/when NIM recovers from its current 160bps to 350bps, Schwab could generate an incremental $1.40 of EPS. Furthermore, we see bulk transfers of money market funds to bank deposits as another driver of growth. Together, we believe Schwab can earn ~$3 per share implying a $51 value as rates normalize.
JPMorgan Pick: Growth
JPMorgan Said: We see Schwab as particularly well positioned for earnings growth in a rising interest rate environment given its money market fund franchise and a rapidly growing bank. Schwab's core business generated EPS of ~$1 in 2015, meaningfully under-earning its potential. The near-term catalyst is rising short term rates driving a recovery of money market fund fee waivers. Longer term, Schwab benefits from a recovery in NIM. Our analysis suggests higher rates could add ~$0.35 to EPS when Fed Funds hits 75bps and if/when NIM recovers from its current 160bps to 350bps, Schwab could generate an incremental $1.40 of EPS. Furthermore, we see bulk transfers of money market funds to bank deposits as another driver of growth. Together, we believe Schwab can earn ~$3 per share implying a $51 value as rates normalize.
TheStreet Said: TheStreet Ratings team rates SCHWAB (CHARLES) CORP as a Buy with a ratings score of A+. TheStreet Ratings Team has this to say about their recommendation:
We rate SCHWAB (CHARLES) CORP (SCHW) 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, expanding profit margins, growth in earnings per share, increase in net income and good cash flow from operations. 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 came in higher than the industry average of 5.6%. Since the same quarter one year prior, revenues slightly increased by 6.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- SCHWAB (CHARLES) CORP has improved earnings per share by 16.7% 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, SCHWAB (CHARLES) CORP increased its bottom line by earning $0.96 versus $0.78 in the prior year. This year, the market expects an improvement in earnings ($0.99 versus $0.96).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Capital Markets industry. The net income increased by 17.1% when compared to the same quarter one year prior, going from $321.00 million to $376.00 million.
- 40.90% is the gross profit margin for SCHWAB (CHARLES) CORP which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 23.12% is above that of the industry average.
- Net operating cash flow has increased to $1,091.00 million or 10.53% when compared to the same quarter last year. Despite an increase in cash flow of 10.53%, SCHWAB (CHARLES) CORP is still growing at a significantly lower rate than the industry average of 275.70%.
- You can view the full analysis from the report here: SCHW
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12. Chevron Corp. (CVX) Industry: Energy/Integrated Oil & Gas
Year-to-date return: -22.2%
Year-to-date return: -22.2%
JPMorgan Rating/Price Target: Overweight/$94
JPMorgan Pick: Value
JPMorgan Said: CVX underperformed peers through mid-September (-33% Jan 1-Sep 10; US peers - 23%) due to low sentiment on project execution difficulties (Bigfoot delayed, Gorgon pushed) and lack of FCF generation as the commodity price downturn correlated with a period of heavy committed capital spend. Sentiment has since improved, and CVX has outperformed (+22% since Sep 10, peers +14%), due mostly to a more aggressive cost reduction message. We believe CVX will continue to outperform in 2016 as the timely startup of Gorgon Train 1 (expected 1Q) should build investor confidence around execution, the second leg of the story. FCF should then begin to improve meaningfully on incoming project cash flows combined with lower project capex. Meanwhile, leverage remains at the lower end of the peer group (~14% FY15E net debt to cap, group average ~21%), bolstered by asset sales ($16-21B current guidance, of which $11B achieved), while cash margins and production growth are top tier, and the dividend appears safe at a 4.6% yield (100bps spread over XOM). We see CVX reaching full dividend coverage in 2018 at $60/bbl Brent, while the company is confident in its ability to further reduce spend to cover the dividend at even lower oil prices. Further, we believe the company can achieve IRR hurdles on new projects in a $60-70/bbl Brent environment (most notably the Tengiz project).
JPMorgan Pick: Value
JPMorgan Said: CVX underperformed peers through mid-September (-33% Jan 1-Sep 10; US peers - 23%) due to low sentiment on project execution difficulties (Bigfoot delayed, Gorgon pushed) and lack of FCF generation as the commodity price downturn correlated with a period of heavy committed capital spend. Sentiment has since improved, and CVX has outperformed (+22% since Sep 10, peers +14%), due mostly to a more aggressive cost reduction message. We believe CVX will continue to outperform in 2016 as the timely startup of Gorgon Train 1 (expected 1Q) should build investor confidence around execution, the second leg of the story. FCF should then begin to improve meaningfully on incoming project cash flows combined with lower project capex. Meanwhile, leverage remains at the lower end of the peer group (~14% FY15E net debt to cap, group average ~21%), bolstered by asset sales ($16-21B current guidance, of which $11B achieved), while cash margins and production growth are top tier, and the dividend appears safe at a 4.6% yield (100bps spread over XOM). We see CVX reaching full dividend coverage in 2018 at $60/bbl Brent, while the company is confident in its ability to further reduce spend to cover the dividend at even lower oil prices. Further, we believe the company can achieve IRR hurdles on new projects in a $60-70/bbl Brent environment (most notably the Tengiz project).
TheStreet Said: TheStreet Ratings team rates CHEVRON CORP as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
We rate CHEVRON CORP (CVX) 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 reasonable valuation levels and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, disappointing return on equity and weak operating cash flow.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- CVX'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. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.91 is somewhat weak and could be cause for future problems.
- CVX, with its decline in revenue, slightly underperformed the industry average of 36.8%. Since the same quarter one year prior, revenues fell by 37.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- 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. When compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, CHEVRON CORP's return on equity is below that of both the industry average and the S&P 500.
- CHEVRON 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. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, CHEVRON CORP reported lower earnings of $10.14 versus $11.09 in the prior year. For the next year, the market is expecting a contraction of 67.5% in earnings ($3.29 versus $10.14).
- You can view the full analysis from the report here: CVX
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13. Chicago Bridge & Iron Co. (CBI) Industry: Industrials/Construction & Engineering
Year-to-date return: -6.8%
Year-to-date return: -6.8%
JPMorgan Rating/Price Target: Overweight/$57
JPMorgan Pick: Value
JPMorgan Said: We believe that CBI shares are undervalued at current levels and should trade closer to the group. We believe the main reasons for CBI's discounted valuation are 1) lingering effect of its exposure to the controversial nuclear contracts inherited via Shaw acquisition in 2013 and 2) uncertainty regarding its ability to generate sustainable FCF. In October, CBI entered into an agreement to sell its nuclear construction business, removing a major overhang (the transaction is likely to close before year-end). While the consideration (of 1x EBITDA) was nominal, CBI has significantly de-risked its portfolio and stopped a cash flow drain (unpaid billings of $500-$700 mm). Looking forward, CBI can re-focus resources on its core strengths in Petrochemicals, Power and LNG. LNG and other energy related projects could come under pressure, yet the near-term pipeline for CBI's projects appears attractive with $14-16bln of new awards expected for 2016 (with ~25-30% in LNG, 35-50% in petrochemical and refining, 12-15% in combined cycle power, and the remainder in fabrication, technology and capital services). Despite the $8 bn loss of backlog from the nuclear sale, momentum around other businesses gives us confidence that CBI will end 2016 with higher backlog and FCF. If LNG demand/supply dynamics deteriorate further or if weak capex trends in oil and gas industry persist, new project bookings for CBI may be at risk.
JPMorgan Pick: Value
JPMorgan Said: We believe that CBI shares are undervalued at current levels and should trade closer to the group. We believe the main reasons for CBI's discounted valuation are 1) lingering effect of its exposure to the controversial nuclear contracts inherited via Shaw acquisition in 2013 and 2) uncertainty regarding its ability to generate sustainable FCF. In October, CBI entered into an agreement to sell its nuclear construction business, removing a major overhang (the transaction is likely to close before year-end). While the consideration (of 1x EBITDA) was nominal, CBI has significantly de-risked its portfolio and stopped a cash flow drain (unpaid billings of $500-$700 mm). Looking forward, CBI can re-focus resources on its core strengths in Petrochemicals, Power and LNG. LNG and other energy related projects could come under pressure, yet the near-term pipeline for CBI's projects appears attractive with $14-16bln of new awards expected for 2016 (with ~25-30% in LNG, 35-50% in petrochemical and refining, 12-15% in combined cycle power, and the remainder in fabrication, technology and capital services). Despite the $8 bn loss of backlog from the nuclear sale, momentum around other businesses gives us confidence that CBI will end 2016 with higher backlog and FCF. If LNG demand/supply dynamics deteriorate further or if weak capex trends in oil and gas industry persist, new project bookings for CBI may be at risk.
TheStreet Said: TheStreet Ratings team rates CHICAGO BRIDGE & IRON CO as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:
We rate CHICAGO BRIDGE & IRON CO (CBI) 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 strongest point has been its a solid financial position based on a variety of debt and liquidity measures that we have looked at. 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:
- CHICAGO BRIDGE & IRON CO 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, CHICAGO BRIDGE & IRON CO increased its bottom line by earning $4.98 versus $4.18 in the prior year. This year, the market expects an improvement in earnings ($5.80 versus $4.98).
- Despite the weak revenue results, CBI has outperformed against the industry average of 15.2%. Since the same quarter one year prior, revenues slightly dropped by 1.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The share price of CHICAGO BRIDGE & IRON CO has not done very well: it is down 12.75% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. 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 gross profit margin for CHICAGO BRIDGE & IRON CO is currently extremely low, coming in at 12.17%. It has decreased from the same quarter the previous year.
- Net operating cash flow has decreased to $21.28 million or 15.10% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- You can view the full analysis from the report here: CBI
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14. Chipotle Mexican Grill (CMG) Industry: Consumer Goods & Services/Restaurants
Year-to-date return: -19.4%
Year-to-date return: -19.4%
JPMorgan Rating/Price Target: Overweight/$680
JPMorgan Pick: Growth
JPMorgan Said: Near- and long-term comp drivers are matched with continued strong unit development potential and are the basis for CMG as an Overweight in the category and our top pick for 2016. Other comp drivers include extended hours, LTO offerings, the return of Carnitas, day-part expansion, pricing, increased throughput from the "second make line", mobile order and pay and delivery. The company has recently hired Curt Garner (former Starbucks CIO) and Jerome Tafani (former CFO of Europe for McDonald's), which likely signal CMG's intention to increase its technology investment and international unit development. The stock has been under pressure since reporting disappointing comps in 3Q and the subsequent E. coli outbreak across 9 states that caused 52 illnesses. We focus beyond the temporary shock and towards long-term brand expansion fundamentals.
JPMorgan Pick: Growth
JPMorgan Said: Near- and long-term comp drivers are matched with continued strong unit development potential and are the basis for CMG as an Overweight in the category and our top pick for 2016. Other comp drivers include extended hours, LTO offerings, the return of Carnitas, day-part expansion, pricing, increased throughput from the "second make line", mobile order and pay and delivery. The company has recently hired Curt Garner (former Starbucks CIO) and Jerome Tafani (former CFO of Europe for McDonald's), which likely signal CMG's intention to increase its technology investment and international unit development. The stock has been under pressure since reporting disappointing comps in 3Q and the subsequent E. coli outbreak across 9 states that caused 52 illnesses. We focus beyond the temporary shock and towards long-term brand expansion fundamentals.
TheStreet Said: TheStreet Ratings team rates CHIPOTLE MEXICAN GRILL INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
We rate CHIPOTLE MEXICAN GRILL INC (CMG) 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, growth in earnings per share, increase in net income and notable return on equity. 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 came in higher than the industry average of 1.4%. Since the same quarter one year prior, revenues rose by 12.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
- CHIPOTLE MEXICAN GRILL INC has improved earnings per share by 10.6% 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, CHIPOTLE MEXICAN GRILL INC increased its bottom line by earning $14.13 versus $10.46 in the prior year. This year, the market expects an improvement in earnings ($17.07 versus $14.13).
- The net income growth from the same quarter one year ago has greatly exceeded that of the S&P 500, but is less than that of the Hotels, Restaurants & Leisure industry average. The net income increased by 10.8% when compared to the same quarter one year prior, going from $130.80 million to $144.88 million.
- 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 Hotels, Restaurants & Leisure industry and the overall market on the basis of return on equity, CHIPOTLE MEXICAN GRILL INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- The gross profit margin for CHIPOTLE MEXICAN GRILL INC is currently lower than what is desirable, coming in at 28.31%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 11.90% trails that of the industry average.
