5 Jefferies Franchise Picks to Buy With Virtually No Foreign Tariff Exposure
Like it or not, at least for the time being, it appears that the U.S. president is staying true to his word and slapping 25% tariffs on up to $200 billion worth of Chinese goods, and with good reason. It was reported last week that the Chinese had started reneging on some already agreed upon parts of the trade deal, and two days of talks at the end of the week was apparently not enough to get something permanent done.
Despite the imposition of tariffs, the market did rally back from a big hole on Friday. We decided to scan the Jefferies Franchise Picks list of top stocks to Buy that are based in the United States and do the vast majority of their business here. We found five that are solid picks for growth accounts looking to hunker down while waiting for trade deals to be finished, not only with China but with the European Union, Mexico and Canada.
Casey’s General Stores
Jefferies has remained positive on this hot consumer staples stock. Casey’s General Stores Inc. (NASDAQ: CASY) and its subsidiaries operate convenience stores under the name Casey’s General Store in approximately 10 Midwestern states, including Iowa, Missouri and Illinois.
The company operates approximately 1,930 such stores, as well as two distribution centers through which it supplies grocery and general merchandise items to its stores. Its general store typically carries over 3,000 food and nonfood items. The stores sell regional brands of dairy and bakery products, and approximately 90% of the stores offer beer. Its nonfood items include tobacco products, health and beauty aids, school supplies, housewares, pet supplies and automotive products.
Shareholders receive just a 0.86% dividend. The Jefferies price objective for the shares is $147, and the Wall Street consensus price target is $139.20. The stock closed trading last Friday at $134.88.
Floor and Decor
Jefferies continues to view this company as a beneficiary of storm-related events, such as those that have plagued the Midwest this spring. Floor and Decor Holdings Inc.’s (NYSE: FND) initial concept focused on buyouts of product, but the company has since evolved to direct sales.
The stores carry all major categories of hard flooring (tile, wood, laminate and stone), along with decorative items and the accessories needed to complete a project. Some 40% of sales are to do it yourself and 60% are to pros. The company currently operates 84 stores and is targeting 400 or more stores over the long term.
After a mixed bag first-quarter earnings report, the analysts said this:
Following a 30%+ run in shares since the fourth quarter print, shares were off as management revised the top-line guide. Comparisons for the quarter came in at +3.1%, well-ahead of peers and against a tough 15.6% compare. Gross Margins of 42.2% came in well-ahead of Street and guide. The light second quarter guide reflects cautious near-term optimism given the housing hangover from late 2018/early 2019, in our view. That said, we think the low bar and set-up for sequential improvement positions the company well for the second half. We see plenty of tailwinds to drive shares higher and we would be buyers on any weakness.
Jefferies has a $53 price target, and the consensus target is $48.Shares closed on Friday at $41.38, down almost 2% on the day.
This gaming and hospitality company has a diverse property portfolio, with casinos and resort stretched across the country. Eldorado Resorts Inc. (NYSE: ERI) owns and operates gaming facilities located in Ohio, Louisiana, Nevada, Pennsylvania and West Virginia.
The company owns and operates approximately 503,000 square feet of casino space with approximately 20,000 slot machines and video lottery terminals, more than 550 table and poker games, 45 restaurants and 6,500 hotel rooms. As of December 31, 2016, it owned and operated various properties, including Eldorado Resort Casino Reno; Silver Legacy Resort Casino; Circus Circus Reno; Eldorado Resort Casino Shreveport; Mountaineer Casino, Racetrack & Resort; Presque Isle Downs & Casino; and Eldorado Gaming Scioto Downs.
The company also reported a strong quarter with earnings growth and cost savings among the highlights for investors. Many analysts cite the casinos’ proximity to the red-hot Reno and Blackhawk markets as a big positive.
The $57 Jefferies price objective is near the $56.75 consensus target. The stock closed at $48.27 on Friday.
This lodging company is a solid pick, especially when people are moving around the country for new job opportunities. Extended Stay America Inc. (NASDAQ: STAY) is one of the largest owner/operators of extended stay hotel properties in the United States, encompassing 21% of the extended stay segment and 1.5% of U.S. room supply. Given the offerings available at the company’s hotels, the top line is driven all by room revenues rather than ancillary spend, which creates property-level margins significantly above competitors.
The company reported solid first-quarter results and reaffirmed guidance of $1.2 billion to $1.5 billion for the rest of 2019. In addition, the company raised the dividend from $0.22 to $0.23 per share, or a 5.07% yield. With operating margins at a healthy 50.1%, the stock makes sense for conservative accounts.
Jefferies has set its price target at $26, The consensus target is $21.36, and the stock was last seen at $18.15.
This midcap bank makes good sense for the rest of 2019. KeyCorp (NYSE: KEY) operates as the bank holding company for KeyBank National Association, which provides deposit, lending, cash management and investment services to individuals, small and medium-sized businesses.
The company also provides a broad range of sophisticated corporate and investment banking products, such as merger and acquisition advice, public and private debt and equity, syndications and derivatives to middle market companies in selected industries throughout the United States under the KeyBanc Capital Markets banner.
The top managers are attracted to the larger regional banks, as valuations look very reasonable and cost-saving plans are helping to make forward estimates look very achievable. With overall credit remaining solid, earnings and loan deposit and fee growth all are positive metrics for the bank.
Jefferies remains bullish on the stock and said this earlier this year:
We believe KEY has the potential to become a higher growth story, driven by synergies related to its acquisition of First Niagara in 2015, and recently elevated business investment. The bank has an attractive valuation, trading at a ~2x discount to its peer average on consensus price to earnings.
KeyCorp investors receive a 3.93% dividend. The Jefferies target is $18. The consensus target is $19.314, and shares closed at $17.30.
These five companies get almost 100% of their revenues from in the United States, and they have little if any exposure to foreign imports that may be subject to tariffs. These top stocks to Buy at Jefferies make sense for accounts looking for growth but with lower risk.