Delta Air Lines
This company consistently ranks high with Wall Street, and the stock recently was added to the Merrill Lynch US 1 list. Delta Air Lines Inc. (NYSE: DAL) and the regional Delta Connection carriers offer service to 334 destinations in 64 countries on six continents. Headquartered in Atlanta, Delta employs nearly 80,000 employees worldwide and operates a mainline fleet of more than 700 aircraft.
Wall Street analysts have long lauded Delta for the most extensive hedging policy among the airlines, and it owns and operates a refinery in addition to a sizable hedging book. Merrill Lynch notes that while the stock has underperformed this year, if bookings and the economy spike in 2017, the company’s stock multiple stands to benefit the most among the major carriers.
Delta investors are paid a 1.63% dividend. Merrill Lynch recently raised its price objective to $66 from $55. The consensus target price is $55.94, and the stock closed most recently at $50.50.
This company, like other major defense prime contractors, has had a very solid year, and it also made the Q4 Best Ideas list and the US 1 list. General Dynamics Corp. (NYSE: GD) is a worldwide aerospace and defense company with over 96,000 employees worldwide. The company operates through four business groups: Aerospace, Combat Systems, Marine Systems, and Information Systems and Technology. The U.S. government is its largest customer, which should continue to bode well as the Republicans control both Congress and the White House.
Merrill Lynch team noted late in November:
We continue to view General Dynamics Aerospace segment, which includes Gulfstream, as undervalued. We reiterate our Buy. The company is trading at 16.3x price to earnings multiple on our 2018 estimates vs. the average of pure play defense companies at 19.5x P/E.
Investors are paid a 1.75% dividend. Merrill Lynch has a $200 price target, while the consensus estimate is at $186.06. The stock closed yesterday at $174.12.
Many on Wall Street feel this company deserves a premium multiple to its peers. Lowe’s Companies Inc. (NYSE: LOW) operates as a home improvement retailer, offering products for maintenance, repair, remodeling and home decorating. Categories include kitchens and appliances; lumber and building materials; tools and hardware; fashion fixtures; rough plumbing and electrical; lawn and garden; seasonal living; paint; home fashions; storage and cleaning; flooring; millwork; and outdoor power equipment. The company also offers installation services through independent contractors in various product categories.
The stock was hit hard during the past quarter, and the analysts at Merrill Lynch note that it is trading at a price-to-earnings discount to its rival Home Depot, as well as trading below its five-year and 10-year P/E averages. With earnings expected to grow at an 18% compounded annual growth rate through 2018, adding shares at current levels makes sense.
Lowe’s investors receive a 1.9% dividend. The Merrill Lynch price objective is $89. The consensus target is $79.71. Shares closed Thursday at $73.67.
These five solid ideas for 2017 all make good sense for growth portfolios. While the market has rallied a ton since the election, it may make sense to buy partial positions here and see if we don’t back up some next year.