- You can view the full analysis from the report here: CMG
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15. Ciena Corp. (CIEN) Industry: Technology/Communications Equipment
Year-to-date return: 27%
Year-to-date return: 27%
JPMorgan Rating/Price Target: Overweight/$30
JPMorgan Pick: Growth
JPMorgan Said: We believe that major carriers are likely to continue ramping spending on 100G optical technology as demand for bandwidth continues to increase across users. We also believe that, in addition to long haul fiber networks, CIEN is also likely to benefit from the deployment of 100G technology to metro level networks as well as webscale company networks. In addition, we believe that Ciena, due to its acquisition of Nortel, has a material competitive product advantage when it comes to 100G optical technology and customer relationships.
JPMorgan Pick: Growth
JPMorgan Said: We believe that major carriers are likely to continue ramping spending on 100G optical technology as demand for bandwidth continues to increase across users. We also believe that, in addition to long haul fiber networks, CIEN is also likely to benefit from the deployment of 100G technology to metro level networks as well as webscale company networks. In addition, we believe that Ciena, due to its acquisition of Nortel, has a material competitive product advantage when it comes to 100G optical technology and customer relationships.
TheStreet Said: TheStreet Ratings team rates CIENA CORP as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
We rate CIENA CORP (CIEN) 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 solid stock price performance, impressive record of earnings per share growth and compelling growth in net income. 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:
- Powered by its strong earnings growth of 26.66% and other important driving factors, this stock has surged by 47.85% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
- CIENA CORP has improved earnings per share by 26.7% 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. This trend suggests that the performance of the business is improving. During the past fiscal year, CIENA CORP continued to lose money by earning -$0.39 versus -$0.84 in the prior year. This year, the market expects an improvement in earnings ($1.24 versus -$0.39).
- Compared to other companies in the Communications Equipment industry and the overall market on the basis of return on equity, CIENA CORP underperformed against that of the industry average and is significantly less than that of the S&P 500.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 6.2%. Since the same quarter one year prior, revenues slightly dropped by 0.1%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- The debt-to-equity ratio is very high at 7.23 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Regardless of the company's weak debt-to-equity ratio, CIEN has managed to keep a strong quick ratio of 2.35, which demonstrates the ability to cover short-term cash needs.
- You can view the full analysis from the report here: CIEN
CI data by YCharts
16. Cigna Corp. (CI) Industry: Health Care/Managed Health Care
Year-to-date return: 34%
Year-to-date return: 34%
JPMorgan Rating/Price Target: Overweight/$169
JPMorgan Pick: Value
JPMorgan Said: Our thesis is based on our view that the DOJ is likely to approve CI's acquisition by Anthem (ANTM) before the end of the year. ANTM's current offer values CI 30% higher than CI's latest price. However, we see 40% upside to CI given that ANTM's offer includes 0.5152 shares of ANTM for each share of CI. We assume ANTM would trade at least 10-20% higher if the DOJ approves the transaction, driving the total 40% return possible for CI. In the event that the DOJ does not approve the transaction, we see 10% downside in CI shares (back to an historic average 20% discount to S&P500 P/E valuation). The resultant -10%/+40% plausible risk reward profile in Cigna is our best idea for 2016.
JPMorgan Pick: Value
JPMorgan Said: Our thesis is based on our view that the DOJ is likely to approve CI's acquisition by Anthem (ANTM) before the end of the year. ANTM's current offer values CI 30% higher than CI's latest price. However, we see 40% upside to CI given that ANTM's offer includes 0.5152 shares of ANTM for each share of CI. We assume ANTM would trade at least 10-20% higher if the DOJ approves the transaction, driving the total 40% return possible for CI. In the event that the DOJ does not approve the transaction, we see 10% downside in CI shares (back to an historic average 20% discount to S&P500 P/E valuation). The resultant -10%/+40% plausible risk reward profile in Cigna is our best idea for 2016.
TheStreet Said: TheStreet Ratings team rates CIGNA CORP as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:
We rate CIGNA CORP (CI) 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 increase in net income, revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity and good cash flow from operations. 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:
- The net income growth from the same quarter one year ago has greatly exceeded that of the S&P 500, but is less than that of the Health Care Providers & Services industry average. The net income increased by 2.4% when compared to the same quarter one year prior, going from $534.00 million to $547.00 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 10.1%. Since the same quarter one year prior, revenues slightly increased by 7.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The current debt-to-equity ratio, 0.44, is low and is below the industry average, implying that there has been successful management of debt levels.
- 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 Health Care Providers & Services industry and the overall market, CIGNA CORP's return on equity exceeds that of both the industry average and the S&P 500.
- Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 31.94% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, CI should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- You can view the full analysis from the report here: CI
C data by YCharts
17. Citigroup Inc.(C) Industry: Financial Services/Diversified Banks
Year-to-date return: 0.54%
Year-to-date return: 0.54%
JPMorgan Rating/Price Target: Overweight/$60.50
JPMorgan Pick: Value
JPMorgan Said: Increased capital return as CCAR 2016 should be a key catalyst for Citi which remains undervalued at 0.9x tangible book value. Emerging markets risk should continue to be manageable with somewhat slower revenue growth in those markets and modest increase in credit losses offset by better revenue growth in key areas such as credit cards and controlled expenses. At 11.7% Basel 3 CET1, Citi's capital ratios remain above peers - there is some uncertainty about the addition of SIFI buffers to CCAR but we expect these to be manageable as Citi is building capital and should continue to grow with divestitures from Holdings and DTA usage.
JPMorgan Pick: Value
JPMorgan Said: Increased capital return as CCAR 2016 should be a key catalyst for Citi which remains undervalued at 0.9x tangible book value. Emerging markets risk should continue to be manageable with somewhat slower revenue growth in those markets and modest increase in credit losses offset by better revenue growth in key areas such as credit cards and controlled expenses. At 11.7% Basel 3 CET1, Citi's capital ratios remain above peers - there is some uncertainty about the addition of SIFI buffers to CCAR but we expect these to be manageable as Citi is building capital and should continue to grow with divestitures from Holdings and DTA usage.
TheStreet Said: TheStreet Ratings team rates CITIGROUP INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
We rate CITIGROUP INC (C) 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 compelling growth in net income, attractive valuation levels, expanding profit margins, good cash flow from operations and impressive record of earnings per share growth. 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:
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Commercial Banks industry. The net income increased by 51.0% when compared to the same quarter one year prior, rising from $2,841.00 million to $4,291.00 million.
- 40.95% is the gross profit margin for CITIGROUP 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 19.83% trails the industry average.
- Net operating cash flow has significantly increased by 266.12% to $23,018.00 million when compared to the same quarter last year. Despite an increase in cash flow, CITIGROUP INC's cash flow growth rate is still lower than the industry average growth rate of 310.31%.
- CITIGROUP INC 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, CITIGROUP INC reported lower earnings of $2.19 versus $4.25 in the prior year. This year, the market expects an improvement in earnings ($5.53 versus $2.19).
- You can view the full analysis from the report here: C
CAG data by YCharts
18. ConAgra Foods Inc. (CAG) Industry: Consumer Non-Discretionary/Packaged Foods & Meats
Year-to-date return: 12.4%
Year-to-date return: 12.4%
JPMorgan Rating/Price Target: $47
JPMorgan Pick: Income
JPMorgan Said: Following 1) the recent sale of its Private Brands segment, 2) the announcement of the spin-off of Lamb Weston, 3) commentary around improving its margin structure in the Consumer segment, and 4) management's recognition that the company has not raised its dividend in years, we think CAG is heading in the right direction. For income-oriented investors, note that CAG has a great deal of cash coming in from the Private Brands sale, and that management has stated its commitment to a strong dividend. As noted above, CAG is our best idea heading into 2016.
JPMorgan Pick: Income
JPMorgan Said: Following 1) the recent sale of its Private Brands segment, 2) the announcement of the spin-off of Lamb Weston, 3) commentary around improving its margin structure in the Consumer segment, and 4) management's recognition that the company has not raised its dividend in years, we think CAG is heading in the right direction. For income-oriented investors, note that CAG has a great deal of cash coming in from the Private Brands sale, and that management has stated its commitment to a strong dividend. As noted above, CAG is our best idea heading into 2016.
TheStreet Said: TheStreet Ratings team rates CONAGRA FOODS INC as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:
We rate CONAGRA FOODS INC (CAG) 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 solid stock price performance, revenue growth and growth in earnings per share. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally higher debt management risk and disappointing return on equity.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- 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. Looking ahead, our view is that this company's fundamentals will not have much impact in either direction, allowing the stock to generally move up or down based on the push and pull of the broad market.
- Despite its growing revenue, the company underperformed as compared with the industry average of 1.5%. Since the same quarter one year prior, revenues slightly increased by 1.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
- CONAGRA FOODS INC 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, CONAGRA FOODS INC swung to a loss, reporting -$1.49 versus $0.35 in the prior year. This year, the market expects an improvement in earnings ($2.26 versus -$1.49).
- The debt-to-equity ratio is very high at 2.34 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.25, which clearly demonstrates the inability to cover short-term cash needs.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Food Products industry and the overall market, CONAGRA FOODS INC'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: CAG
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19. Crown Holdings Inc. (CCK) Industry: Materials/Metal & Glass Containers
Year-to-date return: flat
Year-to-date return: flat
JPMorgan Rating/Price Target: Overweight/$60
JPMorgan Pick: Value
JPMorgan Said: CCK should see a healthy rebound in earnings in 2016 from productivity gains in Americas Beverage, improved growth in Brazil, lower aluminum premiums in Europe and continued growth in cans on a global basis. We also think the company could see some multiple expansion as earnings move higher and the market becomes more comfortable with the returns associated with recent acquisitions and capacity expansions. Finally, if Ball proceeds with its offer to acquire Rexam, we think Crown could also potentially benefit by acquiring assets that Ball may be potentially required to divest to gain regulatory approval.
JPMorgan Pick: Value
JPMorgan Said: CCK should see a healthy rebound in earnings in 2016 from productivity gains in Americas Beverage, improved growth in Brazil, lower aluminum premiums in Europe and continued growth in cans on a global basis. We also think the company could see some multiple expansion as earnings move higher and the market becomes more comfortable with the returns associated with recent acquisitions and capacity expansions. Finally, if Ball proceeds with its offer to acquire Rexam, we think Crown could also potentially benefit by acquiring assets that Ball may be potentially required to divest to gain regulatory approval.
TheStreet Said: TheStreet Ratings team rates CROWN HOLDINGS INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
We rate CROWN HOLDINGS INC (CCK) a BUY. This is driven by multiple 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 notable return on equity and good cash flow from operations. 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 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 Containers & Packaging industry and the overall market, CROWN HOLDINGS INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
- Net operating cash flow has significantly increased by 161.90% to $330.00 million when compared to the same quarter last year. In addition, CROWN HOLDINGS INC has also vastly surpassed the industry average cash flow growth rate of 0.72%.
- CROWN HOLDINGS INC's earnings per share declined by 42.6% 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, CROWN HOLDINGS INC increased its bottom line by earning $2.78 versus $2.30 in the prior year. This year, the market expects an improvement in earnings ($3.59 versus $2.78).
- CCK, with its decline in revenue, underperformed when compared the industry average of 7.5%. Since the same quarter one year prior, revenues slightly dropped by 5.2%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- After a year of stock price fluctuations, the net result is that CCK'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, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.
- You can view the full analysis from the report here: CCK
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20. CSX Corp. (CSX) Industry: Industrials/Railroads
Year-to-date return: -28.1%
Year-to-date return: -28.1%
JPMorgan Rating/Price Target: Overweight/$39
JPMorgan Pick: Value
JPMorgan Said: We see a strong standalone thesis for Eastern rail CSX, a stock trading cheapest in the group on 2016E EPS and offering best upside potential to increasing track density. The network has struggled for power with too few locomotives on the tracks, but should no longer be constrained in 2016 given a combination of available locomotives in storage and new locomotive deliveries. The resulting benefit is increasing fluidity, which allows service based pricing to prevail, and also facilitates more efficient asset utilization. Intermodal is also currently underrepresented in the portfolio at 39% versus 46% for the group but we believe expansion of the hub in NW Ohio will help drive growth by opening new markets and offering a viable alternative to highway.
JPMorgan Pick: Value
JPMorgan Said: We see a strong standalone thesis for Eastern rail CSX, a stock trading cheapest in the group on 2016E EPS and offering best upside potential to increasing track density. The network has struggled for power with too few locomotives on the tracks, but should no longer be constrained in 2016 given a combination of available locomotives in storage and new locomotive deliveries. The resulting benefit is increasing fluidity, which allows service based pricing to prevail, and also facilitates more efficient asset utilization. Intermodal is also currently underrepresented in the portfolio at 39% versus 46% for the group but we believe expansion of the hub in NW Ohio will help drive growth by opening new markets and offering a viable alternative to highway.
