Merrill Lynch Picks 10 Growth Stocks to Buy for the Rest of 2014

July 10, 2014 by 247lee

With the market getting staggered a touch this week, and the beginning of the second half of the year and a new earnings season here, many Wall Street firms that we cover are presenting their ideas for the balance of 2014. While many differ on tactics, strategy and sector picks, almost all agree we will end the year higher. Some have targets as high as 2,100 on the S&P 500.

The analysts at Merrill Lynch have run their growth stock screens and selected 10 top names that have very high forward five-year earnings per share growth expectations. While they may have a higher level of volatility as opposed to the Merrill Lynch value picks we recently highlighted, they also bring a higher risk/reward quotient.

The Merrill Lynch growth picks list is crowded with solid names that have outstanding earnings projections for the coming years. These are intended for growth-oriented and more risk-tolerant portfolios. Long-term investors though, can feel comfortable adding them to a well-diversified account.

Here are the 10 Merrill Lynch growth stocks to buy for the rest of 2014. All of them are rated Buy at the firm.

Amazon.com Inc. (NASDAQ: AMZN) recently announced its entry into the smartphone arena, and it is a top stock to buy at Merrill Lynch, especially on an oversold basis now. The Internet retail giant is down a very big 18% year-to-date. Many Wall Street analysts view Amazon as the innovation leader and a top stock to own for 2014 and beyond. In addition to its online retailing muscle, it has a gigantic cloud storage business that continues to dominate rivals.

Amazon will add even more revenue to the top line with the recent increase in its Amazon Prime memberships. The Merrill Lynch price target for the stock is $420. The Thomson/First Call consensus target is at $414.32. Amazon closed on Wednesday at $329.97 a share.

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AutoNation Inc. (NYSE: AN) is one of the leading auto dealership conglomerates in the United States. The call at Merrill Lynch is for strong second-quarter new car sales and growing parts and service revenues (boosted by recalls). The firm also sees buybacks or acquisitions driving above-consensus earnings. The Merrill Lynch price target is $75, and the consensus is much lower at $52.29. AutoNation closed Wednesday at $61.23.

Cognizant Technology Solutions Corp. (NASDAQ: CTSH) makes the Merrill Lynch list and is a favorite name at many Wall Street firms. The company provides information technology (IT), consulting and business process outsourcing services worldwide. The company operates through four segments: Financial Services; Healthcare; Manufacturing, Retail, and Logistics; and Other.

Cognizant offers consulting and technology services, such as IT strategy, program management, operations improvement, strategy and business consulting services. The Merrill Lynch price objective is $57, and the consensus price target for this top tech name is at $56.20. Cognizant closed Wednesday at $50.37.

Walt Disney Co. (NYSE: DIS) is a top consumer discretionary pick and is also on the Merrill Lynch U.S. 1 list. The company has struck a multiyear deal with one of the same Chinese media companies with which DreamWorks has a deal, Shanghai Media Group, to begin producing content specifically for a Chinese audience. Disney as a company is not new to working in China. Disneyland Hong Kong has operated since 2005.

Investors are paid a 1% dividend. The Merrill Lynch price target is $94, and the consensus is posted lower at $89.73. Disney closed trading Wednesday at $87.22.

Dollar Tree Inc. (NASDAQ: DLTR) has underperformed its rivals in the discount space, and many on Wall Street see a turnaround coming. The company has 4,777 stores in the United States and another 177 in Canada. It expands its square footage through new locations and tries to increase sales in existing stores in order to grow.

With Dollar Tree’s metrics bottoming and their core clientele improving along with the economy, the stock has good potential. The Merrill Lynch price target is $71, and the consensus target is $61.85. The stock closed Wednesday at $55.22.

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Ensco PLC (NYSE: ESV) is one of the out-of-favor deepwater drillers and a solid energy name to make the list. It also was included on the Merrill Lynch top value list. Last year the company took delivery of ENSCO 121, the second of four ultra-premium harsh environment jackup rigs in its ENSCO 120 Series. ENSCO 121 is an enhanced version of Keppel’s proprietary KFELS Super A Class design. The rig has been contracted in the North Sea at a day rate of approximately $230,000.

Ensco shareholders are paid an outstanding 5.4% dividend. Merrill Lynch has a $64 target price, while the consensus target is posted at $53.32. Ensco closed Wednesday at $53.95.

Fifth Third Bancorp (NASDAQ: FITB) is a top regional banking name that makes the grade at Merrill Lynch, and it is also a value list member. The company recently announced an 8.3% hike in its quarterly dividend, and it has repurchased 8 million shares of stock this year. The bank also cleared the stress test in the reported period and subsequently got its capital plan approved by the Federal Reserve, under the 2014 Comprehensive Capital Analysis and Review.

Fifth Third’s capital plan included a raise in the company’s quarterly common stock dividend to 13 cents per share, which pays investors 2.4% yearly. The Merrill Lynch price target is $25 and the consensus target is $24.15. Shares closed Wednesday at $21.51.

Intercontinental Exchange Group Inc. (NYSE: ICE) makes the growth list and is the leading network of regulated exchanges and clearinghouses for financial and commodity markets. The company delivers transparent, reliable and accessible data, technology and risk management services to markets around the world through its portfolio of exchanges, including the New York Stock Exchange, ICE Futures, Liffe and Euronext.

ICE investors are paid a small 1.3% dividend. The Merrill Lynch target is $212, and the consensus target is $223.21. ICE closed Wednesday at $186.91.

Noble Corp. (NYSE: NE) is another deepwater driller that many Wall Street analysts are very bullish on, and it is the third name on the value list to do double duty as a top growth stock to buy. With numerous corporate missteps behind it, Noble’s shift to the deepwater/floater market will benefit from an improving landscape and very strong demand. Investors receive a very solid 4.4% dividend. Merrill Lynch has a $40 price target, while consensus is lower at $34.82. Noble closed Wednesday trading at $32.33.

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O’Reilly Automotive Inc. (NASDAQ: ORLY) has been riding the same positive wave that all the automotive parts retailers have. In fact, the current growth estimate for this year calls for earnings-per-share growth of 16.3%. Furthermore, the long-term growth rate is currently an impressive 15.6%, suggesting pretty good prospects for the long haul. Merrill Lynch has a $166 price objective. The consensus price target is $160.65. The stock closed Wednesday at $155.65.

Wednesday’s top analyst upgrades and downgrades included shares of Alcoa, BP, Broadcom, Garmin, Gigamon, KKR, Marvell, KLA-Tencor, Potash, Zillow and many more.