4 Top Jefferies Value Stocks to Buy With Big Upside Potential

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Medtronic

This company is now based in Ireland after the gigantic merger with Covidien in 2015. Medtronic PLC (NYSE: MDT) is a medical devices giant, and many on Wall Street saw this historical merger, probably one of the largest in the medtech industry, as a momentous event, leading to the creation of a unique company that combines the extensive and innovative abilities of both Medtronic and Covidien. The combined company officially has joint forces of over 85,000 employees present in more than 160 countries.

Top analysts feel that the contributions from Medtronic’s three growth drivers, which they cite as therapy innovation, globalization and services/solutions, should support a 5% or greater constant currency top-line growth this year and beyond. Some also feel that the Covidien earnings potential is underappreciated, and the change in domicile is also a positive.

The company also still is pursuing a huge new restructuring move that is expected to free up $9.3 billion in cash, which can help pay down debt, buy back shares or maybe even help with a selective acquisition. With the stock trading at 16.5 times 2017 estimates, Jefferies feels it is too cheap given the stability at the company and the 10% or so earnings growth.

Medtronic investors receive a 1.82% dividend. The $93 Jefferies price target compares with the consensus target of $86.98 and the $83.72 share price on Tuesday’s close.

Shire

This is one of the top picks on Wall Street in specialty pharma. Shire PLC (NASDAQ: SHPG) develops, licenses, manufactures, markets, distributes and sells pharmaceutical products. It offers various products for the treatment of attention deficit hyperactivity disorder. The company also focuses on the development of resources projects in various therapeutic areas, including rare diseases, neuroscience, ophthalmics, hematology and gastrointestinal disorders, as well as early development projects, primarily on rare diseases. Shire markets its products through wholesalers and pharmacies.

Many analysts were perplexed by the somewhat mixed market reaction to the Baxalta bid. Baxalta was spun off from Baxter last year, and the market correction in the fall provided investors a compelling opportunity to refocus on company’s true intrinsic value. The Baxalta acquisition could produce $13 billion in revenues for Shire’s rare disease portfolio by 2020, according to Bloomberg Intelligence analysis. Sales at the combined entity are projected to reach $20 billion.

The Jefferies team has adjusted its number to account for the completion of the Baxalta transaction and expect high digit accretion, and they raised the long-term earnings per share growth estimate to 15.5%. They even think top and bottom line synergies could be higher and the lifitegrast launch could be a positive catalyst.

Shire investors receive a tiny 0.42% dividend. The $262 Jefferies price target is higher than the consensus target of $242.71. The shares closed Tuesday at $192.02.

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These are four solid value stocks, all among the leaders in their respective sectors. They make good sense for patient growth investors with a solid long-term time horizon.