TheStreet Said: TheStreet Ratings team rates CSX CORP as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
We rate CSX CORP (CSX) 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 largely solid financial position with reasonable debt levels by most measures, good cash flow from operations, growth in earnings per share, expanding profit margins and notable return on equity. 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 0.87, 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 1.02, which illustrates the ability to avoid short-term cash problems.
- Net operating cash flow has slightly increased to $930.00 million or 8.51% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -5.04%.
- CSX CORP's earnings per share improvement from the most recent quarter was slightly positive. 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, CSX CORP increased its bottom line by earning $1.93 versus $1.83 in the prior year. This year, the market expects an improvement in earnings ($1.99 versus $1.93).
- 42.02% is the gross profit margin for CSX CORP 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 17.25% trails the industry average.
- 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 Road & Rail industry and the overall market on the basis of return on equity, CSX CORP has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- You can view the full analysis from the report here: CSX
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21. Delta Air Lines (DAL) Industry: Industrials/Airlines
Year-to-date return: 5.3%
Year-to-date return: 5.3%
JPMorgan Rating/Price Target: Overweight/$74
JPMorgan Pick: Growth
JPMorgan Said: Delta is our top pick in the sector, and remains the name favored by many first-time airline investors. We project EPS growth of ~30% in 2016 on flat RASM, driven by a realized fuel price of $1.80/gal (or ~$0.40 below 2015 due to sour fuel hedges) and ~$2 billion of share buybacks. For investors most concerned with unit revenue trends, we believe Delta will trend towards positive monthly RASM in 1H:16 and post a full quarter of positive RASM in Q3:16 - reaching this milestone before that of legacy peers UAL or AAL. Even as we acknowledge the potential for modest 7% y/y earnings downside in 2017 (after 2016's peak), the 8.4x 2016 P/E valuation enhances the 2016 earnings growth story. We'd acknowledge that labor remains a headline risk for Delta, given that its pilot contract is currently amendable and an initial tentative agreement was already rejected in July 2015.
JPMorgan Pick: Growth
JPMorgan Said: Delta is our top pick in the sector, and remains the name favored by many first-time airline investors. We project EPS growth of ~30% in 2016 on flat RASM, driven by a realized fuel price of $1.80/gal (or ~$0.40 below 2015 due to sour fuel hedges) and ~$2 billion of share buybacks. For investors most concerned with unit revenue trends, we believe Delta will trend towards positive monthly RASM in 1H:16 and post a full quarter of positive RASM in Q3:16 - reaching this milestone before that of legacy peers UAL or AAL. Even as we acknowledge the potential for modest 7% y/y earnings downside in 2017 (after 2016's peak), the 8.4x 2016 P/E valuation enhances the 2016 earnings growth story. We'd acknowledge that labor remains a headline risk for Delta, given that its pilot contract is currently amendable and an initial tentative agreement was already rejected in July 2015.
TheStreet Said: TheStreet Ratings team rates DELTA AIR LINES INC as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:
We rate DELTA AIR LINES INC (DAL) 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 increase in net income, solid stock price performance, growth in earnings per share, largely solid financial position with reasonable debt levels by most measures and good cash flow from operations. 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:
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Airlines industry. The net income increased by 268.3% when compared to the same quarter one year prior, rising from $357.00 million to $1,315.00 million.
- 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. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- DELTA AIR LINES INC 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, DELTA AIR LINES INC reported lower earnings of $0.75 versus $12.29 in the prior year. This year, the market expects an improvement in earnings ($4.65 versus $0.75).
- The debt-to-equity ratio is somewhat low, currently at 0.85, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.35 is very weak and demonstrates a lack of ability to pay short-term obligations.
- Net operating cash flow has significantly increased by 52.20% to $2,067.00 million when compared to the same quarter last year. Despite an increase in cash flow of 52.20%, DELTA AIR LINES INC is still growing at a significantly lower rate than the industry average of 139.37%.
- You can view the full analysis from the report here: DAL
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22. The Walt Disney Co.(DIS) Industry: Consumer Goods & Services/Movies & Entertainment
Year-to-date return: 20.8%
Year-to-date return: 20.8%
JPMorgan Rating/Price Target: Overweight/$130
JPMorgan Pick: Growth
JPMorgan Said: We believe Disney will continue to show strong growth across its segments next year with the long-awaited Star Wars theatrical release this month and the opening of Shanghai Disneyland in spring 2016 as significant catalysts. Across the company's segments, we expect Media to benefit from lower cable programming expenses, healthy advertising revenue growth, and relatively steady subscriber trends while Parks is likely to have strong domestic attendance/spending trends, which should offset some modest margin pressure from the Shanghai opening. The Studio and Consumer Products segments are likely to be the highlights of the year with big releases from all of Disney's major studio brands and the most notable upside from the global launch of the new Star Wars film and merchandise.
JPMorgan Pick: Growth
JPMorgan Said: We believe Disney will continue to show strong growth across its segments next year with the long-awaited Star Wars theatrical release this month and the opening of Shanghai Disneyland in spring 2016 as significant catalysts. Across the company's segments, we expect Media to benefit from lower cable programming expenses, healthy advertising revenue growth, and relatively steady subscriber trends while Parks is likely to have strong domestic attendance/spending trends, which should offset some modest margin pressure from the Shanghai opening. The Studio and Consumer Products segments are likely to be the highlights of the year with big releases from all of Disney's major studio brands and the most notable upside from the global launch of the new Star Wars film and merchandise.
TheStreet Said: TheStreet Ratings team rates DISNEY (WALT) CO as a Buy with a ratings score of A+. TheStreet Ratings Team has this to say about their recommendation:
We rate DISNEY (WALT) CO (DIS) 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, growth in earnings per share, increase in net income and notable return on equity. 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:
- DIS's revenue growth has slightly outpaced the industry average of 7.3%. Since the same quarter one year prior, revenues slightly increased by 9.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- 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.
- DISNEY (WALT) CO has improved earnings per share by 10.5% 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, DISNEY (WALT) CO increased its bottom line by earning $4.90 versus $4.25 in the prior year. This year, the market expects an improvement in earnings ($5.66 versus $4.90).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Media industry. The net income increased by 7.3% when compared to the same quarter one year prior, going from $1,499.00 million to $1,609.00 million.
- 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. In comparison to the other companies in the Media industry and the overall market, DISNEY (WALT) CO'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: DIS
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23. Dollar Tree Inc. (DLTR) Industry: Consumer Goods & Services/General Merchandise Stores
Year-to-date return: 11.5%
Year-to-date return: 11.5%
JPMorgan Rating/Price Target: Overweight/$90
JPMorgan Pick: Growth
JPMorgan Said: OW-rated DLTR represents a self-help integration story in a growing dollar store sector with 8-10 years sq ft. growth remaining and base case 3-year 20%+ EPS growth on our math. Importantly, the company's FDO integration appears firmly on track with mgmt. citing disappointment w/ achievement of $300M synergy target and 7-8% FDO EBIT margin incl synergies alone. Specifically vendor funding and labor investments are fully embedded in multi-year plans, with Year #1 cash accretion not off the table (despite 330 divestitures), and our test store checks pointing to signs of progress today.
JPMorgan Pick: Growth
JPMorgan Said: OW-rated DLTR represents a self-help integration story in a growing dollar store sector with 8-10 years sq ft. growth remaining and base case 3-year 20%+ EPS growth on our math. Importantly, the company's FDO integration appears firmly on track with mgmt. citing disappointment w/ achievement of $300M synergy target and 7-8% FDO EBIT margin incl synergies alone. Specifically vendor funding and labor investments are fully embedded in multi-year plans, with Year #1 cash accretion not off the table (despite 330 divestitures), and our test store checks pointing to signs of progress today.
TheStreet Said: TheStreet Ratings team rates DOLLAR TREE INC as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:
We rate DOLLAR TREE INC (DLTR) a BUY. This is driven by multiple 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 robust revenue growth 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:
- DLTR's very impressive revenue growth greatly exceeded the industry average of 15.1%. Since the same quarter one year prior, revenues leaped by 136.0%. 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.
- 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, despite the company's weak earnings results. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
- DOLLAR TREE INC's earnings per share declined by 45.3% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, DOLLAR TREE INC increased its bottom line by earning $2.90 versus $2.75 in the prior year. For the next year, the market is expecting a contraction of 8.8% in earnings ($2.65 versus $2.90).
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Multiline Retail industry. The net income has significantly decreased by 38.4% when compared to the same quarter one year ago, falling from $133.00 million to $81.90 million.
- The debt-to-equity ratio is very high at 2.01 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. To add to this, DLTR has a quick ratio of 0.51, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
- You can view the full analysis from the report here: DLTR
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24. Dow Chemical Co. (DOW) Industry: Materials/Diversified Chemicals
Year-to-date return: 14.1%
Year-to-date return: 14.1%
JPMorgan Rating/Price Target: Overweight/$55
JPMorgan Pick: Growth
JPMorgan Said: Dow Chemical is taking steps that could lead to meaningful changes to its product portfolio and business structure in 2016. It is taking a more active hand in improving and shaping its returns on capital. Dow indicated that it is now exploring strategic options for its Agricultural business, which may or may not lead to a transaction. Were the company to monetize the agricultural asset for 15x EBITDA, a value consistent with recent proptrueosed transactions, and do so in a tax-efficient structure, we estimate the resulting proceeds would be $11 billion, and were Dow to repurchase shares with the proceeds, EPS accretion would be about $0.40/sh. Dow also indicated in its conference call an interest in obtaining the 50% of Dow Corning that it does not own. Were it to purchase its joint venture stake in Dow Corning for 10x EBITDA, reflecting a modest premium to trading multiples in the electronics sector, we estimate the transaction could be accretive by $0.20 per share. Dow appears to be levering its joint ventures in order to create greater optionality for the parent. Dow is indicating that its business model would normally generate high rates of free cash flow following the bringing on stream of its Freeport, Texas 1.5 million metric ton ethylene unit. Dow said that it was neither interested in new large capital projects nor large M&A transactions over a longer period of time. The key to the Dow longer-term investment case is bringing on stream three large capital projects: A PDH unit in 2015; the Sadara chemical complex in Saudi Arabia in 2016 and the Freeport ethylene unit in the first-half of 2017.
JPMorgan Pick: Growth
JPMorgan Said: Dow Chemical is taking steps that could lead to meaningful changes to its product portfolio and business structure in 2016. It is taking a more active hand in improving and shaping its returns on capital. Dow indicated that it is now exploring strategic options for its Agricultural business, which may or may not lead to a transaction. Were the company to monetize the agricultural asset for 15x EBITDA, a value consistent with recent proptrueosed transactions, and do so in a tax-efficient structure, we estimate the resulting proceeds would be $11 billion, and were Dow to repurchase shares with the proceeds, EPS accretion would be about $0.40/sh. Dow also indicated in its conference call an interest in obtaining the 50% of Dow Corning that it does not own. Were it to purchase its joint venture stake in Dow Corning for 10x EBITDA, reflecting a modest premium to trading multiples in the electronics sector, we estimate the transaction could be accretive by $0.20 per share. Dow appears to be levering its joint ventures in order to create greater optionality for the parent. Dow is indicating that its business model would normally generate high rates of free cash flow following the bringing on stream of its Freeport, Texas 1.5 million metric ton ethylene unit. Dow said that it was neither interested in new large capital projects nor large M&A transactions over a longer period of time. The key to the Dow longer-term investment case is bringing on stream three large capital projects: A PDH unit in 2015; the Sadara chemical complex in Saudi Arabia in 2016 and the Freeport ethylene unit in the first-half of 2017.
TheStreet Said: TheStreet Ratings team rates DOW CHEMICAL as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:
We rate DOW CHEMICAL (DOW) 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 compelling growth in net income, largely solid financial position with reasonable debt levels by most measures, attractive valuation levels, good cash flow from operations and notable return on equity. 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:
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Chemicals industry. The net income increased by 46.7% when compared to the same quarter one year prior, rising from $937.00 million to $1,375.00 million.
- The debt-to-equity ratio is somewhat low, currently at 0.81, 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 1.20, which illustrates the ability to avoid short-term cash problems.
- Net operating cash flow has increased to $2,511.00 million or 41.46% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 13.26%.
