Two Energy And Two Financial Stocks For The Rest Of 2014
A research report this past week from Credit Suisse analysts featured financials Discover Financial Services (NYSE: DFS) and KeyCorp (NYSE: KEY), as well as energy plays Cameron International (NYSE: CAM) and Tesoro (NYSE: TSO), as picks for the remainder of 2014.
The momentous rise in the stock market in 2013 is well behind us now, and 2014 has proved to more volatile. One correction already has happening and concerns grow about another as economic signals are mixed. The standoff between Russia and West is ongoing, and new uncertainty about Federal Reserve strategies has appeared. It is time to investors to be more choosy about picking stocks.
Below is a quick look at how the four Credit Suisse picks have fared and what analysts expect from them. Note that the analysts also liked retailer AutoZone and IT company Cognizant Technology Solutions in their report.
Last week, this oil and gas equipment and services provider announced that its board had approved a $500 million increase in the company's share repurchase program. The Houston-based company sports a market capitalization of more than $13 billion. Its long-term earnings per share (EPS) growth forecast is about 18 percent.
Seven of the 29 analysts surveyed by Thomson/First Call rate the stock at Strong Buy, and 11 more recommend buying shares. The mean price target, or where analysts expect the share price to go, is more than nine percent higher than the current share price. That target would be a new multi-year high.
Shares are trading about seven percent higher than at the beginning of the year. The 50-day and 200-day moving averages formed a golden cross at the end of February. Over the past six months, the stock has outperformed competitors National Oilwell Varco and Schlumberger.
Discover Financial Services
After passing the most recent Federal Reserve stress test, this credit services company said it will seek approval to increase its dividend and buy back shares. Its market cap is more than $27 billion, and it offers a dividend yield of about 1.4 percent. Its return on equity is more than 24 percent.
Of the 26 analysts polled, all but five recommend buying shares, with 11 of them rating the stock at Strong Buy. Analysts see some headroom for shares, as their mean price target is more than eight percent higher than the current share price. Here too, the consensus target would be a new multi-year high.
The share price hit a new 52-week high on Friday and is more than four percent higher year to date. The stock is up almost 750 percent in the past five years. It narrowly outperformed MasterCard and Visa over the past six months. It also outperformed the S&P 500 in that time.
This Cleveland-based regional bank is scheduled to report its Federal Reserve stress test results this week and its first-quarter results on April 17. The bank holding company has a market cap of less than $13 billion. Its dividend yield is near 1.6 percent, and its price-to-earnings (P/E) ratio is less than the industry average.
For at least three months, the consensus recommendation has been to hold shares, though more of them say to buy that to sell. However, the share price has overrun their mean price target, meaning the analysts see no upside potential at this time. At least one analyst sees more than 10 percent upside, though.
KeyCorp also hit a multiyear high on Friday. The share price is up more than eight percent year to date, as well as almost 73 percent in the past five years. Over the past six months, the stock has outperformed competitors Huntington Bancshares and U.S. Bancorp, as well as the broader markets.
Earlier this month, this independent petroleum refiner offered $300 million in senior notes in order to pay down debt. The San Antonio-based company has a market cap of more than $6 billion and a dividend yield around 1.9 percent. Its forward earnings multiple is much less than the trailing P/E ratio.
Ten of the 17 analysts surveyed recommend buying shares, with three of them rating the stock at Strong Buy. A move to the analysts' mean price target would represent an almost 25 percent gain for shareholders. That consensus price target would be a new multi-year high.
The share price is down about 13 percent year-to-date, after a five percent drop in the past week. And note that the 50-day and 200-day moving averages formed a death cross last week. The stock has underperformed competitors HollyFrontier and Valero Energy over the past six months.
At the time of this writing, the author had no position in the mentioned equities.
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