Investing

RBC Capital Markets Out With First Top Picks Equity List for 2020

Truist Financial

This top financial company makes its debut on the RBC Top Picks list. Truist Financial Corp. (NYSE: TFC) is a bank holding company incorporated in North Carolina and headquartered in Charlotte. It was formerly known as BB&T but changed its name in December 2019 upon the acquisition of SunTrust Banks.

The transition to the Truist brand will take about two years. Until then, customers of both BB&T and SunTrust will be served through their respective bank branches using the same apps, websites and services as before the merger closed.

As part of the regulatory approval process, the new company will sell off 30 SunTrust branches in North Carolina, Virginia and Georgia to First Horizon Bank and divest $2.4 billion in deposits to “mitigate the competitive effects of the merger,” according to the Federal Reserve.

RBC loves the merger and said this regarding valuation:

The current stock price does not reflect any upside to the conservatively targeted cost savings of $1.6 billion, in our view. Assuming that cost savings approach 35–40% of SunTrust’s expense base, the incremental expenses savings above the targeted $1.6 billion would range from $0.21 to $0.37 per share. Truist’s footprint is located in one of the strongest and fastest growing regions of the U.S. We expect the company to maintain a competitive advantage over many of its competitors headquartered outside its footprint due to its being physically located in the southeast part of the U.S.

Investors receive a 3.18% dividend. The $62 RBC price target is higher than the $58.08 consensus figure. Shares closed most recently at $55.73.

Gilead Sciences

This stock trades a very reasonable 9.36 times estimated 2020 earnings. Gilead Sciences Inc. (NASDAQ: GILD) is a biopharmaceutical company that discovers, develops and commercializes therapies for the treatment of HIV/AIDS, liver disease, cancer and inflammation. The acquisition of Kite Pharmaceutical in 2017 allowed for entry into the CAR-T space, indicating a renewed focus in oncology.

The company’s products include Stribild, Complera/Eviplera, Atripla, Truvada, Viread, Emtriva, Tybost and Vitekta for the treatment of human immunodeficiency virus (HIV) infection in adults; and Harvoni, Sovaldi, Viread and Hepsera products for the treatment of liver disease.

Investors receive a 3.88% dividend. The RBC price objective is $90. The consensus target price is $76.92, and the stock closed at $65.65 a share.

NCR

This is an old-school company with new world technology. NCR Corp. (NYSE: NCR) engages in the development, manufacture and sale of consumer transaction solutions. Its Software segment includes industry-based software platforms, applications and application suites for the financial services, retail, hospitality and small business industries.

The Service segment offers assessment and preparation, staging, installation, implementation and maintenance, and support solutions. The Hardware segment offers financial-oriented self-service ATM-related hardware, retail and hospitality-oriented point of sale terminal, a self-checkout kiosk and related hardware.

Late last year the company acquired U.K.-based edge virtualization technology provider Zynstra for about $129.3 million. The buyout is in line with the company’s strategy of acquiring firms that will enhance NCR’s product capabilities. NCR noted then that a subscription-based virtualization solution is an integral part of its next-generation store architecture for the retail and hospitality industries.

RBC has set its price target at $48. The consensus target is $40.25, and shares closed at $40.25.

These five top picks from the RBC Capital Markets team all make sense for growth investors looking to move to companies with more reasonable valuations. With 2020 starting off with heightened volatility, it’s good to look at new additions that have not been part of the “crowded trade” group.

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