瑞信-美股-投资策略-瑞信顶级投资策略-2019.2.8-69页.pdf

Credit Suisse Equity Research Americas/United States Top Picks Credit Suisse Top Investment Ideas in the United States February 8,2019 Credit Suisse US Equity Research Credit Suisse Global Product Marketing Arbin Sherchan,CFA equity.researchcredit- global.productmarketingcredit- arbin.sherchancredit-(877)291-2683 (212)538-4442 (212)325-8967 DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES,ANALYST CERTIFICATIONS,LEGAL ENTITY DISCLOSURE AND THE STATUS OF NON-US ANALYSTS.US Disclosure:Credit Suisse does and seeks to do business with companies covered in its research reports.As a result,investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report.Investors should consider this report as only a single factor in making their investment decision.2 Top Picks 104 Top Ideas:We highlight 96 Top Outperform and 8 Top Underperform Ideas.Ideas Across Style,Sector,and Size:We have grouped Top Outperform ideas by style(growth/value),sector and market cap on slide 8.What is New?3 New#1 Top Outperforms:1 Addition(MU)and 2 Upgrades(JEC,SWK).Recent Research on New#1 Top Outperforms:JEC,MU,SWK 10 Names Added to Top Outperform Ideas:CNI,GRA,MU,MYOK,NXPI,OLLI,PFE,PRI,PUMP,SYY 14 Names Removed from Top Outperform Ideas:ADI,AGN,ALXN,ATH,DLTR,DWDP,FLR,JBHT,MCHP,NEP,PFGC,TUSK,TXN,ZS 2 Name Removed from Top Underperform Ideas:BPMP,LPI Methodology“One-stop shop”for the research teams best ideas.Every US research analyst identifies and ranks up to three top stock picks based on a 6-to 12-month time horizon.For each name,we include a short summary of our analysts thesis as a starting point for further analysis.These should not be viewed as portfolios;they are simply a current snapshot of the analysts top picks in their coverage universes.3 Table of Contents Section Page#1 Top Outperforms 4 Summary of Top Ideas 5 Top Outperforms by Style,Size and Sector 8 Top Picks That Rank in Top 25%in HOLT Scorecard 9 Top Ideas by Sector/Industry Basic Materials 11 Consumer 14 Energy/Utilities 23 Financials 30 Healthcare 37 Industrials 46 Services 53 TMT 55 Valuation Tables 61 4#1 Top Outperforms BASIC MATERIALS Chemicals&Ag Sciences ASH Metals&Mining EAF Paper&Packaging CCK Click here for previous edition,1/11/19 CONSUMER Gaming CZR Homebuilding&Building Products SWK Leisure HGV Packaged Food NOMD Retail:Hardlines AAP Retail:Softlines&Global Brands RL Retail:Staples&Distribution USFD ENERGY/UTILITIES Alternative Energy RUN E&Ps Large Cap MRO E&Ps SMID Cap CLR Midstream&MLPs ET Oilfield Services&Equipment HAL Refining&Marketing MPC Utilities EXC SERVICES Engineering&Construction JEC Machinery DE INDUSTRIALS Aerospace&Defense BA Airfreight&Ground Transport CSX Airlines SAVE Electrical Equipment&Multi-Industry HON FINANCIALS Asset Managers/Retail Brokers BX Banks JPM Insurance Life VOYA Insurance P&C/Brokers WLTW Mortgage Finance NRZ Specialty Finance SYF HEALTHCARE Biotechnology SMID Cap PTCT Healthcare Facilities HCA Healthcare Technology&Distribution CVS Managed Care UNH Medical Supplies&Devices SYK Pharmaceuticals MRK TMT Communications&Networking Equipment ANET Consumer Internet GOOGL Datacenter REITs INXN Semiconductors MU Software ORCL Telecom&Media ATUS New Top Pick Stock Moved Up in Rank Source:Credit Suisse SERVICES Business Services INFO 5 Analyst Top Outperform Top Underperform Removals#1#2#3 BASIC MATERIALS Chemicals&Ag Sciences Chris Parkinson ASH FMC GRA DWDP Metals&Mining Curt Woodworth EAF CSTM HCC Paper&Packaging Lars Kjellberg CCK OI CONSUMER Gaming Cameron McKnight CZR Homebuilding&Building Products Susan Maklari SWK FBHS DHI Leisure Cameron McKnight HGV Packaged Food Rob Moskow NOMD MDLZ BGS Retail:Hardlines Seth Sigman AAP WSM Retail:Softlines&Global