With less than 60 days until the end of 2017, firms are starting to issue preliminary predictions for 2018. These should not yet be considered formal lists for 2018 because, frankly, there is just too much calendar between now and mid-January when formal picks are issued. Credit Suisse has issued its top picks at the firm, and while there are 101 companies listed as U.S. picks, there were 15 companies added and 15 deleted from the list.
24/7 Wall St. reviewed the top picks, and here we focus on the core additions. Credit Suisse’s eight new “number-one top picks” included four additions and four upgrades. While these are not being touted as the firm’s formal top picks for 2018, the timeline sure sets them up to be top contenders if all things remain the same through the end of 2017.
Note that Credit Suisse specifically tells its clients not to use these top picks as portfolios, because there are a rolling list of top picks at any given time. Every one of the firm’s U.S. research analysts identifies and ranks up to three top stock picks based on a six-month to 12-month outlook, and the prevailing pick is the best at that particular time.
This list has been kept in the same order these were presented, featuring the four new companies on the list first and then the four upgraded companies that already were among their top picks. All these stocks have Outperform ratings at Credit Suisse, and the firm’s target price on each is either consistent with or above the consensus analyst target prices.
Also included here is a brief note on what Credit Suisse sees, as well as trading history and the consensus analyst target price from Thomson Reuters. Upside projections were based on the price noted at Credit Suisse rather than using live share prices.
As a reminder, most Outperform and Buy ratings from traditional bulge bracket firms come with total return projections of 8% to 10% at this stage in the bull market. Most of these top picks have been given higher upside than that.
First Data Corp. (NYSE: FDC) was a new addition to the Credit Suisse number-one top picks. The firm’s $21 price target implied upside of just over 22.5%.
Credit Suisse rates First Data as Outperform due to its ability to deleverage while still making opportunistic acquisitions. The firm also sees potential for multiple expansion at the company while management is working to turn GBS around. Faster growth in GFS and NSS are also helping to sustain low- to mid-single-digits organic growth. That $21 price target is a 50-50 blend of 11 times 2018 EV/EBITDA and 14 times 2018 price-to-earnings (PE).
First Data shares were last seen trading at $17.24, within a 52-week range of $13.74 to $19.23, and the consensus analyst price target is $20.98.
HCA Healthcare Inc. (NYSE: HCA) is a new addition to the Credit Suisse number-one top picks as a market-leading play on the long-term secular growth in demand for medical services. The firm’s $95 price target implies 24% upside, and its sees HCA as poised to continue to generate above-average volume growth and market share gains.
Credit Suisse said:
The company has strong positioning in large urban markets and continues to invest in its existing hospital operations to improve access and expand its reach. Given the company’s low leverage profile coupled with its strong FCF generation and track record for returning capital to shareholders, capital deployment is a further differentiator for HCA. 2017 has been a relatively challenging year for HCA, with sluggishness in the London market (1H17) and hurricane impacts (2H17). We see these headwinds becoming tailwinds on Y/Y growth in 2018. Additionally, the company is on track to close on recent acquisitions, which will provide incremental Y/Y EBITDA growth in 2018. We expect HCA to report consolidated Y/Y growth at or above the high end of its 4-6% long-term EBITDA growth in 2018.
HCA shares were recently trading at $77.40, in a 52-week range of $67.00 to $91.03. The consensus price target is $88.74.
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