15 Top ESG Stocks That Look Undervalued for 2020

McDonald’s: 8.6% Implied Upside

McDonald’s Corp. (NYSE: MCD) may seem odd to be on an ESG report considering that the Happy Meal and other fast-food offerings haven’t exactly been great for America’s battle of the bulge. There is also its recent CEO firing over its relationship policies, although that likely improved its governance score. With shares at $216.00, the consensus target price of $229.70 leaves an implied upside of 6.3%, before taking its 2.3% dividend yield into consideration. Its 52-week and all-time high are $221.93.

The analyst community did not panic after the big share price drop in McDonald’s, and premium price targets are out there from Baird ($230), BMO ($235), Guggenheim ($239) and Merrill Lynch ($240). After earnings, Deutsche Bank kept its Hold rating, and it has only a $199 target price for the Golden Arches.

Merck: 22.4% Implied Upside

Merck & Co. Inc. (NYSE: MRK) has been in limbo since announcing a restructuring and breakup around earnings. Now that it is down to $82.00 a share, it is more than $10 from a 52-week low. The $97.94 consensus target price implies upside of 19.5%, before adding in its 2.9% dividend yield for total return investors. One caveat is that companies enduring a restructuring often have to get past a “wait and see” period before new investors will give a look. After all, restructurings can be bumpy. UBS recently lowered its target on Merck to $96 from $99. That was after having raised the target to $99 from $94 in late January.

Nike: 8.7% Implied Upside

Nike Inc. (NYSE: NKE) was last seen up at $102.50, which is still under its recent all-time high of $105.62. The consensus target price of $110.37 implies upside of 7.7%, before factoring in a dividend yield of just under 1%. While Nike has exposure to the coronavirus in China, UBS lifted its target price to $136 from $103 on February 3, and Deutsche Bank had a $120 target at the end of 2019, before the coronavirus news was even out in the public.

Union Pacific: 10.5% Implied Upside

Union Pacific Corp. (NYSE: UNP) was last seen trading at $183.50, and its $198.90 consensus analyst target leaves an implied 8.4% upside, before considering its 2.1% dividend yield. This is the largest railroad by market value, with a market cap of nearly $127 billion. Despite what is expected to be a weak year in rail shipments trends, some above-consensus target prices were seen: Deutsche Bank (to $215 from $185), BMO (to $220 from $188) and Argus (to $205 from $190).

U.S. Bancorp: 10.8% Implied Upside

U.S. Bancorp (NYSE: USB) may be smaller than the mega-banks, with its $86 billion market cap, but the $54.80 share price and $59.03 consensus target price suggest implied upside of 7.7%, before even factoring in the 3.1% dividend yield. It is one of the few large banks that was expected to still survive had the bailouts not been made a decade ago. Credit Suisse was not so pleased with earnings and downgraded the stock to Underperform with a $52 target price, while Morgan Stanley’s $62 target was trimmed to $61.

Visa: Over 8% Implied Upside

Visa Inc. (NYSE: V) and Mastercard are nearly identical in their characteristics as ESG investments, but analysts have a higher implied upside of 7.8% (versus less than 4% for Mastercard) for Visa. With shares as $214.00 apiece, Visa’s consensus analyst target is $228.55. The dividend yield is still rather small at just 0.56%. After earnings, Wells Fargo raised its target to $230 from $213, but both Oppenheimer and KeyBanc see Visa as more or less at fair value.

Walt Disney: 15% Implied Upside

Walt Disney Co. (NYSE: DIS) saw its shares surge into and after the launch of its Disney+ streaming service, but they have been range-bound between $140 and $150 for most of the past 90 days. At $141.40 a share, the consensus target price of $160.92 implies upside of 13.8%, before factoring in its 1.2% dividend yield.

After earnings, Rosenblatt raised its target to $180 from $175, and Wells Fargo raised its target to $180 from $175, based on strong Disney+ subscriptions. While most analysts are positive here, Disney does face a double-whammy against the coronavirus in China as the Disney theme park and all movie theaters were shut down during the scare.

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