Brands Michael Binetti RL VFC BURL Retail:Staples&Distribution Judah Frommer USFD SYY OLLI DLTR,PFGC ENERGY/UTILITIES Alternative Energy Michael Weinstein/Maheep Mandloi RUN NEP E&Ps Large Cap Bill Featherston MRO APC E&Ps SMID Cap Betty Jiang CLR VNOM LPI Midstream&MLPs Spiro Dounis ET BPMP Oilfield Services&Equipment James Wicklund HAL WHD PUMP TUSK Summary of Top Ideas New Top Pick Stock Moved Up in Rank Stock Moved Down in Rank New Top Pick Stock Moved Up in Rank Stock Moved Down in Rank Source:Credit Suisse 6 Analyst Top Outperform Top Underperform Removals#1#2#3 ENERGY/UTILITIES Refining&Marketing Manav Gupta MPC Utilities Michael Weinstein EXC NI NEE FINANCIALS Asset Managers/Retail Brokers Craig Siegenthaler BX BLK LPLA Banks Susan Katzke JPM BAC Insurance Life Andrew Kligerman VOYA PRI MET ATH Insurance P&C/Brokers Mike Zaremski WLTW PGR AJG Mortgage Finance Doug Harter NRZ COOP STWD Specialty Finance Moshe Orenbuch SYF V AXP HEALTHCARE Biotechnology SMID Cap Martin Auster PTCT SRPT MYOK UTHR ALXN Healthcare Facilities A.J.Rice HCA Healthcare Technology&Distribution Erin Wright CVS IQV ZTS Managed Care A.J.Rice UNH ANTM Medical Supplies&Devices Matt Miksic SYK EW GMED ZBH Pharmaceuticals Vamil Divan MRK PFE JNJ ABBV AGN Summary of Top Ideas New Top Pick Stock Moved Up in Rank Stock Moved Down in Rank Source:Credit Suisse 7 Analyst Top Outperform Top Underperform Removals#1#2#3 INDUSTRIALS Aerospace&Defense Rob Spingarn BA HRS HEI Airfreight&Ground Transport Allison Landry CSX UNP CNI GWR JBHT Airlines Joe Caiado SAVE ALK UAL Electrical Equipment&Multi-Industry John Walsh HON EMR IR Engineering&Construction Jamie Cook JEC FLR Machinery Jamie Cook DE CAT SERVICES Business Services Kevin McVeigh INFO EFX IRM TMT Communications&Networking Equipment Sami Badri ANET FFIV MSI Consumer Internet Stephen Ju GOOGL AMZN FB Datacenter REITs Sami Badri INXN EQIX Semiconductors John Pitzer MU NXPI ADI,MCHP,TXN Software Brad Zelnick ORCL CRM ZS Telecom&Media Doug Mitchelson/Brian Russo ATUS Summary of Top Ideas New Top Pick Stock Moved Up in Rank Stock Moved Down in Rank Source:Credit Suisse 8 Small Cap(4.3B,$28.7B)*Growth Stocks*Basic Materials OI ASH,CCK,FMC,GRA Consumer AAP,BURL,DHI,FBHS,OLLI,RL,SWK SYY,VFC Energy RUN CLR MPC Financials AJG,LPLA BLK,V Healthcare PTCT GMED,SRPT ANTM,CVS,EW,HCA,JNJ,MRK,SYK,UNH,ZTS Industrials SAVE ALK,HEI,HRS,IR,UAL BA,CAT,CSX,DE,EMR,HON,UNP Services EFX TMT ANET,FFIV,MSI AMZN,CRM,EQIX,FB,GOOGL,MU,ORCL Value Stocks*Basic Materials Consumer CZR MDLZ Energy APC,HAL,MRO,NI EXC,NEE Financials NRZ,PRI,STWD,SYF,VOYA BAC,JPM,MET,PGR Healthcare PFE Industrials JEC Services TMT Top Outperforms by Style,Size,and Sector*Note:Market Cap cut offs and Style categorization are based on Russell classifications.Source:Credit Suisse 9 Top Picks That Rank in Top 25%in HOLT Scorecard Source:Credit Suisse The HOLT scorecard calculates factors scores on a group relative basis.We indicate above where a company ranks above the 25th percentile in each of the categories:(1)Quality:A firms track record of earning returns on capital(CFROI)and managing growth.(2)Momentum:Revisions to consensus EPS estimates translated into cash flow impact(CFROI)and medium-term share price momentum.