All Of Imperial Capital's Best Ideas For June

Imperial Capital analysts presented their current list of top equity investment opportunities. All these best ideas were assigned Outperform ratings and represented average upside potential of about 29 percent.

Allegion

Analyst Jeff Kessler has a target price of $71 for Allegion PLC ALLE. He mentioned that the company’s fundamentals appears strong, given its cost reductions, continued expansion, a lower projected tax rate as well as its leading position in certain key product categories and geographies.

Kessler believes that management continues to seek strategic acquisition opportunities, especially those targets that had excellent technology. He added that in case the company was not active in M&A, it could still repurchase shares.

“We believe that upcoming ISC West security conference in Las Vegas, Nevada is likely to showcase Allegion’s expertise in the tech-enabled access control market,” the Imperial Capital report stated.

Boyd Gaming

Analyst Gregg Klein has a target price of $26 for Boyd Gaming Corporation BYD. The company has recently inked a number of deals, including the acquisition of Aliante Casino for $380mn, the purchase of Canner Casinos for $230mn and the sale of 50 percent interest in the Borgata for about $690mn.

“We expect the company to follow by refinancing and consolidating the Peninsula Gaming subsidiary following when the call price on the 8.375% notes drops to par on 8/15/16,” Klein wrote. He added that Boyd Gaming’s core Las Vegas Locals and regional casinos were generating robust earnings growth and should continue to do so into 2017.

Callaway Golf

Analyst George Kelly has a target price of $13 for Callaway Golf Co ELY. The company of named as the Top Pick.

Callaway Golf had a strong start to the year, with an improving retail environment and growth in game play. Recent product improvements had borne fruit in club and ball market share, Kelly said. Moreover, FX had turned into a tailwind and is expected to add $10mn through the rest of 2016.

Callon Petroleum

Analyst Kim Pacanovsky has a target price of $14 for Callon Petroleum Company CPE. The recent Big Star transaction has effectively doubled Callon Petroleum’s Midland Basin acreage.

The company is now confident about its liquidity cushion, operational abilities and returns to add a second rig in 4Q16, even if the commodity environment does not improve meaningfully, Pacanovsky said. In fact, if commodity prices improve, Callon Petroleum could add a third rig.

“We believe it is highly likely that CPE can add to inventory without adding acreage, and also will continue to improve recoveries with new frack designs,” the analyst mentioned.

Elizabeth Arden

Analyst Mary Ross Gilbert has a target price of $14 for Elizabeth Arden, Inc. RDEN. The company reported less negative than expected EBITDA for F3Q16, which indicates that the company’s efforts to turn around its business and restore growth “are taking hold,” the analyst commented.

Gilbert expects similar EBITDA growth in F4Q16 and believes that further upside in FY17 would be driven mainly by robust overseas growth in the Arden segment on innovation and expanded distribution, with the absence of FX headwinds. Moreover, modest growth in the North American fragrance bsuiness is likely to resume on innovation as well as acquisitions.

FireEye

Analyst Michael Kim has a target price of $25 for FireEye Inc FEYE. The analyst said that the company was continuing to gain share at the expense of legacy vendors, backed by its “innovative detection technology, global threat intelligence, and extensive security services.”

Moreover, greater revenue visibility can be expected from FireEye’s mix shift towards cloud and subscription offers, despite the adverse impact of lower product billings in the near term.

Kim forecasted robust demand for the company’s cloud-based solutions, particularly FireEye-as-a-Service [FAAS] and cloud email [ETP]. He added, “We look for potential upside from greater segmentation with Essentials (mid-market customers), as well as broadening reach to the endpoint (HX) and network forensics (PX).”

McDermott

Analyst Scott Levine has a target price of $6 for McDermott International MDR. He believes the company is poised to benefit from growing demand for offshore oil & gas construction services, in view of its robust asset base and strong geographic footprint.

“Contract performance has recently been improving, awards are starting to pick up (especially in the Middle East), and liquidity appears sufficient to support MDR’s turnaround plans,” Levine wrote. He added that McDermott could gain further traction if commodity prices continued to stabilize.