These reports, excerpted and edited by Barron’s, were issued recently by investment and research firms. The reports are a sampling of analysts’ thinking; they should not be considered the views or recommendations of Barron’s. Some of the reports’ issuers have provided, or hope to provide, investment-banking or other services to the companies being analyzed.
Sherwin-Williams SHW-NYSE
Outperform Price $576.33 on June 23
by Baird Equity Research
Strength in the U.S. do-it-yourself market and diverse end-market exposure from the acquired Valspar coatings assets have partly offset challenges across other portions of Sherwin-Williams’ portfolio. We continue to believe that the company remains advantaged in the current operating environment, with 2020 earnings probably biased to the upper end of its current guidance of $19 to $21 a share. Noting that Sherwin-Williams’ earnings power is $25 to $27, we believe that our raised, $650 price target is realistic. That underlies our top pick designation.
BlackBerry BB-NYSE
Hold Price $4.92 on June 24
by Canaccord Genuity
BlackBerry reported solid results for the first quarter of its 2021 fiscal year. Strong licensing and solid enterprise sales helped offset the sharp decline in QNX revenue from the challenged auto market. [QNX software is used in driver-assistance and other systems.] While management has created a cogent long-term strategy, and the shares are potentially compelling for longer-term investors, we await more proof for upside to our estimates before becoming more constructive on the shares. Our $6 price target is based on roughly three times enterprise value-to-sales, based on our fiscal-2022 revenue estimate of $1.1 billion.
Lithia Motors LAD-NYSE
Buy Price $141.61 on June 25
by Benchmark
Lithia Motors provided a business update at the beginning of June. Since then, industry feedback has been increasingly positive. We have increased our earnings estimates to reflect better-than-expected unit sales in the new and used vehicle markets, as well as positive pricing.
Since 2013, Lithia has been the most aggressive dealer group, spending $2.3 billion on acquisitions that have contributed to its threefold increase in revenue. During its first-quarter earnings call, the company touched on topics that should provide above-market growth over several years: continuation of an active, disciplined acquisition strategy; expansion of [its system for buying and selling vehicles from the home]; permanent cost reductions of $200 million annually; and the expansion of a national branding strategy. We have increased our target price to $170 per share, up from $136, to reflect higher earnings assumptions.
Lockheed Martin LMT-NYSE
Four Stars (of five) Price $372.20 on June 19
by Morningstar
We view Lockheed Martin as the highest-quality defense prime contractor, given its exposure on the F-35 program and its missile business. We favor companies with growth profiles through a steady stream of contracts that are fulfilled over decades. The F-35, which accounts for about 30% of Lockheed Martin’s revenue, will be sustained through 2070.
Regulated margins, mature markets, customer-paid research and development, and long-term revenue visibility allow the defense primes to deliver a lot of cash to shareholders In the first quarter, earnings per share grew 1.5%, to $6.08 a share, on 9.1% sales growth. Lockheed Martin slightly grew its record backlog, which gives us continued confidence in its future revenue-generating capacity. Although the company reduced its sales guidance slightly, it maintained its guidance for operating profit and cash from operations.
The three biggest growth opportunities we see for Lockheed Martin are the F-35, a large potential contract win on the Future Vertical Lift program, and the hypersonic missile and missile-defense programs. We are maintaining our $429 fair value estimate.
Codexis CDXS-Nasdaq
Buy Price $11.12 on June 24
by H.C. Wainwright
Codexis has entered into a partnership with Molecular Assemblies (a private company) to engineer enzymes for the synthesis of DNA. Molecular Assemblies focuses on developing next-generation technology to produce synthetic DNA for a broad range of industries, including synthetic biology, therapeutics, diagnostics, agriculture, bio-computing, and DNA data storage. In our view, combining Codexis’ protein engineering expertise with Molecular Assemblies’ advanced chemistry know-how could [help Codexis] become a serious player in DNA synthesis, which we believe is still in the early stages of growth. Price target: $21.
Wingstop WING-Nasdaq
Buy Price $133.88 on June 23
by Stifel
We are raising our fiscal second-quarter EPS estimates to reflect a higher margin projection at company-owned restaurants, driven by lower commodity costs and higher per- meal spending by customers. The brand is building greater awareness among heavy fast-food consumers. It recently created a new incentive program to encourage existing franchisees to pull forward their development plans, which we expect to be utilized once construction resources become more available. Target price: $140.
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