While many market participants are thrilled with the action from this week and last, and the short sellers did face some very solid buying pressure, not everybody is feeling relieved, especially after Tuesday’s reversal. With earnings expected to be less than stellar, and the economy stuck in what many feel is a snail-like slow growth mode, one of the biggest and most influential firms on Wall Street is just not buying it.
A recent report from the strategists at Merrill Lynch flat-out says to stay bearish and defensive, and with Treasury bond yields at recent lows, the stock market surprisingly actually remains one of the few good places to reside, other than cash, which earns next to nothing. The Merrill Lynch team recommends staying long consumer staples, utilities and telecommunication companies.
We screened the Merrill Lynch research database and found four stocks rated Buy that fit right into these categories.
This utility posted inline fourth-quarter earnings but came in a little light on the revenue side. PPL Corp. (NYSE: PPL) serves 321,000 natural gas and 397,000 electric customers in Louisville and 16 surrounding counties, and 543,000 customers in 77 Kentucky counties and five counties in Virginia. It also provides electric delivery services to approximately 1.4 million customers in Pennsylvania and operates electricity distribution network for the Midlands, South West and Wales in the United Kingdom.
In addition, it offers a range of customer-care and back-office services to competitive retail energy suppliers, including customer enrollments, contract management, electronic data exchange, simple and complex billing and call center operations, comprising telemarketing, payment processing and collections of overdue accounts.
PPL is one of the leading utility companies in the United States that plans to continue to increase regulated operations and lower earnings volatility attached to competitive operations. It raised cash and lowered debt late last year by selling some hydroelectric assets to NorthWestern energy.
PPL investors receive a generous 4.22% dividend. The Merrill Lynch price target for the stock is $38, and the Thomson/First Call consensus target is $37.78. Shares closed Tuesday at $36.07.
This top telecommunications company recently did away with some phone incentives, and it resides on the Merrill Lynch US 1 list. 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.
Wall Street has applauded Frontier’s acquisition of Verizon’s wireline operations in California, Florida and Texas, which is expected to be completed at the end of March 2016. Many feel that focusing on the higher margin segments at the company makes sense, and the sale to Frontier is a huge cash boost to the balance sheet. The company reported solid fourth-quarter numbers with earnings slightly higher than the Merrill Lynch estimates and revenues right in line but above the street consensus.
There was some chatter earlier this month that the company was enlisting the aid of the firm’s AOL unit CEO Tim Armstrong to help with a leading role in exploring a possible bid for Yahoo assets. Verizon has not officially started negotiations, and the rumors are just that, but the company has said in the past it was open to acquiring additional assets.
Investors receive a 4.46% dividend. The $55 Merrill Lynch price target is higher than the consensus price objective of $50.72. Shares closed Tuesday at $50.63.