Jefferies Has 4 Top Value Stocks to Buy With Big Implied Upside

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KeyCorp

This top 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 has stayed positive on the shares:

We recently hosted meetings with management and continue to see a path for shares to rerate toward peers. While soft first quarter revenue weighed on sentiment and shares, we note that many of the issues should reverse, and we highlight that mgmt. reiterated fiscal 2019 guidance. Also, actions planned to get $200 million of costs out will be completed by the end of second quarter and management expects the cash efficiency ratio will get pushed into the 54-56% range in the second half of 2019.

KeyCorp investors receive a 4.10% dividend. The $20 Jefferies target price compares with the $19.14 consensus target. The shares closed most recently at $16.57.

Raytheon

This company has a diversified mix of business and remains a defense favorite at Jefferies. Raytheon Co. (NYSE: RTN) is an industry leader in defense, government electronics, space, information technology and technical services. The company operates in four principal business segments: Integrated Defense Systems, Intelligence, Information and Services, Missile Systems, and Space and Airborne Systems.

Top Wall Street analysts feel that the company could be one of the biggest winners as the global threat environment has been heightened substantially this year, and with 31% of total sales from international, the prospects remain very positive. Many cite the Patriot Missile deal signed with Poland as a good example, which could propel 2018 and beyond earnings.

With the huge forward earnings potential, Jefferies remains positive and said this in its report:

We met with the Chairman and CEO recently. We highlight that Raytheon’s pipeline totals $76 billion over 20 years and includes key programs such as Patriot, NASMS and THAAD. This could translate into $3.8 billion of incremental revenues per year or 13 points to growth, driving a sustainable revenue pipeline, which we think may be overlooked.

Shareholders receive a 2.13% dividend. Jefferies has set a $216 price objective. The consensus target is $208.24, and shares were last seen at $177.28.

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When top growth companies become value plays, there is often solid upside potential, and all four of these stocks are offering investors some of the best entry levels in years. With the potential for the market to remain volatile as the trade issues continue, it makes sense to shift some portfolio capital to the value arena.