All the companies that we follow here at 24/7 Wall St. keep a list for their institutional and high net worth retail clients of high-conviction stock picks. Generally, analysts like these companies on a longer-term basis, and they usually have big upside to the assigned target prices. Since the beginning of the year, many Wall Street firms have tweaked their lists to account for potential changes in 2020, and one company has added some outstanding stocks we feel could have outsized upside.
In a recent Jefferies research note, the analysts make a big move by adding a top retail leader, an outstanding defense play and a storied electrical equipment and parts maker to the Franchise Picks family. Here we cover these new additions and also highlight two additional stocks that were added to the list recently and in December.
Lowe’s
This company has a low 6% of foreign sales, which has helped in a strong-dollar scenario. Lowe’s Companies Inc. (NYSE: LOW) is a leading home improvement retailer with more than 2,000 stores in North America. The company has tempered its new store opening plans and is focusing investments on technology and e-commerce capabilities, in addition to improving its retail store productivity.
Lowes offers products for maintenance, repair, remodeling and home decorating. It provides home improvement products under the categories of kitchens and appliances, lumber and building materials, tools and hardware, fashion fixtures, rough plumbing and electrical, lawn and garden, seasonal living, paint, home fashions, storage and cleaning, flooring, millwork, and outdoor power equipment. The company also offers installation services through independent contractors in various product categories.
Jefferies likes the setup for this year and noted this in its report:
Analyst Jonathan Matuszewski adds Lowes to the Franchise Pick list as he believes evidence of the company’s transformational turnaround will continue to unfold. In addition, he believes the backdrop for remodeling demand remains conducive, due to aging household inventory, millennial household formation and increasing home equity values. He expects that comp sales to grow in the ~3% range, aided by improved execution, better merchandising, enhanced in-stock inventory positions, a greater focus on the Pro and localization efforts.
Investors receive a 1.84% dividend. The Jefferies price target for the stock is $143, while the Wall Street consensus target is $132.52. The stock was last seen trading at $119.63.
Energizer
Everybody is familiar with the Energizer Bunny, and most investors have used the company’s battery products. Energizer Holdings Inc. (NYSE: ENR) is primarily a battery company. With a 33% global market share and its strong brand name and experienced management team, it is focused on maintaining category health and profitability, and ultimately employing its strong free-cash-flow to drive shareholder returns through dividends, share buybacks and growth-accretive mergers and acquisitions.
Last year the company acquired Spectrum Brands’ battery and auto care businesses, adding the Rayovac, Armor All and STP brands to the company’s portfolio. Jefferies likes the growth potential and its report said this:
Battery fundamentals have improved markedly in recent years, owing to growth in Internet of Things and devices, demographics, mix and an increase in storms. Management sufficiently de-risked its fiscal year 2020 guidance, issued a better than anticipated outlook for fiscal 2022, and noted that the auto/battery integration is progressing well.
Shareholders receive a 2.43% dividend. Jefferies has a $65 price objective, and the consensus target price is $55.27. Tuesday’s last trade came in at $49.48.
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