In this article, we will take a look at the 10 important stock analyst ratings to watch.
Investors often use stock ratings before deciding on buying, selling or holding a stock. These ratings also usually come with a price target that helps traders understand how far a stock will move in either direction.
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Aerospace giant The Boeing Company (NYSE:BA), aftermarket automotive parts retailer AutoZone, Inc. (NYSE:AZO) and agricultural fertilizers maker CF Industries Holdings, Inc. (NYSE:CF) recently came into the limelight after receiving revised recommendations from analysts.
In addition, analysts also updated their ratings for Capital One Financial Corporation (NYSE:COF) and Republic Services, Inc. (NYSE:RSG). We will discuss the details of the new ratings in the remaining article.
10. Arthur J. Gallagher & Co. (NYSE:AJG)
Number of Hedge Fund Holders: 24
RBC Capital upgraded Arthur J. Gallagher & Co. on Thursday, June 16, 2022. The research firm improved its ratings for the Illinois-based insurance brokerage company from “Sector Perform” to “Outperform,” and lifted its price target for the stock from $182 per share to $185 per share.
RBC Capital analyst Mark Dwelle believes Arthur J. Gallagher & Co. has a solid cash flow and great earnings visibility. In a research note to clients, Dwelle said that Arthur J. Gallagher & Co. ‘s current valuation is a decent entry point to buy the stock.
Separately, Cooper Investors Global Equities Fund mentioned Arthur J. Gallagher & Co. in its first-quarter 2022 investor letter published in April. Here’s what the fund said about the company:
“In terms of underlying businesses, the portfolio holdings are going well and largely reported solid numbers during earnings season with positive language around the outlook for 2022. Our insurance broker Arthur J Gallagher is a stand-out performer, delivering low-double-digit organic revenue growth at the same time as margin expansion – this is a business that benefit from higher interest rates, emerging risks and inflating premiums. While rising rates, supply chain constraints and war in Europe represent a myriad of challenges for many industries, our view is that our management teams are highly experienced focused operators. They are well equipped to deal with these challenges, having shown great resilience and flexibility during many crises, the most recent example (COVID) proving yet again the power of their business models.”
9. Tri Pointe Homes, Inc. (NYSE:TPH)
Number of Hedge Fund Holders: 26
Shares of Tri Pointe Homes, Inc. (NYSE:TPH) fell over 12 percent on Thursday, June 16, 2022, after B. Riley downgraded the Nevada-based home construction company from “Buy” to “Neutral.”
The research firm also cut its price target for Tri Pointe Homes, Inc. from $26 per share to $20 per share. B. Riley analyst Alex Rygiel sees lower new order activities in the homebuilding industry due to higher interest rates. Rygiel also projected lower gross profit margins and weak new home sales for 2023.
Earlier this year, investment management firm Third Avenue Management discussed the growth potential of Tri Pointe Homes, Inc. in its fourth-quarter 2021 investor letter. The fund stated:
“Single-Family (4.0% of assets): Tri-Pointe Holdings own highly attractive land assets in supply constrained geographies. The company have taken advantage of the single-family housing boom by monetizing assets at attractive prices despite a challenged cost environment. Tri-Pointe’s exceptional asset quality coupled with insatiable demand for residential housing should allow them to grow intrinsic value despite higher costs and supply chain delays industrywide.”
8. Urban Outfitters, Inc. (NASDAQ:URBN)
Number of Hedge Fund Holders: 27
B. Riley lowered its ratings for Urban Outfitters, Inc. (NASDAQ:URBN) from “Buy” to “Neutral” on Friday, June 17, 2022. The research firm also slashed its price target for the Pennsylvania-based lifestyle retailer from $35 per share to $23 per share.
B. Riley analyst Susan Anderson said inflation continues to weigh on the consumer sector. She added that Urban Outfitters, Inc. stock would likely stay range-bound until investors get a clear idea about sales trends and promotions.
Anderson also referred to merchandising mistakes indicated by Urban Outfitters, Inc. management, and she believes those missteps will result in increased markdowns.
Like Urban Outfitters, Inc., analysts also updated their ratings for The Boeing Company, AutoZone, Inc. and CF Industries Holdings, Inc..
7. Toll Brothers, Inc. (NYSE:TOL)
Number of Hedge Fund Holders: 29
Toll Brothers, Inc. (NYSE:TOL) is one of the largest homebuilders in the U.S. in terms of revenue. The company designs, builds and sells both residential and commercial properties across the country. It also provides mortgage loans to clients.
The Pennsylvania-based homebuilder was downgraded by Wells Fargo from “Overweight” to “Equal Weight” on Friday, June 17, 2022. The research firm also set a price target of $48 per share for Toll Brothers, Inc..
Wells Fargo analyst Deepa Raghavan stated that the tumbling U.S. housing data would lead to negative investor sentiment. Raghavan referred to the housing market slowdown due to a sharp rise in interest rates.
Meanwhile, home loans are getting expensive, impacting the purchasing power of many buyers. The trend will impact the growth of leading homebuilders, including Toll Brothers, Inc..
6. The AZEK Company Inc. (NYSE:AZEK)
Number of Hedge Fund Holders: 29
Shares of The AZEK Company Inc. rose over six percent on Friday, June 17, 2022, after BofA Securities upgraded the outdoor living products maker from “Neutral” to “Buy,” citing the company’s compelling growth potential.
In a research note to clients, BofA analyst Rafe Jadrosich said he expects the composite decking companies, including The AZEK Company Inc., to outperform the overall market.