- 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 Chemicals industry and the overall market on the basis of return on equity, DOW CHEMICAL has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- You can view the full analysis from the report here: DOW
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25. Express Scripts Holding Co.(ESRX) Industry: Health Care/Health Care Services
Year-to-date return: 2%
Year-to-date return: 2%
JPMorgan Rating/Price Target: Overweight/$105
JPMorgan Pick: Value
JPMorgan Said: We highlight a favorable fundamental backdrop for the PBM industry, driven by script volume growth, generics, specialty pharmacy and restrictive plan design. We believe ESRX should continue to see improving net new business trends, as M&A related churn subsides and as the Medco integration is now behind. In our view, specialty represents a significant catalyst, as we expect plan sponsors to increasingly look to PBMs to help manage this rapidly growing area of spend. We view the recently-announced CEO succession plan positively, and while we don't expect a major shift in strategy, given the changing competitive landscape, we believe there could be opportunities to work more closely with various channel partners (including Walgreens) in mutually beneficial ways. Trading at the one of the lowest multiples across the Rx channel, we believe ESRX shares are undervalued.
JPMorgan Pick: Value
JPMorgan Said: We highlight a favorable fundamental backdrop for the PBM industry, driven by script volume growth, generics, specialty pharmacy and restrictive plan design. We believe ESRX should continue to see improving net new business trends, as M&A related churn subsides and as the Medco integration is now behind. In our view, specialty represents a significant catalyst, as we expect plan sponsors to increasingly look to PBMs to help manage this rapidly growing area of spend. We view the recently-announced CEO succession plan positively, and while we don't expect a major shift in strategy, given the changing competitive landscape, we believe there could be opportunities to work more closely with various channel partners (including Walgreens) in mutually beneficial ways. Trading at the one of the lowest multiples across the Rx channel, we believe ESRX shares are undervalued.
TheStreet Said: TheStreet Ratings team rates EXPRESS SCRIPTS HOLDING CO as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:
We rate EXPRESS SCRIPTS HOLDING CO (ESRX) 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 impressive record of earnings per share growth, increase in net income, good cash flow from operations, notable return on equity and solid stock price performance. We feel its strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- EXPRESS SCRIPTS HOLDING CO has improved earnings per share by 24.4% 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, EXPRESS SCRIPTS HOLDING CO increased its bottom line by earning $2.66 versus $2.31 in the prior year. This year, the market expects an improvement in earnings ($5.53 versus $2.66).
- The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Health Care Providers & Services industry average. The net income increased by 13.6% when compared to the same quarter one year prior, going from $582.30 million to $661.70 million.
- Net operating cash flow has significantly increased by 82.25% to $793.00 million when compared to the same quarter last year. In addition, EXPRESS SCRIPTS HOLDING CO has also vastly surpassed the industry average cash flow growth rate of 12.11%.
- 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 Health Care Providers & Services industry and the overall market on the basis of return on equity, EXPRESS SCRIPTS HOLDING CO has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- ESRX, with its decline in revenue, underperformed when compared the industry average of 10.1%. Since the same quarter one year prior, revenues slightly dropped by 2.1%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- You can view the full analysis from the report here: ESRX
FRC data by YCharts
26. First Republic Bank (FRC) Industry: Financial Services/Regional Banks
Year-to-date return: 30.8%
Year-to-date return: 30.8%
JPMorgan Rating/Price Target: Overweight/$78
JPMorgan Pick: Growth
JPMorgan Said: First Republic is perhaps the most differentiated regional bank in the industry in that the company grows 2-3x faster than the typical bank and simultaneously with a risk profile that is among the lowest in the industry. The company is in essence a pure-play private bank that has created the most effective model we've seen to date in taking share in the high net worth market. With 20%+ EPS growth expected in 2016 and with FRC at the lower end of the spectrum of needing higher rates, we see FRC entering a sweet spot as a ROE expansion story.
JPMorgan Pick: Growth
JPMorgan Said: First Republic is perhaps the most differentiated regional bank in the industry in that the company grows 2-3x faster than the typical bank and simultaneously with a risk profile that is among the lowest in the industry. The company is in essence a pure-play private bank that has created the most effective model we've seen to date in taking share in the high net worth market. With 20%+ EPS growth expected in 2016 and with FRC at the lower end of the spectrum of needing higher rates, we see FRC entering a sweet spot as a ROE expansion story.
TheStreet Said: TheStreet Ratings team rates FIRST REPUBLIC BANK as a Buy with a ratings score of A+. TheStreet Ratings Team has this to say about their recommendation:
We rate FIRST REPUBLIC BANK (FRC) 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, expanding profit margins, 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:
- FRC's revenue growth has slightly outpaced the industry average of 3.2%. Since the same quarter one year prior, revenues slightly increased by 5.1%. 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.
- The gross profit margin for FIRST REPUBLIC BANK is currently very high, coming in at 89.79%. 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 26.66% trails the industry average.
- Net operating cash flow has significantly increased by 50.66% to $235.94 million when compared to the same quarter last year. Despite an increase in cash flow of 50.66%, FIRST REPUBLIC BANK is still growing at a significantly lower rate than the industry average of 310.31%.
- Compared to its closing price of one year ago, FRC's share price has jumped by 31.25%, exceeding the performance of the broader market during that same time frame. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- FIRST REPUBLIC BANK' earnings per share from the most recent quarter came in slightly below the year earlier quarter. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, FIRST REPUBLIC BANK reported lower earnings of $3.07 versus $3.11 in the prior year. This year, the market expects an improvement in earnings ($3.16 versus $3.07).
- You can view the full analysis from the report here: FRC
FE data by YCharts
27. FirstEnergy Corp. (FE) Industry: Utilities Non-Telecom/Electric Utilities
Year-to-date return: -16.7%
Year-to-date return: -16.7%
JPMorgan Rating/Price Target: Overweight/$38
JPMorgan Pick: Income
JPMorgan Said: FirstEnergy is a de-risking and de-levering hybrid utility story that is well positioned to benefit from early-stage transmission growth. At a sizable discount to regulated peers despite deriving a shrinking portion of earnings from its power business, we think the company stands out as undervalued while paying a 3.8% yield. Its aggressive cost cutting efforts are expected to result in meaningful cash flow increases and a slowly de-levering balance sheet. We see these factors as slowly being priced into shares as 2016 progresses, even in a stagnant utility and commodity price landscape.
JPMorgan Pick: Income
JPMorgan Said: FirstEnergy is a de-risking and de-levering hybrid utility story that is well positioned to benefit from early-stage transmission growth. At a sizable discount to regulated peers despite deriving a shrinking portion of earnings from its power business, we think the company stands out as undervalued while paying a 3.8% yield. Its aggressive cost cutting efforts are expected to result in meaningful cash flow increases and a slowly de-levering balance sheet. We see these factors as slowly being priced into shares as 2016 progresses, even in a stagnant utility and commodity price landscape.
TheStreet Said: TheStreet Ratings team rates FIRSTENERGY CORP as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
We rate FIRSTENERGY CORP (FE) 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, good cash flow from operations and increase in net income. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, generally higher debt management risk and disappointing return on equity.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- FE's revenue growth has slightly outpaced the industry average of 0.8%. Since the same quarter one year prior, revenues slightly increased by 6.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The net income growth from the same quarter one year ago has greatly exceeded that of the S&P 500, but is less than that of the Electric Utilities industry average. The net income increased by 18.6% when compared to the same quarter one year prior, going from $333.00 million to $395.00 million.
- FIRSTENERGY CORP has improved earnings per share by 17.7% 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, FIRSTENERGY CORP reported lower earnings of $0.50 versus $0.90 in the prior year. This year, the market expects an improvement in earnings ($2.71 versus $0.50).
- Currently the debt-to-equity ratio of 1.76 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Along with this, the company manages to maintain a quick ratio of 0.32, which clearly demonstrates the inability to cover short-term cash needs.
- 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 Electric Utilities industry and the overall market, FIRSTENERGY CORP'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: FE
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28. Great Western Bancorp Inc. (GWB) Industry: Financial Services/Regional Banks
Year-to-date return: 35%
Year-to-date return: 35%
JPMorgan Rating/Price Target: Overweight/$33
JPMorgan Pick: Value
JPMorgan Said: We see GWB as delivering at least peer-level growth in combination with well above-peer profitability, yet shares trade at a well below-peer multiple. In FY15 GWB delivered ~8% loan growth and over 15% ROTE. With credit indicators positive and strong POL, we look for the valuation gap to narrow.
JPMorgan Pick: Value
JPMorgan Said: We see GWB as delivering at least peer-level growth in combination with well above-peer profitability, yet shares trade at a well below-peer multiple. In FY15 GWB delivered ~8% loan growth and over 15% ROTE. With credit indicators positive and strong POL, we look for the valuation gap to narrow.
TheStreet Said: TheStreet Ratings team rates GREAT WESTERN BANCORP INC as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:
We rate GREAT WESTERN BANCORP INC (GWB) 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, solid stock price performance and impressive record of earnings per share growth. However, as a counter to these strengths, we find that the stock itself is trading at a premium valuation.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- GWB's revenue growth has slightly outpaced the industry average of 3.2%. Since the same quarter one year prior, revenues slightly increased by 2.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 33.79% over the past year, a rise that has exceeded that of the S&P 500 Index. Although GWB had significant growth over the past year, our hold rating indicates that we do not recommend additional investment in this stock at the current time.
- When compared to other companies in the Commercial Banks industry and the overall market, GREAT WESTERN BANCORP 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: GWB
HAR data by YCharts
29. Harman International Industries (HAR) Industry: Consumer Goods & Services/Consumer Electronics
Year-to-date return: -8.2%
Year-to-date return: -8.2%
JPMorgan Rating/Price Target: Overweight/$138
JPMorgan Pick: Growth
JPMorgan Said: We continue to see HAR as well positioned for best-in-class revenue and profit growth, driven by a faster than expected industry-wide rise in automotive infotainment system take-rates, combined with company-specific margin initiatives (i.e., the move toward higher margin "scalable systems" and restructuring in the firm's Professional segment). We expect a 2014-2017 revenue CAGR of +14% and EBITDA CAGR of +18%, relative to our average covered supplier of just +7% on the top-line and +10% for EBITDA.
JPMorgan Pick: Growth
JPMorgan Said: We continue to see HAR as well positioned for best-in-class revenue and profit growth, driven by a faster than expected industry-wide rise in automotive infotainment system take-rates, combined with company-specific margin initiatives (i.e., the move toward higher margin "scalable systems" and restructuring in the firm's Professional segment). We expect a 2014-2017 revenue CAGR of +14% and EBITDA CAGR of +18%, relative to our average covered supplier of just +7% on the top-line and +10% for EBITDA.
TheStreet Said: TheStreet Ratings team rates HARMAN INTERNATIONAL INDS as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:
We rate HARMAN INTERNATIONAL INDS (HAR) 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, growth in earnings per share, largely solid financial position with reasonable debt levels by most measures, notable return on equity 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:
- HAR's revenue growth has slightly outpaced the industry average of 9.5%. Since the same quarter one year prior, revenues rose by 14.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- HARMAN INTERNATIONAL INDS's earnings per share improvement from the most recent quarter was slightly positive. 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, HARMAN INTERNATIONAL INDS increased its bottom line by earning $4.83 versus $3.36 in the prior year. This year, the market expects an improvement in earnings ($6.50 versus $4.83).
- The current debt-to-equity ratio, 0.45, is low and is below the industry average, implying that there has been successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.70 is somewhat weak and could be cause for future 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 Household Durables industry and the overall market on the basis of return on equity, HARMAN INTERNATIONAL INDS has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- You can view the full analysis from the report here: HAR
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30. Hilton Worldwide Holdings (HLT) Industry: Consumer Goods & Services/Hotels, Resorts & Cruise Lines
Year-to-date return: -13.5%
Year-to-date return: -13.5%
JPMorgan Rating/Price Target: Overweight/$33
JPMorgan Pick: Growth
JPMorgan Said: We expect HLT to update investors on strategic issues (real estate, REIT, timeshare spin potential) in the coming months, something that should start to be positively reflected in its valuation multiple heading into the beginning of 2016. HLT remains a top pick for us given steady organically driven, segment-diversified, global fee growth, and an increasingly capital light business model run by, in our view, an excellent management team. Looking out over the next two years, we expect HLT to generate a low double digit EBITDA CAGR.
JPMorgan Pick: Growth
JPMorgan Said: We expect HLT to update investors on strategic issues (real estate, REIT, timeshare spin potential) in the coming months, something that should start to be positively reflected in its valuation multiple heading into the beginning of 2016. HLT remains a top pick for us given steady organically driven, segment-diversified, global fee growth, and an increasingly capital light business model run by, in our view, an excellent management team. Looking out over the next two years, we expect HLT to generate a low double digit EBITDA CAGR.
