With earnings for the third quarter over, and the fourth quarter of 2016 in full swing, many of the top companies we follow on Wall Street are making some changes to the lists of their high conviction stock picks for clients. With the market continuing to trade to all-time highs, it makes sense to examine the lists and make some changes, as the new administration could prove to be a very volatile component.
In a recent research note, the analysts at Jefferies made a big move by adding a top business services company to the portfolio. We cover this new addition, and we also screened the list for the top dividend-paying companies that also have solid upside potential.
This top business service company is added to the Franchise Picks list and may be offering investors an outstanding entry point. Fleetcor Technologies (NYSE: FLT) provides fuel cards, commercial payment and data solutions, stored value solutions, and workforce payment products and services. The company sells a range of customized fleet and lodging payment programs; and offers card products to purchase fuel, lodging, food, toll, transportation, and related products and services at participating locations.
The company also offers telematics solution that allows fleet operators to monitor the capacity utilization and movement of vehicles and drivers; vehicle maintenance services; prepaid fuel and food vouchers, and cards; and workforce payment product related to public transportation and toll vouchers. In addition, it provides proprietary equipment that reduces unauthorized and fraudulent transactions to over-the-road trucking fleets, shipping fleets, and other operators of heavily industrialized equipment, including sea-going vessels, mining equipment, agricultural equipment, and locomotives.
The Jefferies team noted the recent steep drop in the company’s stock price in their research report:
Fleetcor Technologies has declined 15% since the third quarter earnings and analyst Ramsey El-Assal believes that these factors will be temporary and that there could be upside to earnings in fiscal 2017.(Ramsey at $8.30 vs street at $8.18) driven by multiple factors. Ramsey still believes that the company will benefit from the secular growth in electronic payments which drives organic growth of 10% top line and low to mid-teens earnings-per-share growth.
The Jefferies price objective for the stock is posted at $185, and the Wall Street consensus is at $185.39. The shares closed Monday at $152.32.
Here are the top three dividend paying stock in the Franchise List portfolio.
This stock is one of the top global pharmaceutical stocks picks across Wall Street. 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 employs more than 26,000 people worldwide and markets medicines in more than 170 countries.
One of the biggest concerns with AbbVie is what might eventually happen with anti-inflammatory therapy Humira, which generated $14 billion in sales in fiscal 2015. That $14 billion is the most any drug has recorded during a single year and represents a gigantic part of the company’s overall earnings. The problem with Humira is that biosimilars and generics are itching to enter the market with Amgen Inc. (NASDAQ: AMGN) leading the charge, and some Wall Street analysts project that AbbVie may have a difficult time stopping that trend.
Back in May the patent board instituted Coherus’ Inter Partes Review or IPR against the Humira ‘135 patent. The outcome of the IPR is expected next year. While most analysts remain positive on Humira duration, the expected litigation uncertainty could continue to create an overhang on the stock, which does give investors chances to pick up shares lower.
AbbVie investors are paid an outstanding 4.23% dividend. The Jefferies price target is $90, and the Wall Street consensus price target is posted at $70 Shares closed Monday at $60.42.
This top aerospace industrial is finally up slightly for 2016 after some rough going earlier in the year. The Boeing Company (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. The company operates in five segments: Commercial Airplanes, Boeing Military Aircraft, Network & Space Systems, Global Services & Support, and Boeing Capital.
Top analysts have noted that the commercial aerospace business is cyclical and there are some indications that airlines may have expanded their wide-body fleets too aggressively in recent years, suggesting a period of weaker demand going forward. In addition, the fall in oil prices reduces the incentive to upgrade to the most fuel-efficient planes. Boeing is launching refreshed versions of the 737 and the 777 in the next couple of years.
The company was recently awarded a $478.79 million contract for engineering manufacturing and development of a Passive/Active Warning and Survivability System for the F-15 Eagle fighter jet. With Donald Trump’s pledge to rebuild the military a positive for the aerospace and defense sector, the stock looks like a solid valuation play at current levels.
Boeing investors are paid a solid 3% dividend. The Jefferies price target is set at $165, and the consensus price target for the stock is $151.22 The shares closed trading on Monday at $147.02.
This company is one of the two energy sector stocks in the Franchise Picks portfolio, and is still down almost 30% from highs printed two years ago. Halliburton Company (NYSE: HAL) is one of the world’s largest providers of products and services to the energy industry. The company serves the upstream oil and gas industry throughout the lifecycle of the reservoir – from locating hydrocarbons and managing geological data, to drilling and formation evaluation, well construction and completion, and optimizing production through the life of the field.
The oil field giant announced last year a $1 billion investment to develop huge potential oil fields in Ecuador and has entered into a long time deal with Petroamazonas, an Ecuador-based company involved in the exploration and development of the country’s oil reserves. With oil looking to stabilize in the $45 to $50 range, this top oil service company is a great stock to buy on sale, as the oil recovery has shown some legs.
Halliburton is the second largest provider of oil services and the number one pressure pumping services provider worldwide. Revenues in 2015 totaled $27.8 billion and EBITDA was $7.2 billion. For investors looking for an oil field services company to add this is arguably the best.
Halliburton shareholders are paid a 1.46 dividend. The Jefferies price target is $58. The Wall Street consensus is at $55.17. The shares closed yesterday at $50.10.
We have stressed to our readers the need for caution as a tired bull market deals with a new president and other end-of-the-year issues. The Franchise List has outperformed the S&P 500 big since its 2013 debut, and all of these companies make good sense now.