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Despite the recent volatility, which has investors seeing huge swings in the market, there is plenty to be positive about first-quarter earnings, reporting of which is right around the corner. Many U.S. companies are enjoying the most favorable currency tailwinds in six years, in addition to the benefits of lowered corporate taxes. In fact, almost 150 companies have announced major spending plans since the package was approved late last year.
A new research report from Merrill Lynch’s outstanding equity and quantitative strategist, Savita Subramanian, lists stocks that are expected to beat earnings and sales estimates. The report also highlights companies in the list that are under-owned by active fund portfolio managers.
Here we take a look at eight of the under-owned shares that may offer the best value to investors now.
Insurance companies tend to do well as rates rise, and this sector giant may be an outstanding pick for investors. Allstate Corp. (NYSE: ALL) is the largest publicly traded personal lines insurance company, with about 12% of the personal lines market (one in eight households). Allstate is primarily a direct writer. Besides a full array of personal lines P/C products (preferred, standard and nonstandard auto insurance, and homeowners’ insurance), the company also offers life insurance and annuity products.
Allstate shareholders are paid a 1.94% dividend. The Merrill Lynch price objective for the shares is $111, and that compares with the Wall Street consensus target price of $106. The stock closed trading on Wednesday at $94.61.
After years of lousy earnings growth, this large cap leader is hitting on all cylinders. Caterpillar Inc. (NYSE: CAT) is the largest manufacturer and marketer of construction equipment worldwide, It is also a leading manufacturer of diesel engines and turbines for transport and industrial applications.
Caterpillar shareholders are paid a solid 2.15% dividend. Merrill Lynch has a $192 price objective for the shares, and the consensus target price is $180. The stock closed Wednesday at $145.16 per share.
This is a top play for investors looking to the Permian Basin. Cimarex Energy Co. (NYSE: XEC) is an independent exploration and production company. Its primary activities are in the Mid-Continent and Permian Basin areas of the United States.
Cimarex has a diversified base of high-quality production and attractive drilling opportunities. It should be noted that hedge funds have initiated sizable new positions in the company over the past year, and like its brethren in the Permian, many consider the company a very solid takeover target.
Investors in Cimarex are paid just a 0.7% dividend. The whopping $161 Merrill Lynch price target is well above the posted consensus price target of $138.19. The shares closed most recently at $92.75.
The fast-food giant does a ton of business overseas and still remains a solid pick for investors seeking dividends and a degree of safety. McDonald’s Corp. (NYSE: MCD) is the world’s leading global foodservice retailer, with over 36,000 locations serving approximately 69 million customers in over 100 countries each day. More than 80% of McDonald’s restaurants worldwide are owned and operated by independent local business persons.
McDonald’s shareholders are paid a nice 2.57% dividend. The Merrill Lynch price target for the shares is $180. The consensus price objective is $187.50, and the shares closed Wednesday’s trading at $158.41.
MERRILL LYNCH RECOMMENDED STOCK BUYS
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Walmart Inc. (NYSE: WMT) could buy health insurance company Humana Inc. (NYSE: HUM). According to MarketWatch:
Walmart Inc. is in preliminary talks to buy insurer Humana Inc., according to people familiar with the matter, a deal that would mark a dramatic shift for the retail behemoth and would be the latest in a recent flurry of big deals in health-care services.
It isn’t clear what terms the companies may be discussing, and there is no guarantee they will strike a deal. If they do, the deal would be big: Humana currently has a market value of about $37 billion.
Tesla Inc. (NASDAQ: TSLA) has recalled 123,000 cars. According to MarketWatch:
Tesla Inc. finished off its worth month in seven years with the news late Thursday that the electric-auto maker is recalling 123,000 Model S vehicles due to a potential flaw in a power steering component.
Investors continued to punish Tesla stock in after-hours trading, with the stock more than 3% in the red, giving back the day’s regular-session gains of 3.2%, when it closed at $257.50. Tesla stock is down 23% in the past month, as the S&P 500 index has fallen 4%. Markets are closed Friday in observance of Good Friday.
The recall of the Model S vehicles is due to a bolt that could corrode, an issue that occurs in cars built before April 2016, and in winter conditions where roads are frequently salted, the company said. Just 0.02% of the cars ever experience the problem, Tesla said.
Under Armour Inc. (NYSE: UAA) has announced a huge data breach. According to Reuters:
Under Armour Inc said on Thursday that data from some 150 million MyFitnessPal diet and fitness app accounts was compromised in February, in one of the biggest hacks in history, sending shares of the athletic apparel maker down 3 percent in after-hours trade.
