Investing

Jefferies Top Stocks to Buy May Have Market-Moving Catalysts

PNM Resources

PNM Resources Inc. (NYSE: PNM) is primarily involved in the generation, transmission and distribution of electricity. The company generates electricity using coal, nuclear fuel, natural gas, solar, geothermal and wind energy sources. It also provides regulated transmission and distribution services. As of December 31, 2014, the company’s owned or leased facilities had a total net generation capacity of 2,397 megawatts. It serves approximately 753,000 residential, commercial and industrial customers, as well as end-users of electricity in New Mexico and Texas.

The stock had been held back as investors awaited a ruling from regulators. The company finally has received the go-ahead from the New Mexico Public Regulation Commission to increase electricity rates. However, the approved rate is lower than the 14.4% rate hike proposed by the company. The approved rate will increase PNM Resources’ annual revenues by $65.7 million and is slightly above 50% of the company’s proposed increase of $123.5 million.

In the report The Jefferies analysts also noted:

Stock offers 7-9% EPS growth and is trading at a 7% discount. The plan to add a Facebook data center could add to earnings and/or rate base and should help justify future capex needs.

Investors receive a 2.61% dividend. The Jefferies price objective is $37.50, and the consensus target is $36.75. The shares closed most recently at $33.69, but may be volatile Thursday, so investors may want to watch how it trades before stepping in.

Viacom

This company has had a ton of headline risk and may be offering patient investors an interesting entry point. Viacom Inc. (NASDAQ: VIAB) creates television programs, motion pictures, short-form video, applications, games, consumer products, social media, and other entertainment content. It operates in two segments: Media Networks and Filmed Entertainment.

The Media Networks segment provides entertainment content and related branded products through approximately 230 programmed and operated TV channels, including MTV, VH1, CMT, Logo, BET, CENTRIC, Nickelodeon, Nick Jr., TeenNick, Nicktoons, Nick at Nite, Comedy Central, TV Land, SPIKE, Channel 5, Tr3s, Paramount Channel and VIVA, as well as through online, mobile and apps.

Shari Redstone is moving to potentially undo the last big strategic move of her ailing father, Sumner Redstone. National Amusements, the Redstone family’s holding company, is poised to urge the boards of the companies it controls, Viacom and CBS, to explore a merger.

The Jefferies team said this in the report:

The company will be looking to delever and to address the public versus private market gap which plagues the stock. Company could look to unlock value from its unconsolidated assets, including potentially selling Viacom18. We do think a recombination with CBS would be 15-25% accretive, but that it’s unlikely in the near-term.

After the recent dividend cut, Viacom shareholders are now paid a 2.21% dividend. The Jefferies price target is $49, and the consensus target is $43.97. The share closed Wednesday at $36.56.

These four companies have plenty on their proverbial plates and could be poised to move higher if their near-term and longer-term catalysts play out. For the most part, these companies are more suited for accounts with a higher risk tolerance.