The kind of sell-off that we have lived through in 2016 has driven metrics and sentiment in the markets to levels not seen since the beginning of the Great Recession in 2008 and 2009. The strategists at Jefferies have one major comment on the extreme bearishness in the market today: It’s not 2008.
One thing that the sell-off has accomplished is to take top companies residing in the Jefferies Franchise Picks list to levels not seen in some time. We screened the list not only for the top stocks that are beaten down, but for the companies that are paying, and can maintain their dividends to shareholders. We found four that are very attractive now. All of course, are rated Buy at Jefferies.
This one of the top global pharmaceutical stocks at Jefferies. 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 markets medicines in more than 170 countries.
The stock fell 10% in late October after an FDA warning about liver risk with the company’s hepatitis C (HCV) products. However, Jefferies points out that this applies to a small sub-population of cirrhotics who are 3% to 5% of the total patient population. Additionally, the next generation HCV product could be launched as early as 2017, and even of the entire Viekira Pak/Technivie business were lost over the next two years, it represents only 4% of net percentage value.
AbbVie announced recently that the supplemental New Drug Application (sNDA) for Viekira Pak to be used without ribavirin has been accepted by the FDA with priority review. The company is looking to get the product’s label expanded for use without ribavirin for the treatment of patients with genotype 1b (GT1b) chronic HCV and compensated cirrhosis (Child-Pugh A).
The company reported mixed fourth-quarter numbers but affirmed guidance, and some on Wall Street were concerned over a new hepatitis C drug from a rival company. The company reported earnings, excluding one-time items, that were up 27% from the year-earlier quarter and a penny over the Thomson Reuters consensus. Revenue rose 18% but was below estimates.
AbbVie investors receive an outstanding 4.35% dividend. The Jefferies price target is $80, among the highest on Wall Street. The Thomson/First Call consensus target is $72.25. Shares closed last Friday at $52.58.
Shares of this top aerospace industrial have dropped a whopping 18% since the beginning of the year. Boeing Co. (NYSE: BA) together with its subsidiaries, designs, develops, manufactures, sells, services and supports commercial jetliners, military aircraft, satellites, missile defense, human space flight and launch systems and services worldwide.
Jefferies has increased confidence in continuing good demand and notes that Boeing has made announcements in the past that support the thesis that productivity and margins will continue to improve. 787 execution is good as the company works through the backlog, and cash flow looks to be strong with 787 deliveries and C-17 orders. Some Wall Street analysts also point to low oil prices as a bullish indicator for the top carriers who are Boeing’s big customers.
Jefferies thinks that some of the quarterly earnings report was misunderstood, and that trading at a very cheap 10 time free cash flow, the valuation is the best in some time. While there was an accounting change for KC-46 tankers, the 777 rate change was already in the Jefferies numbers, and the 737 rate boost was a positive that was not figured into numbers.
Boeing investors receive a 4.01% dividend. The $165 Jefferies price target is higher than the consensus price target of $145.37. The shares closed on Friday at $108.63.