Jefferies Makes a Huge Q4 Change to the Franchise Picks List

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With earnings for the third quarter almost over, and the fourth quarter of 2016 in full swing, many of the top companies we follow on Wall Street are making some changes to the lists of their high conviction stock picks for clients. With the market continuing to trade to near all-time highs, it makes sense to examine the lists and make some changes, as the rest of the year could have additional volatility as the political cycle could prove to be very volatile component.

In a recent research note, the analysts at Jefferies make a big move by removing a top medical devices company from the firm’s well-respected Franchise Picks list of stocks.

Zimmer Biomet Holdings Inc. (NYSE: ZBH) was a huge 2015 merger that Wall Street was positive on from the get-go, but Jefferies now has removed the stock from its Franchise Picks portfolio. The company is a global leader in musculoskeletal health care. The company designs, manufactures and markets orthopaedic reconstructive products; sports medicine, biologics, extremities and trauma products; spine, bone healing, cranio maxillofacial and thoracic products; dental implants; and related surgical products.

After Zimmer Biomet reported weak third-quarter results, Jefferies chalked it up to what the analysts termed “unforeseen supply issues.” The firm also noted this in their research coverage:

Management lowered guidance and at this point it remains unclear exactly how far into 2017 these supply issues will linger, which brings us to question if double digit earnings-per-share growth is a reasonable goal. Our Buy rating remains given the overly discounted valuation and intact cash position.

Jefferies has a $129 price target for the stock. The Wall Street consensus price objective is higher at $132.24, and the shares closed last Friday at $103.01.

In addition, here are four stocks in the Franchise Picks portfolio offering big dividends and solid upside potential.

AbbVie

This is one of the top global pharmaceutical stocks picks across Wall Street. AbbVie Inc. (NYSE: ABBV) is a global, research-based biopharmaceutical company formed in 2013 following separation from Abbott Laboratories. The company’s mission is to use its expertise, dedicated people and unique approach to innovation to develop and market advanced therapies that address some of the world’s most complex and serious diseases. AbbVie employs more than 26,000 people worldwide and markets medicines in more than 170 countries.

One of the biggest concerns with AbbVie is what eventually might happen with anti-inflammatory therapy Humira, which generated $14 billion in sales in fiscal 2015. That was the most any drug has recorded during a single year and represents a gigantic part of the company’s overall earnings. The problem is that biosimilars and generics are itching to enter the market with Amgen leading the charge, and some Wall Street analysts project that AbbVie may have a difficult time stopping that trend.

Back in May, the patent board instituted Coherus BioSciences’ Inter Partes Review against the Humira ‘135 patent. The outcome of the review is expected next year. While most analysts remain positive on Humira duration, the expected litigation uncertainty could continue to create an overhang on the stock, which does give investors chances to pick up shares lower.

AbbVie investors receive a 4.57% dividend. The Jefferies price target for the stock is $90, and the Wall Street consensus target is $71.21 Shares closed Friday at $56.04.