TheStreet Said: TheStreet Ratings team rates HILTON WORLDWIDE HOLDINGS as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
We rate HILTON WORLDWIDE HOLDINGS (HLT) 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, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk, weak operating cash flow and a generally disappointing performance in the stock itself.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- HLT's revenue growth has slightly outpaced the industry average of 1.4%. Since the same quarter one year prior, revenues slightly increased by 9.5%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- HILTON WORLDWIDE HOLDINGS has improved earnings per share by 47.4% 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 year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, HILTON WORLDWIDE HOLDINGS increased its bottom line by earning $0.68 versus $0.22 in the prior year. This year, the market expects an improvement in earnings ($0.82 versus $0.68).
- 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 Hotels, Restaurants & Leisure industry and the overall market on the basis of return on equity, HILTON WORLDWIDE HOLDINGS has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- Net operating cash flow has decreased to $343.00 million or 11.36% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- The debt-to-equity ratio is very high at 2.07 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, HLT maintains a poor quick ratio of 0.77, which illustrates the inability to avoid short-term cash problems.
- You can view the full analysis from the report here: HLT
HON data by YCharts
31. Honeywell International Inc. (HON) Industry: Industrials/Aerospace & Defense
Year-to-date return: 4.3%
Year-to-date return: 4.3%
JPMorgan Rating/Price Target: Overweight/$121
JPMorgan Pick: Income
JPMorgan Said: HON is our top pick and a core EE/MI holding. While fundamentals are not best-in-class, we see HON as the best Energy play within the group with overall profit growth continuing to stand out next year, driven by high business quality and ongoing execution around cost and margins. And with '17 the "inflection" year for revenues and Elster accretion, coupled with plenty of balance sheet optionality, we believe the stock deserves to trade at a premium versus an average discount across a range of metrics, including an adjustment for pension.
JPMorgan Pick: Income
JPMorgan Said: HON is our top pick and a core EE/MI holding. While fundamentals are not best-in-class, we see HON as the best Energy play within the group with overall profit growth continuing to stand out next year, driven by high business quality and ongoing execution around cost and margins. And with '17 the "inflection" year for revenues and Elster accretion, coupled with plenty of balance sheet optionality, we believe the stock deserves to trade at a premium versus an average discount across a range of metrics, including an adjustment for pension.
TheStreet Said: TheStreet Ratings team rates HONEYWELL INTERNATIONAL INC as a Buy with a ratings score of A+. TheStreet Ratings Team has this to say about their recommendation:
We rate HONEYWELL INTERNATIONAL INC (HON) 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, increase in net income, good cash flow from operations, solid stock price performance and largely solid financial position with reasonable debt levels by most measures. 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:
- HONEYWELL INTERNATIONAL INC has improved earnings per share by 8.8% 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, HONEYWELL INTERNATIONAL INC increased its bottom line by earning $5.33 versus $4.92 in the prior year. This year, the market expects an improvement in earnings ($6.10 versus $5.33).
- The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Aerospace & Defense industry average. The net income increased by 8.3% when compared to the same quarter one year prior, going from $1,167.00 million to $1,264.00 million.
- Net operating cash flow has increased to $1,666.00 million or 35.11% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 20.91%.
- After a year of stock price fluctuations, the net result is that HON'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. 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, 0.60, is low and is below the industry average, implying that there has been successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.89 is somewhat weak and could be cause for future problems.
- You can view the full analysis from the report here: HON
JAH data by YCharts
32. Jarden Corp. (JAH) Industry: Consumer Goods & Services/Housewares & Specialties
Year-to-date return: 4.6%
Year-to-date return: 4.6%
JPMorgan Rating/Price Target: Overweight/$62
JPMorgan Pick: Value
JPMorgan Said: JAH is one of the few names in our coverage universe where numbers have moved up over the course of 2015, yet the stock hasn't outperformed. At 15x '16 EPS, with expected double-digit growth, we think the stock offers significant upside given both the company's history of effective cash usage and better than anticipated organic sales growth. While JAH may not achieve a high teens multiple in the short term given its more discretionary portfolio, and the recent deals, which have been received less than enthusiastically by the market, we think the valuation gap versus NWL (currently at 21%) is too great given similar portfolios.
JPMorgan Pick: Value
JPMorgan Said: JAH is one of the few names in our coverage universe where numbers have moved up over the course of 2015, yet the stock hasn't outperformed. At 15x '16 EPS, with expected double-digit growth, we think the stock offers significant upside given both the company's history of effective cash usage and better than anticipated organic sales growth. While JAH may not achieve a high teens multiple in the short term given its more discretionary portfolio, and the recent deals, which have been received less than enthusiastically by the market, we think the valuation gap versus NWL (currently at 21%) is too great given similar portfolios.
TheStreet Said: TheStreet Ratings team rates JARDEN CORP as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
We rate JARDEN CORP (JAH) 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, increase in net income 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:
- Despite its growing revenue, the company underperformed as compared with the industry average of 9.5%. Since the same quarter one year prior, revenues slightly increased by 5.3%. 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.
- JARDEN CORP' earnings per share from the most recent quarter came in slightly below the year earlier quarter. 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 ($2.72 versus $1.29).
- The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Household Durables industry average, but is greater than that of the S&P 500. The net income increased by 10.7% when compared to the same quarter one year prior, going from $108.60 million to $120.20 million.
- 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, despite the company's weak earnings results. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
- The gross profit margin for JARDEN CORP is currently lower than what is desirable, coming in at 34.39%. Regardless of JAH's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 5.32% trails the industry average.
- You can view the full analysis from the report here: JAH
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33. Jazz Pharmaceuticals Plc (JAZZ) Industry: Health Care/Pharmaceuticals
Year-to-date return: -12.3%
Year-to-date return: -12.3%
JPMorgan Rating/Price Target: Overweight/$200
JPMorgan Pick: Growth
JPMorgan Said: We see Jazz offering healthy organic topline and EPS growth over the next several years driven by new launches as well as core driver Xyrem and note we continue to expect this asset will remain free from generic competition at least through the end of the decade. Along these lines, while we continue to watch for progress with new line extensions, we see ample time for the company to develop a next-generation Xyrem replacement. There remains uncertainty in the market around the ultimate life of this asset, and we believe Jazz could eventually settle the ongoing patent litigation, which in our view would represent a clear positive for the stock. In addition, with the company approaching a net cash position, with $1bn in cash as of Sept 30 plus $750mm available in the revolver (in addition to potential borrowing capacity), we see Jazz as well positioned to pursue business development to diversify the company's reliance on Xyrem.
JPMorgan Pick: Growth
JPMorgan Said: We see Jazz offering healthy organic topline and EPS growth over the next several years driven by new launches as well as core driver Xyrem and note we continue to expect this asset will remain free from generic competition at least through the end of the decade. Along these lines, while we continue to watch for progress with new line extensions, we see ample time for the company to develop a next-generation Xyrem replacement. There remains uncertainty in the market around the ultimate life of this asset, and we believe Jazz could eventually settle the ongoing patent litigation, which in our view would represent a clear positive for the stock. In addition, with the company approaching a net cash position, with $1bn in cash as of Sept 30 plus $750mm available in the revolver (in addition to potential borrowing capacity), we see Jazz as well positioned to pursue business development to diversify the company's reliance on Xyrem.
TheStreet Said: TheStreet Ratings team rates JAZZ PHARMACEUTICALS PLC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
We rate JAZZ PHARMACEUTICALS PLC (JAZZ) 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, compelling growth in net income, good cash flow from operations, expanding profit margins and impressive record of earnings per share growth. 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 came in higher than the industry average of 3.3%. Since the same quarter one year prior, revenues rose by 11.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Pharmaceuticals industry. The net income increased by 241.4% when compared to the same quarter one year prior, rising from $25.77 million to $87.96 million.
- Net operating cash flow has increased to $175.08 million or 34.98% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -0.29%.
- The gross profit margin for JAZZ PHARMACEUTICALS PLC is currently very high, coming in at 92.42%. 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 25.80% trails the industry average.
- JAZZ's debt-to-equity ratio of 0.82 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 3.51 is very high and demonstrates very strong liquidity.
- You can view the full analysis from the report here: JAZZ
LRCX data by YCharts
34. Lam Research Corp. (LRCX) Industry: Technology/Semiconductor Equipment
Year-to-date return: -1.8%
Year-to-date return: -1.8%
JPMorgan Rating/Price Target: Overweight/$92
JPMorgan Pick: Growth
JPMorgan Said: Lam Research continues to outperform our semicap companies under coverage with >20% revenue growth over past two years, outpacing WFE spending growth, with earnings growth exceeding 40% over the same timeframe. LRCX currently trades at 12x our C16E earnings, a discount to peer semicap companies trading at 15x. We believe LRCX should trade at a premium to peers on continued growth expectations, share gains, SAM expansion and earnings leverage. We also view Lam Research's proposed acquisition of KLA-Tencor positively and we anticipate long-term cost and revenue synergies between the combined entity in-line with company expectations ($600M in revenue synergies by 2020, $250M in cost synergies within 18-24 months of deal closure, expected mid-2016). Furthermore, the combined entity will have increased scale and better end-market exposure than both Lam and KLA-Tencor currently have on a stand-alone basis.
JPMorgan Pick: Growth
JPMorgan Said: Lam Research continues to outperform our semicap companies under coverage with >20% revenue growth over past two years, outpacing WFE spending growth, with earnings growth exceeding 40% over the same timeframe. LRCX currently trades at 12x our C16E earnings, a discount to peer semicap companies trading at 15x. We believe LRCX should trade at a premium to peers on continued growth expectations, share gains, SAM expansion and earnings leverage. We also view Lam Research's proposed acquisition of KLA-Tencor positively and we anticipate long-term cost and revenue synergies between the combined entity in-line with company expectations ($600M in revenue synergies by 2020, $250M in cost synergies within 18-24 months of deal closure, expected mid-2016). Furthermore, the combined entity will have increased scale and better end-market exposure than both Lam and KLA-Tencor currently have on a stand-alone basis.
TheStreet Said: TheStreet Ratings team rates LAM RESEARCH CORP as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:
We rate LAM RESEARCH CORP (LRCX) 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, growth in earnings per share, compelling growth in net income and attractive valuation levels. 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 9.8%. Since the same quarter one year prior, revenues rose by 38.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The current debt-to-equity ratio, 0.43, is low and is below the industry average, implying that there has been successful management of debt levels. To add to this, LRCX has a quick ratio of 2.38, which demonstrates the ability of the company to cover short-term liquidity needs.
- LAM RESEARCH CORP 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, LAM RESEARCH CORP increased its bottom line by earning $3.70 versus $3.68 in the prior year. This year, the market expects an improvement in earnings ($6.05 versus $3.70).
- 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 104.6% when compared to the same quarter one year prior, rising from $141.08 million to $288.68 million.
- You can view the full analysis from the report here: LRCX
MIC data by YCharts
35. Macquarie Infrastructure Corp. (MIC) Industry: Industrials/Airport Services
Year-to-date return: -3.5%
Year-to-date return: -3.5%
JPMorgan Rating/Price Target: Overweight/$103
JPMorgan Pick: Growth
JPMorgan Said: Well positioned to confront headwinds. With no direct commodity price exposure, solid diversification, stable cash flows and a strong B/S, we view MIC as best positioned to weather the challenging environment among c-corps under coverage. Moreover, MIC possesses strong visibility to 14% dividend growth for several years without need to issue equity (>1.3x dividend coverage). MIC's strength allows them to opportunistically pick over renewable energy and midstream assets, or even entities.
JPMorgan Pick: Growth
JPMorgan Said: Well positioned to confront headwinds. With no direct commodity price exposure, solid diversification, stable cash flows and a strong B/S, we view MIC as best positioned to weather the challenging environment among c-corps under coverage. Moreover, MIC possesses strong visibility to 14% dividend growth for several years without need to issue equity (>1.3x dividend coverage). MIC's strength allows them to opportunistically pick over renewable energy and midstream assets, or even entities.
TheStreet Said: TheStreet Ratings team rates MACQUARIE INFRASTRUCTURE CP as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
We rate MACQUARIE INFRASTRUCTURE CP (MIC) 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, expanding profit margins, solid stock price performance and largely solid financial position with reasonable debt levels by most measures. 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:
- MIC's revenue growth has slightly outpaced the industry average of 3.9%. Since the same quarter one year prior, revenues slightly increased by 7.0%. 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.
- The gross profit margin for MACQUARIE INFRASTRUCTURE CP is rather high; currently it is at 56.85%. 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 2.55% trails the industry average.
- 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, despite the company's weak earnings results. 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.
- MIC's debt-to-equity ratio of 0.92 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 0.77 is weak.
- MACQUARIE INFRASTRUCTURE CP 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. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, MACQUARIE INFRASTRUCTURE CP increased its bottom line by earning $14.70 versus $0.60 in the prior year. For the next year, the market is expecting a contraction of 109.1% in earnings (-$1.33 versus $14.70).