(3)Valuation:Based on the HOLT DCF framework and traditional valuation multiples Company NameTickerQualityMomentum Valuation BASIC MATERIALSW.R.Grace&Co.GRAaWarrior Met Coal Inc.HCCaaaOwens IllinoisOIaaCONSUMERStryker Corp.SYKaD.R.Horton Inc.DHIaNomad FoodsNOMDaaRalph Lauren CorporationRLaVF CorporationVFCaaBurlington Stores,Inc.BURLaOllies Bargain Outlet Holdings,Inc.OLLIaaENERGY/UTILITIESSunrunRUNaCactus,Inc.WHDaaProPetro Holding CorporationPUMPaaaMarathon Petroleum CorporationMPCaaExelon CorporationEXCaNextEra Energy Inc.NEEaFINANCIALSBlackRockBLKaLPL Financial ServicesLPLAaaVoya FinancialVOYAaPrimericaPRIaMetLifeMETaProgressive CorporationPGRaaArthur J.Gallagher&Co.AJGaaNew ResidentialNRZaaaSynchrony FinancialSYFaVisa Inc.VaHEALTHCARESarepta Therapeutics,Inc.SRPTaCVS HealthCVSaaIQVIA Holdings,Inc.IQVaCompany NameTickerQualityMomentum Valuation HEALTHCAREUnitedHealth Group Inc.UNHaaAnthem,Inc.ANTMaaaStryker Corp.SYKaGlobus Medical,Inc.GMEDaMerck&Co.,Inc.MRKaaJohnson&JohnsonJNJaaINDUSTRIALSBoeingBAaHarris CorporationHRSaHeico CorpHEIaaCSX CorporationCSXaUnion PacificUNPaSpirit Airlines,Inc.SAVEaAlaska Air Group,Inc.ALKaUnited Continental Holdings,Inc.UALaIngersoll-Rand PlcIRaJacobs EngineeringJECaDeere&Co.DEaCaterpillar Inc.CATaSERVICESIHS MarkitINFOaTMTArista NetworksANETaaF5 Networks,Inc.FFIVaaaAlphabetGOOGLaaAmazon com Inc.AMZNaFacebook Inc.FBaaEquinix,Inc.EQIXaMicron Technology Inc.MUaNXP Semiconductors N.V.NXPIaSCRMaAltice USAATUSaa Top Ideas by Sector/Industry 11 Chris Parkinson christopher.parkinsoncredit-(212)538-6286 Basic Materials Chemicals&Ag Science Top Outperform Rank Company Pricing Rationale 1 Ashland Global Holdings Inc.(ASH)HOLT Lens Price:$78.38 Target:$93.00 Mkt Cap:$4.9B Thesis:More visibility into cost-cutting initiatives,including speed of execution,margin acceleration on improving mix,and portfolio optionality(sale of businesses,debt pay down,potential take-out).ASH is our top pick,as we believe:(1)there is an improving price/mix on strong Pharma/PC demand(skin care,etc.),and(2)further cost-cutting optionality(CSe$50mm co target)/asset optimization opportunities are driving ASI margin expansion.CSe$1bln net proceeds from the sales of Composites and Marl(expected close prior to June 2019)will be used predominantly for debt reduction(CSe$40-50mm in interest savings),with buybacks representing longer-term optionality.ASH is also a potential takeout target(CSe$100/share),though not crux to our thesis.Potential Catalysts over next 3-6 months:Sale of the Composites and I&S(ex.Lima)businesses(June 19),cost-cutting progress,mix improvement,potential takeout.Valuation:Our$93 target price is based on 11.0 x our 2020 EBITDA,discounted back.2 FMC Corporation(FMC)HOLT Lens Price:$85.41 Target:$114.00 Mkt Cap:$11.5B Our bull thesis is underscored by:(1)FMCs ability to outgrow CPC markets by 200-400bps,(2)ability to further expand long-term margins via mix,new MOAs and cost reductions,(3)further benefits from the DuPont asset integration/revenue synergies,(4)Central/SE Asian and EE growth potential,and(5)M&A/cap allocation optionality;this includes new molecule purchases.FMCs balance sheet provides a strong degree of upside optionality,with net debt/EBITDA 950 LT vs.300 now)(2)internal drivers beyond mid-teens annual growth,including improved deal sourcing and further monetization of Ollies Army program,(3)recession resistant and insulation from online incursion Judah Frommer judah.frommercredit-(212)325-8681 Consumer Retail:Staples&Distribution 23 Source:Credit Suisse;Data as of 6-Feb-19 Top Outperform Rank Company Pricing Rationale 1 Sunrun(RUN)HOLT Lens Price:$14.33 Target:$23.00 Mkt Cap:$1.6B Thesis:Non-regulated residential rooftop solar financing and installation with a market price that only reflects current contract with no credit for growth.Potential Catalysts over next 3-6 months:Catalysts include(1)investments in 2019 to safe harbor 30%tax credit(ITC)through 2023 that rather sunset after 2019,and(2)partnerships with homebuilders in California to take advantage of rooftop solar mandate that starts January 2020.Valuation:Our$23 target price is based on a DCF of future cash flows,assuming installation growth of 15%in 2018,15%in 2019,19%in 