The AZEK Company Inc. also grabbed the attention of asset management firm Baron Funds last month. Here’s what the fund said about AZEK in its first-quarter 2022 investor letter:
“As noted earlier in this letter, several residential-related real estate companies corrected sharply in the first quarter of 2022, in part due to concerns about the possibility of a slowdown in the for-sale portion of the U.S. housing market due to consumer affordability concerns and material and labor bottlenecks. Examples of residential-related companies that declined in the first quarter includes: The AZEK Company Inc.: A leading manufacturer of outdoor, non-wood building products including decking, railing, trim, and other leading outdoor products. We believe current valuations for the company now reflect a good portion of a possible temporary slowdown in the U.S. housing market and have begun to offer compelling multi-year return prospects.”
5. Republic Services, Inc. (NYSE:RSG)
Number of Hedge Fund Holders: 34
Republic Services, Inc. is a leading provider of waste disposal services in the U.S. Its primary services include collecting, transferring and recycling non-hazardous solid waste.
Deutsche Bank upgraded Republic Services, Inc. on Thursday, June 16, 2022, from “Hold” to “Buy,” stating the Phoenix-based waste disposal company provides an inflation hedge in the current environment.
Deutsche Bank analyst Kyle White thinks that Republic Services, Inc. ‘s core pricing will keep increasing, balancing the negative impact of inflation. White considers Republic Services, Inc. a safe investment citing its defensive attributes.
4. AutoZone, Inc. (NYSE:AZO)
Number of Hedge Fund Holders: 38
Morgan Stanley improved its ratings for AutoZone, Inc. from “Equal Weight” to “Overweight” on Thursday, June 16, 2022, saying the stock offers a 20 percent upside given the durability of its profit and sales growth. The research firm also increased its price target for the aftermarket automotive parts retailer from $2,125 per share to $2,420 per share.
Separately, investment management firm Altron Capital Management also discussed the growth prospects of AutoZone, Inc. in its fourth-quarter 2021 investor letter published in April. Here’s what the fund said about AutoZone, Inc.:
“AutoZone has been a winner since we built a position in the company last quarter. Given the current supply challenges in the automotive sector, we believe the long-standing trend of America’s aging automotive fleet will continue for the foreseeable future with AutoZone as a primary beneficiary.”
3. The Boeing Company (NYSE:BA)
Number of Hedge Fund Holders: 52
The Boeing Company received an upgrade from Citigroup on Thursday, June 16, 2022. The research firm raised its ratings for the Virginia-based aerospace giant from “Neutral” to “Buy.”
The research firm said the fair value of The Boeing Company stock would be $209 if its programs (737 MAX, 777X, 787) meet Citi’s production and profitability projections. Citi analyst Charles Armitage expects 737MAX to return to commercial service. He also anticipates 787 deliveries resuming in the near future.
The Boeing Company stock has been struggling to gain value since the coronavirus outbreak in 2020. The company’s share price has plummeted about 42 percent over the past 12 months and roughly -34 percent so far in 2022.
2. Capital One Financial Corporation (NYSE:COF)
Number of Hedge Fund Holders: 56
Shares of Capital One Financial Corporation rose over five percent on Friday, June 17, 2022, after Baird turned bullish on the bank holding company. The research firm raised its ratings for Capital One Financial Corporation from “Neutral” to “Outperform,” maintaining a price target of $145 per share for the stock.
Baird analyst David George admitted that Capital One Financial Corporation stock has recently come under pressure due to macro concerns. However, George believes those concerns “are more than priced” into the stock as it trades at 15 – 20 percent discount considering key performance metrics like price-to-earnings and sales. He added that the company’s current share price presents a good entry point.
Separately, investment management firm Davis Funds mentioned Capital One Financial Corporation in its fourth-quarter 2021 investor letter published in March. The firm stated:
“The absolute level of revenues and profits generated by such companies is in fact so large that most of the major financial holdings in the portfolio produce enough annual operating income individually that a number of them could, in theory, purchase several entire businesses among hundreds of choices within the S&P 1500 Index, using just a year’s cash earnings without dipping into capital. This is theoretical, as financial companies would not be in the business of buying healthcare or technology companies, for example, but we point out these facts to illustrate the sheer scale of the economics produced by single financial companies in a given year, which is often a multiple of the cash earnings yielded by companies in a host of other industries.
Given this cash-generation power, we are naturally drawn to what we believe are strong and profitable financial institutions when the price is right. Presently, we believe the valuations of our financial holdings are not only reasonable, but extremely compelling, and our portfolio composition reflects this view. Representative financial holdings in the Fund includes Capital One Financial.”
1. CF Industries Holdings, Inc. (NYSE:CF)
Number of Hedge Fund Holders: 67
Shares of CF Industries Holdings, Inc. fell over four percent on Friday, June 17, 2022, after Citigroup downgraded the agricultural fertilizers maker from “Buy” to “Neutral.”
The research firm also cut its price target for CF Industries Holdings, Inc. from $123 per share to $99 per share. Citi analyst P.J. Juvekar said commodity chemicals has been outpacing the S&P 500 Index but that’s about to end.
In a research note to investors, Juvekar said rising interest rates will slow down the economic activity, leading to a weaker housing and consumer spending. He added that Federal Reserve’s latest interest rate hike sent chemical companies, including CF Industries Holdings, Inc., down this week. Juvekar warned of an additional downside in case of economic deceleration.
You can also take a peek at 10 Best Biotech Stocks Under $5 and 10 Favorite Stocks of Dan Loeb’s Third Point.
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This article is originally published at Insider Monkey.