- You can view the full analysis from the report here: MIC
MAN data by YCharts
36. ManpowerGroup Inc. (MAN) Industry: Industrials/Human Resource & Employment Services
Year-to-date return: 30.7%
Year-to-date return: 30.7%
JPMorgan Rating/Price Target: Overweight/$105
JPMorgan Pick: Value
JPMorgan Said: ManpowerGroup is a leading global flexible staffing vendor. MAN is primarily international, with 66% of revenues coming from Europe. We favor MAN for its exposure to the earlier stage European labor recovery, which has shown signs of firming. France is MAN's largest market at 25% of revenues, and has shown encouraging signs of acceleration. Our economists' outlook is for conducive levels of real GDP growth to continue in Europe. Recent cost simplification should allow MAN to grow without expanding office count, which should in turn lead to record operating margins this cycle. Shares of MAN trade at 16x our 2016E EPS, well below the 18x median P/E for the MAN stock during the last economic expansion.
JPMorgan Pick: Value
JPMorgan Said: ManpowerGroup is a leading global flexible staffing vendor. MAN is primarily international, with 66% of revenues coming from Europe. We favor MAN for its exposure to the earlier stage European labor recovery, which has shown signs of firming. France is MAN's largest market at 25% of revenues, and has shown encouraging signs of acceleration. Our economists' outlook is for conducive levels of real GDP growth to continue in Europe. Recent cost simplification should allow MAN to grow without expanding office count, which should in turn lead to record operating margins this cycle. Shares of MAN trade at 16x our 2016E EPS, well below the 18x median P/E for the MAN stock during the last economic expansion.
TheStreet Said: TheStreet Ratings team rates MANPOWERGROUP as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:
We rate MANPOWERGROUP (MAN) 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, attractive valuation levels, good cash flow from operations 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:
- Compared to its closing price of one year ago, MAN's share price has jumped by 26.98%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, MAN should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- The current debt-to-equity ratio, 0.34, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.42, which illustrates the ability to avoid short-term cash problems.
- Net operating cash flow has significantly increased by 101.81% to $244.00 million when compared to the same quarter last year. In addition, MANPOWERGROUP has also vastly surpassed the industry average cash flow growth rate of 33.39%.
- 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 Professional Services industry and the overall market on the basis of return on equity, MANPOWERGROUP has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- You can view the full analysis from the report here: MAN
NBIX data by YCharts
37. Neurocrine Biosciences Inc. (NBIX) Industry: Health Care/Biotechnology
Year-to-date return: 130%
Year-to-date return: 130%
JPMorgan Rating/Price Target: Overweight/$70
JPMorgan Pick: Growth
JPMorgan Said: We continue to believe NBIX shares do not fully reflect the transformative nature of the phase 3 KINECT 3 data for NBI-98854 in Tardive Dyskinesia. Furthermore, we note there are catalysts in the near term, including early data from 98854 in children/adolescent Tourette's syndrome by YE15 and the second phase 3 trial of Elagolix in endometriosis in early-2016. As Neurocrine shifts to a commercial stage company YE16 / 2017, there are compelling commercial levers for both 98854 and Elagolix that are not completely appreciated, in our view.
JPMorgan Pick: Growth
JPMorgan Said: We continue to believe NBIX shares do not fully reflect the transformative nature of the phase 3 KINECT 3 data for NBI-98854 in Tardive Dyskinesia. Furthermore, we note there are catalysts in the near term, including early data from 98854 in children/adolescent Tourette's syndrome by YE15 and the second phase 3 trial of Elagolix in endometriosis in early-2016. As Neurocrine shifts to a commercial stage company YE16 / 2017, there are compelling commercial levers for both 98854 and Elagolix that are not completely appreciated, in our view.
TheStreet Said: no rating available.
PYPL data by YCharts
38. PayPal Holdings Inc. (PYPL) Industry: Payments Technology
Return since July 20: -13.1%
Return since July 20: -13.1%
JPMorgan Rating/Price Target: Overweight/$44
JPMorgan Pick: Growth
JPMorgan Said: PayPal is a battleground stock, evidenced by an EV/EBITDA valuation that is roughly in-line with merchant acquirers despite growing the top-line 1.7x faster. We see PayPal sustaining top-tier growth as a beneficiary of scale with strong underlying growth in global e-commerce. We do see competition on many fronts, but believe PayPal's early leadership in core e-commerce plus under-appreciated operating leverage should yield above-average bottom line growth in 2016 to make it our top growth pick for 2016.
JPMorgan Pick: Growth
JPMorgan Said: PayPal is a battleground stock, evidenced by an EV/EBITDA valuation that is roughly in-line with merchant acquirers despite growing the top-line 1.7x faster. We see PayPal sustaining top-tier growth as a beneficiary of scale with strong underlying growth in global e-commerce. We do see competition on many fronts, but believe PayPal's early leadership in core e-commerce plus under-appreciated operating leverage should yield above-average bottom line growth in 2016 to make it our top growth pick for 2016.
TheStreet Said: no rating available yet
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39. Planet Fitness Inc. (PLNT) Industry: Consumer Goods & Services/Leisure Facilities
Return since August 6 (IPO): flat
Return since August 6 (IPO): flat
JPMorgan Rating/Price Target: Overweight/$22
JPMorgan Pick: Growth
JPMorgan Said: We are attracted to PLNT given its simple growth algorithm that is driven by a combination of 1) new store additions/unit growth (expected to grow ~200/year for next several years), 2) mid-to-high single digit same store growth, plus 3) fitness equipment sales (to new and existing locations). PLNT is the market leader in the low-cost fitness segment and we believe it has substantial unit growth prospects in the year ahead. We believe PLNT is a defensive (yet growth focused) investment in a 2016 operating environment that is expected to reflect a step down in consumer spending and sluggish GDP growth.
JPMorgan Pick: Growth
JPMorgan Said: We are attracted to PLNT given its simple growth algorithm that is driven by a combination of 1) new store additions/unit growth (expected to grow ~200/year for next several years), 2) mid-to-high single digit same store growth, plus 3) fitness equipment sales (to new and existing locations). PLNT is the market leader in the low-cost fitness segment and we believe it has substantial unit growth prospects in the year ahead. We believe PLNT is a defensive (yet growth focused) investment in a 2016 operating environment that is expected to reflect a step down in consumer spending and sluggish GDP growth.
Planet Fitness is a U.S. growth story as it derives nearly 100% of its revenue and EBITDA from U.S. locations. As our economists expect lackluster U.S. GDP growth of +2.25% in FY16, which could be further pressured by the continued strengthening of the USD following what we believe will be an eventual rate-hike environment (given the sensitivity of a rising USD to the US GDP and SPX earnings environment), we see PLNT as an attractive investment story for investors who continue to look for growth stories that are not predicated on a bullish macro environment.
TheStreet Said: no rating available yet
40. PTC Inc. (PTC) Industry: Technology/Application Software
Year-to-date return: -4.3%
Year-to-date return: -4.3%
JPMorgan Rating/Price Target: Overweight/$53
JPMorgan Pick: Value
JPMorgan Said: PTC and Autodesk provide design software. In the case of PTC the core end markets range from manufacturing to automotive to aerospace/defense and even to consumer package goods and technology. Both companies are going through a transition to a subscription business model, but PTC is currently trading below a market multiple on CY2015E. Once the transition is complete we expect PTC growth to accelerate from the mid-single digits towards the 9-10% level and operating margins to expand from 24% in FY15 to 31% in FY21E. This faster growing and more profitable PTC we believe will re-rate to a multiple above that of the market.
JPMorgan Pick: Value
JPMorgan Said: PTC and Autodesk provide design software. In the case of PTC the core end markets range from manufacturing to automotive to aerospace/defense and even to consumer package goods and technology. Both companies are going through a transition to a subscription business model, but PTC is currently trading below a market multiple on CY2015E. Once the transition is complete we expect PTC growth to accelerate from the mid-single digits towards the 9-10% level and operating margins to expand from 24% in FY15 to 31% in FY21E. This faster growing and more profitable PTC we believe will re-rate to a multiple above that of the market.
TheStreet Said: TheStreet Ratings team rates PTC INC as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:
We rate PTC INC (PTC) 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 expanding profit margins and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and disappointing return on equity.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The gross profit margin for PTC INC is currently very high, coming in at 79.58%. 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 -1.77% is in-line with the industry average.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 15.6%. Since the same quarter one year prior, revenues fell by 14.8%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- PTC's debt-to-equity ratio of 0.78 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 0.76 is weak.
- Net operating cash flow has significantly decreased to -$12.56 million or 124.54% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- The share price of PTC INC has not done very well: it is down 10.18% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. 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: PTC
CRM data by YCharts
41. Salesforce.com Inc. (CRM) Industry: Technology/Application Software
Year-to-date return: 36%
Year-to-date return: 36%
JPMorgan Rating/Price Target: Overweight/$90
JPMorgan Pick: Growth
JPMorgan Said: Salesforce.com stands out from almost any pack as the pioneering trailblazer of the cloud computing movement, and has blossomed into a true multi-product success story as it now rides atop multiple product pillars of substantial scale and trajectory. The company has established itself as a premier Platform-as-a-service provider; we believe the ability to establish a widely adopted public cloud platform is foundational for a vendor's ability to attract developers and become a standard for building and running next-generation IT applications. If Salesforce is able to show consistent revenue growth in the 20s with margin expansion at this scale, then it will be a highly differentiated performance. Salesforce is a structural share-gainer and we see it as an attractive long-term investment in the cloud space.
JPMorgan Pick: Growth
JPMorgan Said: Salesforce.com stands out from almost any pack as the pioneering trailblazer of the cloud computing movement, and has blossomed into a true multi-product success story as it now rides atop multiple product pillars of substantial scale and trajectory. The company has established itself as a premier Platform-as-a-service provider; we believe the ability to establish a widely adopted public cloud platform is foundational for a vendor's ability to attract developers and become a standard for building and running next-generation IT applications. If Salesforce is able to show consistent revenue growth in the 20s with margin expansion at this scale, then it will be a highly differentiated performance. Salesforce is a structural share-gainer and we see it as an attractive long-term investment in the cloud space.
TheStreet Said: TheStreet Ratings team rates SALESFORCE.COM INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
We rate SALESFORCE.COM INC (CRM) 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, solid stock price performance and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk and weak operating cash flow.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth greatly exceeded the industry average of 15.6%. Since the same quarter one year prior, revenues rose by 23.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- Powered by its strong earnings growth of 33.33% and other important driving factors, this stock has surged by 35.75% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
- SALESFORCE.COM INC has improved earnings per share by 33.3% 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, SALESFORCE.COM INC reported poor results of -$0.42 versus -$0.40 in the prior year. This year, the market expects an improvement in earnings ($0.75 versus -$0.42).
- Net operating cash flow has declined marginally to $117.91 million or 3.75% when compared to the same quarter last year. Despite a decrease in cash flow of 3.75%, SALESFORCE.COM INC is in line with the industry average cash flow growth rate of -8.52%.
- Despite currently having a low debt-to-equity ratio of 0.31, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Despite the fact that CRM's debt-to-equity ratio is mixed in its results, the company's quick ratio of 0.62 is low and demonstrates weak liquidity.
- You can view the full analysis from the report here: CRM
SLB data by YCharts
42. Schlumberger Ltd. (SLB) Industry: Energy/Oil & Gas Equipment & Services
Year-to-date return: -14.8%
Year-to-date return: -14.8%
JPMorgan Rating/Price Target: Overweight/$83
JPMorgan Pick: Growth
JPMorgan Said: With its balanced exposures and market leadership, the strong momentum of its internal transformation, and the optionality afforded by its balance sheet, best-in-class margins and free cash flow, we see SLB as best positioned to not just survive the downturn but exit it stronger (e.g. CAM acquisition).
JPMorgan Pick: Growth
JPMorgan Said: With its balanced exposures and market leadership, the strong momentum of its internal transformation, and the optionality afforded by its balance sheet, best-in-class margins and free cash flow, we see SLB as best positioned to not just survive the downturn but exit it stronger (e.g. CAM acquisition).
TheStreet Said: TheStreet Ratings team rates SCHLUMBERGER LTD as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
We rate SCHLUMBERGER LTD (SLB) 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 financial position based on a variety of debt and liquidity measures that we have evaluated. At the same time, however, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and disappointing return on equity.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- SLB, with its decline in revenue, slightly underperformed the industry average of 30.9%. Since the same quarter one year prior, revenues fell by 33.0%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- Despite currently having a low debt-to-equity ratio of 0.32, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 1.14 is sturdy.
- The gross profit margin for SCHLUMBERGER LTD is currently lower than what is desirable, coming in at 30.97%. Regardless of SLB's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, SLB's net profit margin of 11.67% compares favorably to the industry average.