The stolen data includes account user names, email addresses and scrambled passwords for the popular MyFitnessPal mobile app and website, Under Armour said in a statement. Social Security numbers, driver license numbers and payment card data were not compromised, it said.I'm interested in the
MARCH NEWSLETTER 8
Constellation Brands Inc. (NYSE: STZ) reported its most recent quarterly results before the markets opened on Thursday. The company posted $1.90 in earnings per share (EPS) on $1.94 billion in revenue, while consensus estimates from Thomson Reuters had called for $1.74 in EPS on revenue of $1.75 billion. The fiscal fourth quarter of last year reportedly had EPS of $1.48 and $1.63 billion in revenue.
Fiscal 2018 reported-basis results reflect a benefit of $363 million, or $1.81 EPS, for a net adjustment to deferred and long-term tax liabilities related to recently enacted U.S. tax reform.
Over the past year, Constellation’s Beer portfolio was the number one growth contributor to the U.S. beer market, with all import brand families achieving record volume levels.
During this quarter specifically, strong portfolio depletion performance was driven by the Modelo and Corona brand families, up 18% and 6%, respectively.
Looking ahead to the fiscal 2019 full year, the company expects to see EPS in the range of $9.40 to $9.70. The consensus estimates call for $9.58 in EPS on $8.13 billion in revenue for the year.
For 2018, the company generated record operating cash flow of more than $1.9 billion and $874 million of free cash flow. On the books, cash and cash equivalents totaled $90.3 million at the end of the quarter, compared with $177.4 million at the end of the previous fiscal year.
Rob Sands, CEO of Constellation Brands, commented:
Execution of our Total Beverage Alcohol premiumization strategy for fiscal 2018 produced best-in-class EPS growth of almost 30% as we continued to grow overall market share and improve margins across the business. We also completed significant operational expansion milestones at our Nava brewery and glass plant. We expect to capitalize on this momentum, as we are targeting impressive sales and earnings growth for the coming year.
Shares of Constellation Brands were last seen up nearly 3% at $226.88, with a consensus analyst price target of $251.00 and a 52-week trading range of $160.53 to $231.83
Health care services are expected to continue to grow at a furious rate over the coming years. McKesson Corp. (NYSE: MCK) is the largest drug distributor in the United States, as well as having sizable businesses in Canada and Europe, including distribution and retail pharmacy assets.
The company is also the largest medical-surgical distributor to the non-acute care market and offers various supply chain services and technology, although recently divested its clinical health IT platform.
McKesson investors are paid a small 0.98% dividend. Note that the $179 Merrill Lynch price target is less than the posted consensus target of $182.69. Shares closed most recently at $140.66.
This top chip company has reported strong earnings the past few years and remains a top pick at Jefferies for 2018. Nvidia Corp. (NASDAQ: NVDA) is one of the leaders when it comes to supplying graphics processing technology for the 3D graphics market, including desktop graphics processors and gaming consoles.
Nvidia is also moving into visual computing chips for cars, mobile devices and supercomputers. The company has been able to use its ability to leverage past investments, with a more controlled spending structure ahead on unified, which enables strong cash flow that is allowing a focus on capital return, which is currently estimated to be $1 billion next year.
Investors in Nvidia are paid a small 0.28% dividend. The Merrill Lynch price target is $300. The posted consensus target is much lower at $251.29. The stock closed Wednesday at $221.35 per share.24/7 Wall St.
Institutional Investors Loading Up on 5 Top Tech Stocks After Sell-Off
This stock recently was added to the Merrill Lynch US 1 list. Qualcomm Inc. (NASDAQ: QCOM) designs, develops and supplies semiconductors and collects royalties on wireless handheld devices and infrastructure based on its dominant position in CDMA and other related technology patents.
In addition, Qualcomm provides systems software and components to wireless handset vendors and promotes applications and services that run on high-speed wireless networks. The company operates primarily through two segments: CDMA Technologies and Technology Licensing.
Qualcomm shareholders are paid a very hefty 4.16% dividend. Merrill Lynch has set its price target at $75. The consensus target was last seen at $71.03. The stock closed at $54.70 on Wednesday.
This stock has rallied smartly but still has solid upside potential, and it is also on the Merrill Lynch US 1 list. United Rentals Inc. (NYSE: URI) is the largest equipment rental company in the world. It has an integrated network of 876 rental locations in 49 states and 10 Canadian provinces. With approximately 12,200 employees, the company serves construction and industrial customers, utilities, municipalities, homeowners and others. It offers for rent approximately 3,100 classes of equipment for rent.
The Merrill Lynch price target of $230 compares with the $180.29 consensus estimate. The stock closed trading on Wednesday at $169.11 a share.