Investing

Merrill Lynch Out With 11 Top Stock Picks for 2018

Lee Jackson

Published: December 2, 2017 9:25 am

Last Updated: January 12, 2020 5:49 am

It’s that time of year again, the time when all the top firms that we cover here at 24/7 Wall St. start to make their stock picks and prognostications for 2018. This not only gives investors a bit of a head start on year-end portfolio reshuffling, but it also gives them a look at what the overall macro thoughts for the coming year are at the big brokerages and banks.

After another stellar year for the equity markets, the economy perking up, and the potential for growth the best in years, many investors are interested in the top picks for 2018 as the market has become very expensive. A new report from Merrill Lynch unveils the firm’s top picks for 2018. All are good choices for growth accounts with a degree of risk tolerance, and are investment picks for the full year, as opposed to trading ideas.

Andeavor

This large cap refining play could have big upside for 2018. Andeavor (NYSE: ANDV) is an independent refiner and marketer of petroleum products. The company operates seven refineries concentrated in the Western United States with throughput capacity of 1.1 million barrels per day.

The company’s retail marketing system sells gasoline and diesel fuel through retail stations, as well as through third-party dealers and distributors. This segment operates a network of 2,492 retail stations under the ARCO, Shell, Exxon, Mobil, USA Gasoline, Rebel, Thrifty and Tesoro brands. The company was formerly known as Tesoro and changed its name to Andeavor in August 2017.

Shareholders receive a 2.23% dividend. The Merrill Lynch price target for the stock is $119. The Wall Street consensus price target is $122.94. The shares traded at $104.43 by the end of Friday’s session.

BlackRock

Many on Wall Street love this firm’s growth potential near term and especially long term. BlackRock Inc. (NYSE: BLK) is the largest asset manager in the world, with roughly $4.9 trillion in assets under management. Its acquisitions of Merrill Lynch Investment Management (MLIM) and iShares transformed it from a fixed income manager into a multi-product and multi-channel giant, with roughly 40% of its assets under management overseas. It has leading franchises in exchange traded funds, institutional fixed income, alternatives and cash. It also operates Solutions, a leader in risk analytics.

The company’s strong historical and prospective dividend growth is underpinned by the high-quality and diversified business model. Dividends have increased 18% annually over the past 10 years. Dividend growth likely will moderate but remains solid in the low teens, consistent with expectations for earnings growth in the years ahead.

Shareholders receive a 2% dividend. Merrill Lynch has a $500 price objective, while the consensus price target is $520.92. Shares closed Friday at $502.08.

DowDupont

Some thought the blockbuster merger of Dow and DuPont would run into regulatory headwinds in 2017. But now DowDupont Inc. (NYSE: DWDP) is a diversified chemical company with $73 billion in sales as of 2016.

The company is organized in three principal divisions of Agriculture (20% of EBITDA), Material Science (55%) and Specialty Products (25%), and it intends to separate these into three public entities by 2020.

Shareholders are paid a 2.11% dividend. The $82 Merrill Lynch price objective compares with the consensus price target of $80.19. The stock closed Friday at $71.01 a share.

Equinix

This is one of the larger cap companies in the data center arena, and a top play for more conservative accounts. Equinix Inc. (NASDAQ: EQIX) provides data center services to protect and connect the information assets for the enterprises, financial services companies, and content and network providers primarily in the Americas, Europe, the Middle East, Africa and the Asia-Pacific.

The company provides colocation services and related offerings, including operations space, storage space, cabinets and power for customers colocation needs; interconnection services, comprising physical cross connect/direct interconnections, Equinix Internet Exchange, Equinix Cloud Exchange, Equinix Metro Connect and Internet connectivity services; and managed IT infrastructure services, including installation of customer equipment and cabling, as well as equipment rebooting and power cycling, card swapping and emergency equipment replacement services.

Investors receive a 1.71% distribution. Merrill Lynch has set its target price at $500, which is lower than the $520.17 consensus price objective. The shares ended the week at $469.16.

Idexx Laboratories

This is a top health care play that Merrill Lynch likes for 2018. Idexx Laboratories Inc. (NASDAQ: IDXX) is a leading provider of diagnostic and information technology products and services for pet and production animal health, water quality and milk safety, and human point-of-care diagnostics.

The Merrill Lynch price target is $175. The consensus target is $143, less than Friday’s close of $155.00.

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Northrop Grumman

This company was ranked as one of the top five defense contractors by sales last year. Northrop Grumman Corp. (NYSE: NOC) provides innovative systems, products and solutions in unmanned systems, cyber, C4ISR and logistics and modernization to government and commercial customers worldwide.