- The share price of SCHLUMBERGER LTD has not done very well: it is down 13.78% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. 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.
- SCHLUMBERGER LTD's earnings per share declined by 47.6% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, SCHLUMBERGER LTD reported lower earnings of $4.30 versus $5.11 in the prior year. For the next year, the market is expecting a contraction of 21.9% in earnings ($3.36 versus $4.30).
- You can view the full analysis from the report here: SLB
SLW data by YCharts
43. Silver Wheaton Corp. (SLW) Industry: Materials
Year-to-date return: -34.7%
Year-to-date return: -34.7%
JPMorgan Rating/Price Target: Overweight/$18
JPMorgan Pick: Growth
JPMorgan Said: Silver Wheaton has a strong growth profile with silver equivalent sales expected to grow by 20% over the next four years based upon its streaming contracts and mines that are operating or under construction. The Silver Wheaton financial model is different from conventional silver mines since it holds contracts to receive silver rather than being the mine operator and this reduces cost inflation.
JPMorgan Pick: Growth
JPMorgan Said: Silver Wheaton has a strong growth profile with silver equivalent sales expected to grow by 20% over the next four years based upon its streaming contracts and mines that are operating or under construction. The Silver Wheaton financial model is different from conventional silver mines since it holds contracts to receive silver rather than being the mine operator and this reduces cost inflation.
TheStreet Said: TheStreet Ratings team rates SILVER WHEATON CORP as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:
We rate SILVER WHEATON CORP (SLW) 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 financial position based on a variety of debt and liquidity measures that we have evaluated. At the same time, however, we also find weaknesses including a generally disappointing performance in the stock itself, feeble growth in the company's earnings per share and deteriorating net income.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- SLW's debt-to-equity ratio is very low at 0.15 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 4.82, which clearly demonstrates the ability to cover short-term cash needs.
- Despite the weak revenue results, SLW has significantly outperformed against the industry average of 45.4%. Since the same quarter one year prior, revenues slightly dropped by 7.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- 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 Metals & Mining industry and the overall market on the basis of return on equity, SILVER WHEATON CORP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- SILVER WHEATON 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. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, SILVER WHEATON CORP reported lower earnings of $0.55 versus $1.05 in the prior year. For the next year, the market is expecting a contraction of 2.0% in earnings ($0.54 versus $0.55).
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Metals & Mining industry. The net income has significantly decreased by 2234.5% when compared to the same quarter one year ago, falling from $4.49 million to -$95.93 million.
- You can view the full analysis from the report here: SLW
SPR data by YCharts
44. Spirit AeroSystems Holdings (SPR) Industry: Industrials/Aerospace & Defense
Year-to-date return: 19.4%
Year-to-date return: 19.4%
JPMorgan Rating/Price Target: Overweight/$67
JPMorgan Pick: Value
JPMorgan Said: New management has transformed Spirit over the past 2+ years, but we see further runway with a foundation from strong positions on growth programs including the 787 and A350. We see potential 2016 catalysts including a pricing agreement with Boeing, clarity on an A350 charge, and capital deployment.
JPMorgan Pick: Value
JPMorgan Said: New management has transformed Spirit over the past 2+ years, but we see further runway with a foundation from strong positions on growth programs including the 787 and A350. We see potential 2016 catalysts including a pricing agreement with Boeing, clarity on an A350 charge, and capital deployment.
TheStreet Said: TheStreet Ratings team rates SPIRIT AEROSYSTEMS HOLDINGS as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:
We rate SPIRIT AEROSYSTEMS HOLDINGS (SPR) 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 solid stock price performance, impressive record of earnings per share growth, compelling growth in net income, largely solid financial position with reasonable debt levels by most measures and attractive valuation levels. 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:
- 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.
- SPIRIT AEROSYSTEMS HOLDINGS 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, SPIRIT AEROSYSTEMS HOLDINGS turned its bottom line around by earning $2.51 versus -$4.40 in the prior year. This year, the market expects an improvement in earnings ($3.93 versus $2.51).
- 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 86.7% when compared to the same quarter one year prior, rising from $168.00 million to $313.60 million.
- The current debt-to-equity ratio, 0.51, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.08, which illustrates the ability to avoid short-term cash problems.
- You can view the full analysis from the report here: SPR
SWC data by YCharts
45. Stillwater Mining Co.(SWC) Industry: Materials/Precious Metals & Minerals
Year-to-date return: -41.2%
Year-to-date return: -41.2%
JPMorgan Rating/Price Target: Neutral/$14
JPMorgan Pick: Value
JPMorgan Said: Stillwater's stock performance correlates very strongly with the palladium price which, we feel, is facing downward pressure from the strong USD and easing Chinese demand. Operationally, SWC management has made significant progress in aligning the company to go for quality ounces over quantity while improving the mines' productivity. The focus is on cost control with a new longer-term goal to decrease AISC to the mid $600s/oz from the previous target of the low $700s.
JPMorgan Pick: Value
JPMorgan Said: Stillwater's stock performance correlates very strongly with the palladium price which, we feel, is facing downward pressure from the strong USD and easing Chinese demand. Operationally, SWC management has made significant progress in aligning the company to go for quality ounces over quantity while improving the mines' productivity. The focus is on cost control with a new longer-term goal to decrease AISC to the mid $600s/oz from the previous target of the low $700s.
TheStreet Said: TheStreet Ratings team rates STILLWATER MINING CO as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:
We rate STILLWATER MINING CO (SWC) a SELL. This is driven by some concerns, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, poor profit margins, weak operating cash flow, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Metals & Mining industry. The net income has significantly decreased by 165.4% when compared to the same quarter one year ago, falling from $18.15 million to -$11.88 million.
- The gross profit margin for STILLWATER MINING CO is currently extremely low, coming in at 12.30%. It has decreased from the same quarter the previous year.
- Net operating cash flow has significantly decreased to $16.08 million or 77.47% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 31.63%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 171.42% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- STILLWATER MINING CO 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. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, STILLWATER MINING CO turned its bottom line around by earning $0.55 versus -$2.26 in the prior year. For the next year, the market is expecting a contraction of 60.0% in earnings ($0.22 versus $0.55).
- You can view the full analysis from the report here: SWC
TEVA data by YCharts
JPMorgan Rating/Price Target: Overweight/$80
JPMorgan Pick: Value
JPMorgan Said: We see the Allergan generics deal as a transformational acquisition for Teva, creating a clear global leading generics platform and driving a significant step-up in earnings. We now anticipate TEVA's earnings to increase from $5.43 in 2015 to $7.41 by 2018 and see an emerging branded pipeline supporting longer-term growth beyond 2018. Further, post this transaction, we see the narrative of the TEVA story shifting away from Copaxone reliance, a clear positive in our view. With shares trading at <10x our 2017 EPS and several upside drivers to estimates over time, Teva is our top pick.
JPMorgan Pick: Value
JPMorgan Said: We see the Allergan generics deal as a transformational acquisition for Teva, creating a clear global leading generics platform and driving a significant step-up in earnings. We now anticipate TEVA's earnings to increase from $5.43 in 2015 to $7.41 by 2018 and see an emerging branded pipeline supporting longer-term growth beyond 2018. Further, post this transaction, we see the narrative of the TEVA story shifting away from Copaxone reliance, a clear positive in our view. With shares trading at <10x our 2017 EPS and several upside drivers to estimates over time, Teva is our top pick.
TheStreet Said: TheStreet Ratings team rates TEVA PHARMACEUTICALS as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
We rate TEVA PHARMACEUTICALS (TEVA) 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 expanding profit margins, largely solid financial position with reasonable debt levels by most measures 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 gross profit margin for TEVA PHARMACEUTICALS is rather high; currently it is at 63.84%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, TEVA's net profit margin of 2.13% significantly trails the industry average.
- 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, despite the company's weak earnings results. 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.
- TEVA PHARMACEUTICALS 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, TEVA PHARMACEUTICALS increased its bottom line by earning $3.56 versus $1.50 in the prior year. This year, the market expects an improvement in earnings ($5.44 versus $3.56).
- The current debt-to-equity ratio, 0.51, is low and is below the industry average, implying that there has been successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.48 is very weak and demonstrates a lack of ability to pay short-term obligations.
- TEVA, with its decline in revenue, slightly underperformed the industry average of 3.3%. Since the same quarter one year prior, revenues slightly dropped by 4.6%. 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: TEVA
TXN data by YCharts
47. Texas Instruments Inc. (TXN) Industry: Technology/Semiconductors
Year-to-date return: 9.2%
Year-to-date return: 9.2%
JPMorgan Rating/Price Target: Overweight/$62
JPMorgan Pick: Income
JPMorgan Said: We continue to favor TXN on margin performance, broad end-market exposure, cash generation and capital return strategy. We anticipate further gross margin upside as product mix becomes richer and as more products are manufactured at TI's 300mm fab over time (move to 300mm over time should drive 15% product cost reductions). TI's end-market diversification is paying off as weaker end-markets are being offset by stronger end-markets. With disciplined capital expenditures, TI continues to generate significant cash and will likely continue its 100% target payout ratio. TI's dividend yield of 2.6% is near its three-year average and the company has grown its dividend in each of the past five years.
JPMorgan Pick: Income
JPMorgan Said: We continue to favor TXN on margin performance, broad end-market exposure, cash generation and capital return strategy. We anticipate further gross margin upside as product mix becomes richer and as more products are manufactured at TI's 300mm fab over time (move to 300mm over time should drive 15% product cost reductions). TI's end-market diversification is paying off as weaker end-markets are being offset by stronger end-markets. With disciplined capital expenditures, TI continues to generate significant cash and will likely continue its 100% target payout ratio. TI's dividend yield of 2.6% is near its three-year average and the company has grown its dividend in each of the past five years.
TheStreet Said: TheStreet Ratings team rates TEXAS INSTRUMENTS INC as a Buy with a ratings score of A+. TheStreet Ratings Team has this to say about their recommendation:
We rate TEXAS INSTRUMENTS INC (TXN) 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 largely solid financial position with reasonable debt levels by most measures, notable return on equity, good cash flow from operations, solid stock price performance and expanding profit margins. 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 current debt-to-equity ratio, 0.41, is low and is below the industry average, implying that there has been successful management of debt levels. To add to this, TXN has a quick ratio of 1.69, 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. When compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, TEXAS INSTRUMENTS INC's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
- Net operating cash flow has slightly increased to $1,409.00 million or 1.87% when compared to the same quarter last year. In addition, TEXAS INSTRUMENTS INC has also modestly surpassed the industry average cash flow growth rate of -5.47%.
- TEXAS INSTRUMENTS INC reported flat earnings per share in the most recent quarter. 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, TEXAS INSTRUMENTS INC increased its bottom line by earning $2.58 versus $1.92 in the prior year. This year, the market expects an improvement in earnings ($2.72 versus $2.58).
- After a year of stock price fluctuations, the net result is that TXN'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. 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: TXN
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48. Thermo Fisher Scientific Inc. (TMO) Industry: Health Care/Life Sciences Tools & Services
Year-to-date return: 8.2%
Year-to-date return: 8.2%
JPMorgan Rating/Price Target: Overweight/$160
JPMorgan Pick: Income
JPMorgan Said: As a dominant supplier to the diversified life science tools, diagnostics, and broader industrial markets, Thermo should continue to be an industry consolidator in 2016 as the company utilizes growing free cash flow for accretive acquisitions, as well as share buybacks (announced $1B repurchase authorization in November) and the dividend, while a growing presence in key emerging markets, combined with potential for continued margin expansion and healthy end markets (biopharma in particular) make TMO a compelling investment in our view.
JPMorgan Pick: Income
JPMorgan Said: As a dominant supplier to the diversified life science tools, diagnostics, and broader industrial markets, Thermo should continue to be an industry consolidator in 2016 as the company utilizes growing free cash flow for accretive acquisitions, as well as share buybacks (announced $1B repurchase authorization in November) and the dividend, while a growing presence in key emerging markets, combined with potential for continued margin expansion and healthy end markets (biopharma in particular) make TMO a compelling investment in our view.
TheStreet Said: TheStreet Ratings team rates THERMO FISHER SCIENTIFIC INC as a Buy with a ratings score of A+. TheStreet Ratings Team has this to say about their recommendation:
We rate THERMO FISHER SCIENTIFIC INC (TMO) 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 increase in net income, reasonable valuation levels, good cash flow from operations, growth in earnings per share 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:
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Life Sciences Tools & Services industry average. The net income increased by 0.9% when compared to the same quarter one year prior, going from $471.60 million to $476.10 million.
