Merrill Lynch Issues Top 8 US Stock Ideas for Q3 2018
Merrill Lynch is above Honeywell’s consensus analyst target of $172. Over the past few years, organic growth has been the key bear point on the stock. However, over the past quarter, Merrill Lynch has seen an acceleration at Honeywell Aero driven by business jets and defense, among other things, which it believes could and should translate into Honeywell having consistent top quartile organic growth performance in 2018 and 2019. Merrill Lynch thinks this could drive positive earnings revisions and benefit Honeywell’s multiple.
Marvell Technology Group Ltd. (NASDAQ: MRVL) has a $28 price objective at Merrill Lynch, which may be barely above the consensus target price of $27.85, but it represents implied upside of 31% from the recent $21.40 share price.
The firm recently met with Marvell CEO Matt Murphy and the takeaways were as follows: enthusiastic about core growth/margin expansion and positive on the Cavium deal. The firm sees Marvell as an enhanced opportunity to buy a differentiated small/midcap stock with leadership in enterprise storage, security, networking, 4G/5G and cloud/data center, as well as having negligible exposure to the volatile consumer/smartphones markets.
Nucor Corp. (NYSE: NUE) is a name that has been front and center in discussions about the trade war and tariffs in steel and metals. Merrill Lynch is rather positive, with a Buy rating on Nucor, and the firm’s $78 price objective implies roughly 24% upside compared with the more recent $63 share price. Nucor’s consensus target price is $77.70, but its 52-week high is right at $70.
The firm believes that Nucor’s near-term earnings can continue to top expectations, with elevated steel prices and being relatively defensive because of its variable costs and variety of end markets and products. Merrill Lynch also sees an increasing likelihood that U.S. prices stay high under tariffs and the firm expects to see a solid free cash flow outlook and strong balance sheet.
SVB Financial Group (NASDAQ: SIVB) recently has proven its weight as a top bank in 2018, but the Merrill Lynch price objective of $350 implies 21% upside from the more recent $289 share price.
The firm sees the parent of Silicon Valley Bank being among the best secular growth stories in the banking industry, with significantly above-average earnings growth leading the price even higher. Merrill Lynch noted the possibility of accelerated growth as a rising return on equity profile removes capital constraints at the same time the bank can secure larger clients and grow relationships. That said, investors should consider that SVB Financial shares are currently up 25% so far in 2018 and are more than 60% higher than a year ago.
United Technologies Corp. (NYSE: UTX) has a $195 price objective at Merrill Lynch, and that is handily above the consensus target price of roughly $149.50. It represents a whopping 55% upside from the recent $126 share price, not including the 2.2% dividend yield, and this represents the highest analyst target price among Wall Street’s sell-side analysts.
Merrill Lynch likes UTC’s balanced growth, end-market exposure, operating leverage and execution. The firm went on to say that the company has strong market positions in both aerospace/defense and global infrastructure and noted that its diverse markets should provide a solid hedge for UTC during periods of uncertainty. Merrill Lynch also sees a conservative balance sheet and strong free cash flow conversion allowing for continued share buybacks and mergers and acquisitions.