Jefferies Has 5 Stocks to Buy That Should Raise Dividends and Earnings

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In a market that has fought its way back from a brutal 10% correction, investors are once again confronted with the reality that the market is expensive. While almost everybody on Wall Street sees high multiples being tempered by rising earnings from the tax reform package, it is still a classic stock-pickers market.

One of the best ideas when confronted with the current set of market metrics is to look for stocks that have upward earnings revisions and appear to have the potential to raise dividends, a sign of solid free cash flow.

In a new report from Jefferies, their chief global strategist Sean Darby is sticking with stocks that have those characteristics, and the report highlights five that are all rated Buy at Jefferies.

AbbVie

This is one of the top 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 develops and markets drugs in areas such as immunology, virology, renal disease, dyslipidemia and neuroscience.

One of the biggest concerns with AbbVie is what might eventually happen with anti-inflammatory therapy Humira, which has some of the largest sales for a drug ever recorded. Last year the patent board instituted Coherus’s Inter Partes Review against the Humira ‘135 patent. The problem with Humira is that biosimilars and generics are itching to enter the market.

The company reported strong fourth-quarter results that beat consensus sales and non-GAAP earnings per share estimates, mainly driven by strong Mavyret sales. Tax rate guidance of 9% for 2018 estimated to 13% in 2023 came in well above expectations.

Shareholders in AbbVie are paid a solid 3.16% dividend. The Jefferies price target for the shares is $130, and the Wall Street consensus target price is $125.60. The stock closed on Tuesday at $118.26 per share.

Amgen

This biotech giant remains a top stock for investors to buy and a safe way to play the massive potential growth in biosimilars. Amgen Inc. (NASDAQ: AMGN) has been a biotechnology pioneer since 1980 and has grown to be one of the world’s leading independent biotech companies. It has reached millions of patients around the world and is developing a pipeline of medicines with breakaway potential.

Amgen develops, manufactures and markets biologic therapies for oncology and inflammation. The company’s five key marketed products are among the top-selling pharmaceutical products in the world, with expected collective revenues of more than $22 billion in 2018.

Amgen also has billions in overseas cash, and it could see some big tax relief with a lower rate for repatriation of those funds back to the United States.

Amgen shareholders are paid a 2.84% dividend. Jefferies has a $200 price target for the stock. That compares with the posted consensus target of $194.64, as well as Monday’s closing share price of $185.79.