- Net operating cash flow has increased to $743.90 million or 10.04% when compared to the same quarter last year. In addition, THERMO FISHER SCIENTIFIC INC has also modestly surpassed the industry average cash flow growth rate of 0.38%.
- THERMO FISHER SCIENTIFIC INC's earnings per share improvement from the most recent quarter was slightly positive. 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, THERMO FISHER SCIENTIFIC INC increased its bottom line by earning $4.70 versus $3.49 in the prior year. This year, the market expects an improvement in earnings ($7.39 versus $4.70).
- After a year of stock price fluctuations, the net result is that TMO'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. 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: TMO
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49. T-Mobile US Inc. (TMUS) Industry: Telecom/Wireless Telecommunication Services
Year-to-date return: 36%
Year-to-date return: 36%
JPMorgan Rating/Price Target: Overweight/$49
JPMorgan Pick: Growth
JPMorgan Said: We continue to like T-Mobile US in 2016 due to the company's strong postpaid subscriber momentum which has led the industry each quarter for the last 2.5 years. The company overtook Sprint as the #3 carrier in the U.S. this year and with AT&T and Verizon content with the status quo and giving up share in order to maintain margins, we expect the strong momentum to continue at TMUS. In addition, we believe that TMUS will be back in the M&A spotlight again in 2H16 once the broadcast incentive spectrum concludes and as the FCC transitions.
JPMorgan Pick: Growth
JPMorgan Said: We continue to like T-Mobile US in 2016 due to the company's strong postpaid subscriber momentum which has led the industry each quarter for the last 2.5 years. The company overtook Sprint as the #3 carrier in the U.S. this year and with AT&T and Verizon content with the status quo and giving up share in order to maintain margins, we expect the strong momentum to continue at TMUS. In addition, we believe that TMUS will be back in the M&A spotlight again in 2H16 once the broadcast incentive spectrum concludes and as the FCC transitions.
TheStreet Said:
TheStreet Ratings team rates T-MOBILE US INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
We rate T-MOBILE US INC (TMUS) 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 impressive record of earnings per share growth, compelling growth in net income and revenue growth. 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:
- T-MOBILE US 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 year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, T-MOBILE US INC turned its bottom line around by earning $0.29 versus -$0.10 in the prior year. This year, the market expects an improvement in earnings ($0.84 versus $0.29).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Wireless Telecommunication Services industry. The net income increased by 246.8% when compared to the same quarter one year prior, rising from -$94.00 million to $138.00 million.
- 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. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry, implying reduced upside potential.
- 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 Wireless Telecommunication Services industry and the overall market on the basis of return on equity, T-MOBILE US INC has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- Currently the debt-to-equity ratio of 1.53 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Along with the unfavorable debt-to-equity ratio, TMUS maintains a poor quick ratio of 0.89, which illustrates the inability to avoid short-term cash problems.
- You can view the full analysis from the report here: TMUS
TOL data by YCharts
50. Toll Brothers Inc. (TOL) Industry: Consumer Goods & Services/Homebuilding
Year-to-date return: 9.5%
Year-to-date return: 9.5%
JPMorgan Rating/Price Target: Overweight/$45
JPMorgan Pick: Growth
JPMorgan Said: Following material relative underperformance - as the stock is up 11% YTD and up only 18% since 1/1/13 vs. its larger-cap peers' 18% and 43% average gains, respectively (S&P: +2% and +47%) - we view TOL's current valuation as an attractive entry point, trading on a forward P/E basis at 13.9x our FY16E EPS, only slightly above its larger-cap peers 13.1x, or 6%, in contrast to its historical 10% premium. Additionally, we expect above average fundamental performance from the company in FY16, given our outlooks for above average gross margin expansion and above average EPS growth driven by an expected greater contribution from its higher margin California and City Living divisions. Lastly, we point to strong, above average visibility existing for FY16 given TOL's product profile, solid labor relationships and lower interest rate sensitivity.
JPMorgan Pick: Growth
JPMorgan Said: Following material relative underperformance - as the stock is up 11% YTD and up only 18% since 1/1/13 vs. its larger-cap peers' 18% and 43% average gains, respectively (S&P: +2% and +47%) - we view TOL's current valuation as an attractive entry point, trading on a forward P/E basis at 13.9x our FY16E EPS, only slightly above its larger-cap peers 13.1x, or 6%, in contrast to its historical 10% premium. Additionally, we expect above average fundamental performance from the company in FY16, given our outlooks for above average gross margin expansion and above average EPS growth driven by an expected greater contribution from its higher margin California and City Living divisions. Lastly, we point to strong, above average visibility existing for FY16 given TOL's product profile, solid labor relationships and lower interest rate sensitivity.
TheStreet Said: TheStreet Ratings team rates TOLL BROTHERS INC as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:
We rate TOLL BROTHERS INC (TOL) a BUY. This is driven by multiple 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, notable return on equity 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:
- TOLL BROTHERS INC's earnings per share declined by 32.1% 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, TOLL BROTHERS INC increased its bottom line by earning $1.84 versus $0.97 in the prior year. This year, the market expects an improvement in earnings ($2.00 versus $1.84).
- TOL, with its decline in revenue, underperformed when compared the industry average of 9.5%. Since the same quarter one year prior, revenues slightly dropped by 7.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- TOL's debt-to-equity ratio of 0.81 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further.
- 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. In comparison to the other companies in the Household Durables industry and the overall market, TOLL BROTHERS INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- 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, despite the company's weak earnings results. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- You can view the full analysis from the report here: TOL
TRMB data by YCharts
51. Trimble Navigation Ltd. (TRMB) Industry: Technology/Electronic Manufacturing Services
Year-to-date return: -16.2%
Year-to-date return: -16.2%
JPMorgan Rating/Price Target: Overweight/$25
JPMorgan Pick: Value
JPMorgan Said: Despite headwinds in the Construction and Agriculture industries that are likely to persist during 2016, approximately 70% of TRMB's business is stable and there are good prospects for the company to post mid-single digit revenue growth in 2016, particularly if FX headwinds abate. We look for EPS growth to rebound to mid-teens primarily owing to cost controls, pruning underperforming businesses, and easier comps from the accounting treatment of prior acquisitions.
JPMorgan Pick: Value
JPMorgan Said: Despite headwinds in the Construction and Agriculture industries that are likely to persist during 2016, approximately 70% of TRMB's business is stable and there are good prospects for the company to post mid-single digit revenue growth in 2016, particularly if FX headwinds abate. We look for EPS growth to rebound to mid-teens primarily owing to cost controls, pruning underperforming businesses, and easier comps from the accounting treatment of prior acquisitions.
TheStreet Said: TheStreet Ratings team rates TRIMBLE NAVIGATION LTD as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
We rate TRIMBLE NAVIGATION LTD (TRMB) 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 increase in net income, largely solid financial position with reasonable debt levels by most measures and growth in earnings per share. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, disappointing return on equity and weak operating cash flow.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Electronic Equipment, Instruments & Components industry. The net income increased by 213.6% when compared to the same quarter one year prior, rising from $11.83 million to $37.10 million.
- TRIMBLE NAVIGATION LTD 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, TRIMBLE NAVIGATION LTD reported lower earnings of $0.80 versus $0.84 in the prior year. This year, the market expects an improvement in earnings ($1.10 versus $0.80).
- Net operating cash flow has decreased to $72.40 million or 24.48% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- 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 Electronic Equipment, Instruments & Components industry and the overall market, TRIMBLE NAVIGATION LTD'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: TRMB
X data by YCharts
52. United States Steel Corp. (X) Industry: Materials/Steel
Year-to-date return: -73%
Year-to-date return: -73%
JPMorgan Rating/Price Target: Overweight/$24
JPMorgan Pick: Value
JPMorgan Said: We view U.S. Steel as the most levered domestic steel company to a steel price recovery given its high fixed costs. In our opinion, X's stock is discounting the negative macro environment as well as a weak domestic steel market but not the potential for positive trade rulings. With a large short position in the stock and a consensus negative view on the outlook, we believe that a cut in domestic supply from lower imports could result in a significant increase in X's earnings outlook and stock price. In addition, while we have seen X's Carnegie Way mitigate the hit from falling steel prices, a steel recovery could better illuminate the progress of the transformation and X's greater sustained earnings power.
JPMorgan Pick: Value
JPMorgan Said: We view U.S. Steel as the most levered domestic steel company to a steel price recovery given its high fixed costs. In our opinion, X's stock is discounting the negative macro environment as well as a weak domestic steel market but not the potential for positive trade rulings. With a large short position in the stock and a consensus negative view on the outlook, we believe that a cut in domestic supply from lower imports could result in a significant increase in X's earnings outlook and stock price. In addition, while we have seen X's Carnegie Way mitigate the hit from falling steel prices, a steel recovery could better illuminate the progress of the transformation and X's greater sustained earnings power.
TheStreet Said: TheStreet Ratings team rates UNITED STATES STEEL CORP as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:
We rate UNITED STATES STEEL CORP (X) a SELL. This is driven by several weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its generally high debt management risk, disappointing return on equity, poor profit margins and generally disappointing historical performance in the stock itself.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The debt-to-equity ratio of 1.10 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with the unfavorable debt-to-equity ratio, X maintains a poor quick ratio of 0.75, which illustrates the inability to avoid short-term cash problems.
- 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 Metals & Mining industry and the overall market on the basis of return on equity, UNITED STATES STEEL CORP underperformed against that of the industry average and is significantly less than that of the S&P 500.
- The gross profit margin for UNITED STATES STEEL CORP is currently extremely low, coming in at 6.22%. It has decreased from the same quarter the previous year.
- X's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 75.96%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- UNITED STATES STEEL CORP has improved earnings per share by 16.9% 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. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, UNITED STATES STEEL CORP turned its bottom line around by earning $0.63 versus -$11.68 in the prior year. For the next year, the market is expecting a contraction of 477.5% in earnings (-$2.38 versus $0.63).
- You can view the full analysis from the report here: X
VRTX data by YCharts
53. Vertex Pharmaceuticals (VRTX) Industry: Health Care/Biotechnology
Year-to-date return: 2.5%
Year-to-date return: 2.5%
JPMorgan Rating/Price Target: Overweight/$153
JPMorgan Pick: Growth
JPMorgan Said: We expect the Orkambi launch to continue to impress in 2016 following its blowout market introduction in 3Q (beating consensus by 54%). Orkambi should facilitate a turn to profitability as early as 4Q15 (which could attract new money) with the potential for robust bottom line growth from there. In our view, the commercial momentum and potential bottom line leverage combined with a substantial amount of meaningful data (Phase 3 results for '661/Kalydeco in multiple CF populations, initial clinical data for the two next-gen correctors, and Phase 2a data for the ENaC inhibitor) and significant strategic value position VRTX as a top idea in 2016.
JPMorgan Pick: Growth
JPMorgan Said: We expect the Orkambi launch to continue to impress in 2016 following its blowout market introduction in 3Q (beating consensus by 54%). Orkambi should facilitate a turn to profitability as early as 4Q15 (which could attract new money) with the potential for robust bottom line growth from there. In our view, the commercial momentum and potential bottom line leverage combined with a substantial amount of meaningful data (Phase 3 results for '661/Kalydeco in multiple CF populations, initial clinical data for the two next-gen correctors, and Phase 2a data for the ENaC inhibitor) and significant strategic value position VRTX as a top idea in 2016.
TheStreet Said: TheStreet Ratings team rates VERTEX PHARMACEUTICALS INC as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:
We rate VERTEX PHARMACEUTICALS INC (VRTX) a SELL. This is driven by multiple weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. Among the areas we feel are negative, one of the most important has been an overall disappointing return on equity.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Biotechnology industry and the overall market, VERTEX PHARMACEUTICALS INC's return on equity significantly trails that of both the industry average and the S&P 500.
- After a year of stock price fluctuations, the net result is that VRTX'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. Turning our attention to the future direction of the stock, we do not believe this stock offers ample reward opportunity to compensate for the risks, despite the fact that it rose over the past year.
- VERTEX PHARMACEUTICALS INC has improved earnings per share by 45.8% 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, VERTEX PHARMACEUTICALS INC reported poor results of -$3.14 versus -$2.29 in the prior year. This year, the market expects an improvement in earnings (-$1.06 versus -$3.14).
- The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Biotechnology industry average. The net income increased by 44.0% when compared to the same quarter one year prior, rising from -$170.06 million to -$95.15 million.
- Net operating cash flow has increased to -$47.02 million or 46.34% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 1.02%.
- You can view the full analysis from the report here: VRTX
By Laurie Kulikowski
Source: http://www.thestreet.com/story/13389164/1/j-p-morgan-s-53-top-stock-picks-for-2016.html?kval=dontmiss
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