4 Buys in a Watchful Market

Sept. 15, 2017 11:34 p.m. ET

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. Many of the reports may be obtained through Thomson Reuters at thomson.com/financial. Some of the reports’ issuers have provided, or hope to provide, investment-banking or other services to the companies being analyzed.


Eli Lilly



LLY -0.7583965330444203%



Eli Lilly & Co.


U.S.: NYSE


USD82.44


-0.63
-0.7583965330444203%



/Date(1505509273754-0500)/


Volume (Delayed 15m)
:
4764292



AFTER HOURS



USD82.44



%


Volume (Delayed 15m)
:
610212




P/E Ratio
36.14045855069922

Market Cap
91459157029.7275


Dividend Yield
2.523047064531781%

Rev. per Employee
524236









More quote details and news »


• LLY-NYSE
Long-Term Buy • Price $82.17 on Sept. 12
by Hilliard Lyons
At the European Society for Medical Oncology Annual Congress, Lilly presented strong data from a key trial on its cancer drug Abemaciclib. As a reminder to investors, while cross-trial comparisons are difficult to make, the presentation provided physicians and investors the best opportunity to compare Abemaciclib to the other CDK4/6 inhibitors, and we think it can take some market share from competitors in this niche.

Lilly closed on Sept. 12 at 19.1 times our next 12 months’ non-GAAP earnings-per-share estimate. Based on our expectations for its growth, and risk profiles that we view as low relative to the industry, we believe that its price/earnings ratio is set for expansion. Our two-year price target is derived through two methodologies: 50% discounted free cash flow and 50% forward P/E. We assign the shares a two-year price target of $96, an increase of $2 from our previous target, and we maintain our Long-Term Buy rating.


Chubb



CB 0.5042369913859513%



Chubb Ltd.


U.S.: NYSE


USD143.51


0.72
0.5042369913859513%



/Date(1505509303732-0500)/


Volume (Delayed 15m)
:
2197164



AFTER HOURS



USD143.51



%


Volume (Delayed 15m)
:
110514




P/E Ratio
12.616263736263736

Market Cap
66456745388.7477


Dividend Yield
1.978956170301721%

Rev. per Employee
1040900









More quote details and news »


• CB-NYSE
Buy • Price $147.01 on Sept 12
by Sandler O’Neill
As is typical following large catastrophic events, we anticipate that Chubb, along with other insurers, will announce an estimate for their catastrophe losses before reporting third-quarter earnings. We continue to like Chubb’s stock for the following reasons:

First, both the old Chubb and ACE, its acquirer, had a number of franchise businesses—including high-net worth retail, directors’ and officers’ insurance, and accident and health insurance—that should generate higher-than-peer returns with less volatility over the course of the insurance cycle.

Second, Chubb is now one of the largest insurers, with a market cap of more than $65 billion. We think that Chubb’s size means it will be a natural core holding for most large-cap portfolio managers. The only other property-casualty insurer with a similar market cap is American International Group, and that is a more complicated story.

Third, we continue to believe in opportunities for more cost reductions at Chubb as the merger proceeds. This bore true in the second-quarter 2017, when Chubb updated its expectation for approximately $875 million of cost cuts by 2018 from the $800 million previously projected. In fourth-quarter 2016, Chubb reduced its pension costs, which should bolster earnings by about 14 cents per share annually.

Our $163 price target is based on applying a multiple of just under 145% to our one-year forward (third-quarter 2018) book-value estimate of $113.86.


Southern Co.



SO 0.47619047619047616%



Southern Co.


U.S.: NYSE


USD50.64


0.24
0.47619047619047616%



/Date(1505509816664-0500)/


Volume (Delayed 15m)
:
6687604



AFTER HOURS



USD50.64



%


Volume (Delayed 15m)
:
557152




P/E Ratio
77.9076923076923

Market Cap
50373491075.8575


Dividend Yield
4.581358609794629%

Rev. per Employee
705294









More quote details and news »


• SO-NYSE
Buy • Price $49.42 on Sept. 13
by Guggenheim
We upgrade the shares of the electricity generator and distributor to Buy from Neutral and raise our price target to $56 from $49, as we become increasingly comfortable with the path forward for nuclear-power construction in Georgia, following recent meetings with management as well as various commissioners at the Georgia Public Service Commission.

We have been very entrenched in this process and believe the timing is right. Our call is premised on: 1) nuclear construction risk has been abating; 2) concerns about technical equity overhang are well overdone; and 3) concern around a suspended coal-gasification project with Kemper is now in the rearview.

Our upgrade is a valuation call on a catalyst-driven name. We believe that the inflection point is finally here, with shares trading at a 15% discount to regulated peers. We see no need to wait longer, especially given a lack of unique ideas in the sector.


Iconix Brand Group



ICON 2.8933092224231465%



Iconix Brand Group Inc.


U.S.: Nasdaq


USD5.69


0.16
2.8933092224231465%



/Date(1505509200630-0500)/


Volume (Delayed 15m)
:
686485



AFTER HOURS



USD5.69



%


Volume (Delayed 15m)
:
99956




P/E Ratio
N/A

Market Cap
315718766.74675


Dividend Yield
N/A

Rev. per Employee
2058310









More quote details and news »


• ICON-Nasdaq
Buy • Price $5.72 on Sept. 13
by FBR
Iconix is a brand-management company. It markets a portfolio of branded products that it either licenses or owns, including men’s and women’s apparel, sports gear, and entertainment.

We are reiterating our Buy rating, earnings estimates, and $8.50 price target on Iconix shares after meeting with management. With financial pressures basically cured for the near term and the company focused on driving organic revenue growth and new licensing agreements for key brands, we believe that Iconix shares, trading under 8.5 times our somewhat conservative 2018 EPS projection, represent a compelling investment with a current management team that is attuned to a shifting business model that continues to provide material visibility and free cash flow.

Management believes that the easy access afforded by online retailers, coupled with the ability to quickly source and meet retailers’ desires to be more and more relevant, has created a great opportunity for strong brands to take further market share and leverage into new categories and sales locations.

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