All Wall Street firms we follow here at 24/7 Wall St. keep a list for their institutional and retail clients of high-conviction stock picks. These are generally the stocks they not only like on a longer term basis, but those that usually have big upside to the assigned target price. Since the beginning of the year, many analysts have tweaked their lists to account for potential changes in 2018, and one company has added a new stock we feel could have outsized upside potential.
In a recent research note, the analysts at Jefferies make a big move by adding a top retail company Ulta Beauty Inc. (NASDAQ: ULTA) to its well-respected Franchise Picks list of stocks to Buy.
If there is any company to own in the retail sector, this may be the one. Ulta Beauty is a holding company for the Ulta Beauty group of companies. It is a beauty retailer that offers cosmetics, fragrance, skin care, hair care products and salon services. The company offers approximately 20,000 products from over 500 beauty brands across all categories, including its own private label. Ulta Beauty also offers a full-service salon in every store featuring hair, skin and brow services.
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Ulta Beauty operates approximately 970 retail stores across over 48 states and the District of Columbia and also distributes its products through its website, which includes a collection of tips, tutorials and social content. The company offers makeup products, such as foundation, face powder, concealer, color correcting, face primer, blush, bronzer, contouring, highlighter, setting spray, shampoos, conditioners, hair styling products, hair styling tools and perfumes.
The Jefferies price target on Ulta Beauty is a stunning $300, while the Wall Street consensus price objective is $270.82. The shares trade at $221.75 on Monday morning.
Furthermore, we screened the Franchise Picks List for the highest dividend-paying stocks.
AbbVie
This is one of the top pharmaceutical stock 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 are paid a solid 3.38% dividend. Jefferies has a $130 price target on the shares, and the posted consensus price target is $125.90. The stock traded on Monday at $114.40.
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Chevron
This integrated giant is a safe way for investors looking to stay or get long the energy sector, and it has a big Permian Basin exposure. Chevron Corp. (NYSE: CVX) is a U.S.-based integrated oil and gas company with worldwide operations in exploration and production, refining and marketing, transportation and petrochemicals.
The company sports a sizable dividend and has a solid place in the sector when it comes to natural gas and liquefied natural gas. Some on Wall Street estimate the company will have a compound annual growth rate of over 5% for the next five years.
While the company reported fourth-quarter earnings that missed consensus estimates, cash flow covered capital expenditures and the dividend. Production from the Permian Basin continues to exceed trajectory. Chevron provided investors with a positive update at the March 6 investors day.
Chevron shareholders receive an outstanding 3.88% dividend. The $135 Jefferies price target is in line with the $135.26 consensus price target. The shares were trading at $113.65.
Ingersoll-Rand
This is one of the many top companies that have restructured and are now based in Ireland. Ingersoll-Rand PLC (NYSE: IR) is another top industrial stock to buy and, with the housing market continuing to grow, the company’s wide range of portfolio products should continue to sell well.
Many on Wall Street also see the stock as a good play on the replacement, upgrade and, ultimately, growth in the commercial and residential air conditioning markets. Trends in these markets have been highly correlated with overall commercial construction.
Ingersoll Rand has an outstanding portfolio of global brands and holds leading market share in all major product lines. The geographic and industrial diversity coupled with a large installed product base provides solid growth opportunities for the company within service, spare parts and replacement revenue streams.
Ingersoll-Rand investors are paid a 2.01% dividend. Jefferies has set its price objective at $110. The consensus price target is $108.36, and shares were last seen trading at $88.95.
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Texas Instruments
This old-school chip tech company was a recent addition to the Jefferies Franchise List. Texas Instruments Inc. (NASDAQ: TXN) is a broad-based supplier of semiconductor components, ranging from digital signal processors to high-performance analog components to digital light-processing technology and calculators. Some 65% of Texas Instruments sales are exposed to the well-diversified, business-to-business industrial, automotive, communications infrastructure and enterprise markets.
Jefferies remains bullish on the company despite quarterly results that some on Wall Street did not care for. The report noted this:
Analyst Mark Lipacis recently added the stock to the Franchise Pick list as he believes the company is uniquely positioned to benefit from several secular drivers as the industry shifts towards the next phase of growth-the Internet of Things-and cyclical demand from industrial capex picks up. He notes that the Auto and Industrial businesses grew by 18-21% in 2017. Further, he expects the company to expand gross margins by 10% as consolidation in semis drives further pricing power.
Shareholders are paid a 2.25% dividend. The Jefferies price objective is $150. The consensus price target is $120.58, and the stock was trading at $108.10.
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A new addition to the Franchise list portfolio and four additional dividend stocks that the Jefferies team views as their top high conviction picks. They all make good sense for aggressive long-term stock portfolios.
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