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These reports, excerpted and edited by Barron’s, were recently published by investment and research firms. The reports are a sample of the analysts’ thinking; they should not be considered Barron’s opinions or recommendations. Some of the issuers of the reports have provided, or expect to provide, investment banking or other services to the companies analyzed.
Nike
NKE-NYSE
To buy Price $116.87 on September 23
by Guggenheim
Nike reported strong fiscal first quarter results, with earnings per share almost twice our expectations (95 cents vs. 51 cents). Under CEO John Donahoe, Nike is rapidly entering the next era in its history; this will be numerically driven and likely defined by even greater separation from industry peers, as well as Nike’s own historical rates of productivity, consumer engagement and financial performance. Overall, our investment thesis on NKE was further strengthened by the results and strategy presented by the company last night. We are increasing our estimates and target price ($165 from $150). Nike remains our best idea.
Company products
DEP NYSE
strong buy Price $15.33 on September 24
by Raymond James
Business [a natural-gas and oil pipeline company] has not been immune to the headwinds plaguing the wider midfield sector. However, EPD’s unique combination of integration, strong balance sheet and return on invested capital remains among the best in its class. We consider Enterprise to be arguably best positioned in its space to weather the volatile macro landscape. Additionally, it trades at an attractive (and safe) yield of 11.5% and is heavily discounted historically at eight times 2021 Enterprise Value/Ebitda. [earnings before interest, taxes, depreciation, and amortization]. We reiterate our target price of $25, based on our 2021 valuation.
Union Pacific
UNP-NYSE
To buy Price of $194.32 on September 24
by reference
We maintain our buy rating on Union Pacific and raise our price target from $190 to $220. Our target assumes stocks are valued at 23 times our 2021 estimate and 20 times our 2022 forecast. On a relative basis, UNP is trading at a 5% premium to the multiple of the S&P 1-year futures market. . Based on estimated free cash flow for 2021, we have Union Pacific trading at 4.3%, slightly above its peers.
With its successful implementation of a precision programmed railway, UNP is not only better positioned to withstand economic shocks like this, but also to benefit from them in the long run. Coming out of this recession, we are looking for a better incremental margin to free cash flow conversion.
By 2022, we believe Union Pacific can earn between $10.20 and $11. At $11 EPS and an undiscounted multiple of 20, UNP would be worth $220.
Goldman Sachs
GS-NYSE
To buy Price $186.18 on September 23
by UBS
Goldman is delivering strong results in the current environment, and the potential volatility of the upcoming US election could support a strong fourth quarter, tying in with the seasonal strength of the first quarter. Additionally, in 2021, we anticipate that GS’s strategic plan efficiency efforts will begin to impact its profit and loss line, resulting in higher earnings forecasts.
We see a path to returns of over 12% on tangible equity, but Goldman is trading below tangible book value. M&A announcements are starting to pick up, underwriting results have been very strong, and deal volume and investor engagement have remained high, all playing to Goldman’s traditional strengths. As some of that revenue recovers (as trading normalizes), Goldman’s efficiency efforts should limit expense growth.
We are increasing our 2020 EPS estimate by 16%, to $14.80, due to the expected strength in trading, and our 2021 EPS estimate by 5%, to $24.50, thanks to better spending discipline. We are also increasing our price target to $245 from $220 previously. This applies a 10x multiple (previously 9.5x) on our updated 2021 EPS estimate.
WesBanco
WSBC-Nasdaq
Outperformance/Moderate Risk Price: $19.60 on September 24
by Boenning & Scattergood
We resume coverage of WesBanco, with a price target of $27.50, based on around 1.3 times the tangible pound and 11 times the normalized price-to-earnings ratio.
WesBanco is the parent company of WesBanco Bank, which operates 237 branches in Indiana, Kentucky, Maryland, Ohio, Pennsylvania and West Virginia. It had more than $16.8 billion in assets as of June 30 and more than $10.9 billion in loans. We believe that WSBC’s updated valuation of 0.93 times the tangible pounds, compared to the peer average at 1.03 times, is unwarranted. We also believe that WSBC’s strong filing base is
largely misunderstood. In addition, its solid level of capital provides sufficient protection in the event of a more severe credit downturn. Our outperformance rating is driven by these attributes and valuation, where we expect a nearly 25% upside from our target price.
We would potentially look to downgrade this name as we approach our price target, or if credit deteriorates materially relative to our forecast. We are also monitoring WesBanco’s hotel portfolio, which accounts for 7% of its total loans, for additional signs of stress, given the impact of Covid-19 on travel.
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