2020(driven by CA rooftop mandate),10%from 2021 to 2023,and flat thereafter.We assume a 6%project-level discount rate and a 15%corporate development discount rate.Michael Weinstein/Maheep Mandloi w.weinsteincredit- Energy/Utilities Alternative Energy 24 Source:Credit Suisse;Data as of 6-Feb-19 Top Outperform Rank Company Pricing Rationale 1 Marathon Oil Corporation(MRO)HOLT Lens Price:$15.91 Target:$22.00 Mkt Cap:$13.2B Thesis:MROs divestiture of its Canadian oil sands mining business coupled with two Permian acquisitions in 2017 sharply improved the companys portfolio,a dynamic we believe is still underappreciated by investors.MRO offers one of the most attractive oil and cash flow per debt-adjusted share growth profiles among the global E&Ps,driven by the combination of attractive absolute growth and free cash flow assuming$50/Bbl.We also believe MROs“stale”US resource potential and drilling location guidance are conservative and see upside potential to these figures(and thus NAV)without it pursuing another acquisition.Potential Catalysts over next 3-6 months:(1)2019 capex and production guidance in February;(2)US onshore resource update:at last update,MRO estimated its Big-4 resource plays to hold 2P resource potential of 4.4 BBoe with upside to 6.5 Bboe vs.our current estimate of 4.3 BBoe;and(3)disclosure of Northern Delaware type well economics.Valuation:MRO still trades at a 1x discount to peers on 2019-2020 EV/DACF,which we note is even wider than its historical average discount to the group when it had its Canadian oil sands mining business and before it acquired its Permian position(high multiple asset).2 Anadarko Petroleum Corp.(APC)HOLT Lens Price:$45.45 Target:$67.00 Mkt Cap:$22.9B APCs free cash flow generation(assuming$54/Bbl)should enable it to deliver superior growth in cash flow per debt-adjusted share growth,and its large cash balance enables it to return cash to shareholders at an increased level while providing additional optionality.Meanwhile,APC currently trades at a discount to peers on both EV/DACF and price/NAV.Bill Featherston william.featherstoncredit-(212)325-6283 Energy/Utilities E&Ps Large Cap 25 Source:Credit Suisse;Data as of 6-Feb-19 Top Outperform Rank Company Pricing Rationale 1 Continental Resources(CLR)HOLT Lens Price:$46.59 Target:$56.00 Mkt Cap:$17.5B Thesis:We see an attractive combination of(1)above-average cash flow per debt-adjusted share growth and a low break-even oil price needed to maintain flattish production;(2)Bakken well outperformance plus full field development in SCOOP driving oil weighted production growth,and(3)non-core asset sales further optimizing the portfolio.Potential Catalysts over next 3-6 months:We believe 2019 guidance should demonstrate CLRs differentiated ability to show growth and free cash flow in a sub-$50 environment.Continued well outperformance from Bakken wells,and ramping oil volumes from SCOOP/Springer play should increase market confidence in CLRs capital efficiency.Valuation:Our$56 TP is based on a blended average of 7.5x 2019 normalized EBITDX and 0.9x NAV.2 Viper Energy Partners LP(VNOM)HOLT Lens Price:$32.67 Target:$36.00 Mkt Cap:$1.7B The recently announced tax status and structure change marks a fundamental shift in the companys investment appeal as the only growth and high income vehicle exposed to the Permian,now in a C-Corp structure with no tax burden.Post change,VNOM will see a significantly expanded potential investor base which should help further accelerate their role as a natural consolidator of royalty acreage in the Permian.We forecast VNOM is capable of generating 14%annual organic distribution growth through 2022 while yielding 7%and 10%in 2019-2020 based on the CS price deck($54