The Aerospace Systems segment designs, develops, integrates and produces manned aircraft, unmanned systems, spacecraft, high-energy laser systems, microelectronics and other systems and subsystems. The Information Systems segment offers advanced solutions for Department of Defense, national intelligence and federal civilian, state, international and commercial customers.

Wall Street applauded the company’s recent $7.8 billion purchase of Orbital ATK, which will expand its space and missile businesses just as the United States steps up efforts to defend against a possible strike by North Korea and threats in the Middle East.

Shareholders receive a 1.31% dividend. The $350 Merrill Lynch price target is above the consensus target of $324,13. Shares were trading on Friday’s close at $299.63.

Priceline

This internet travel leader gapped down big in early November and is offering a much better price point. Priceline Group Inc. (NASDAQ: PCLN) is an online travel business offering price disclosed and opaque airline tickets, hotel rooms, rental cars, vacation packages and cruises. It generates over 85% of gross profit from its international brands. Priceline operates Priceline.com, Booking.com, Kayak.com, Agoda.com, Rentalcars.com and OpenTable.

The travel giant is seen by many as an “open-ended” growth story. Many on Wall Street continue to see comparisons easing for international bookings and margins improving in 2018.

The Merrill Lynch price objective is $1,890, but the posted consensus target is $1,996.38. Shares were changing hands at $1735.30 and the week came to a close.

Texas Instruments

This old-school chip tech company has come back into favor big-time. Texas Instruments Inc. (NASDAQ: TXN) is a broad-based supplier of semiconductor components, ranging from digital signal processors to high-performance analog components to digital light-processing technology and calculators. Some 65% of Texas Instruments sales are exposed to the well-diversified, business-to-business industrial, automotive, communications infrastructure and enterprise markets.

The company increased its quarterly dividend earlier this year by 32%. The increase reflects its continued strength in free cash flow generation and its commitment to return excess cash to shareholders.

Shareholders are paid a 2.57% dividend. Merrill Lynch has a $115 price objective, and the consensus target price is $99.47. The stock was last seen trading at $97.18.

Xcel Energy

This is a top utility play for 2018. Xcel Energy Inc. (NYSE: XEL) is Midwest-based regulated utility company with operations in Minnesota, Michigan, North Dakota, South Dakota, Wisconsin, Colorado, Texas and New Mexico. It provides electric and gas distribution, as well as electric transmission services, to over 3.5 million customers.

Xcel shareholders receive a nice 2.8% dividend. Merrill Lynch has a $54 price target on the shares, but the consensus estimate is $61.12. The stock closed on Friday at $51.36.

Verizon

This top telecommunications company is a solid growth and income pick for 2018. Verizon Communications Inc. (NYSE: VZ) is a global leader in delivering the digital world. Verizon Wireless operates America’s self-described most reliable wireless network, with 109.5 million retail connections nationwide.

Verizon also provides converged communications, information and entertainment services over America’s most advanced fiber-optic network, and it delivers integrated business solutions to customers worldwide.

Verizon posted solid third-quarter results. It added 274,000 postpaid phone customers in the quarter, which was more than expected. Wireless service revenue inflected positive quarter over quarter for the first time in three years. The stock remains a safe and solid growth and income play.

Investors are paid an outstanding 4.6% dividend. Merrill Lynch raised its price target to $55 from $52. The consensus target is $50.61, which is under Friday’s closing price of $51.25.

Walmart

The giant retailer posted huge quarterly results and is favorite pick for the holidays and 2018. Wal-Mart Stores Inc. (NYSE: WMT) is the world’s largest retailer, operating retail stores in various formats, including Sam’s Club, in the United States as well as a growing e-commerce business (including Jet.com). Internationally Walmart also operates locations in Argentina, Brazil, Canada, China, Japan, Mexico and the United Kingdom.

Each week, nearly 260 million customers and members visit the company’s 11,535 stores under 72 banners in 28 countries and e-commerce websites in 11 countries. With fiscal year 2016 revenue of $482.1 billion, Walmart employs approximately 2.2 million associates worldwide.

Shareholders receive a 2.09% dividend. The Merrill Lynch price target is $120. The consensus target is $100.47. Shares most recently traded at $97.35.

There you have it, 11 top stocks to Buy from the analysts at Merrill Lynch for 2018. They represent a wide group of sectors, and all hold solid prospects for growth. Given the big run in many of these companies, investors may want to buy partial positions, and see if the new year doesn’t bring a chance to buy shares at lower levels.