瑞信-美股-股票策略-瑞士信贷在美国的顶级投资理念-2019.5.10-73页.pdf

Credit Suisse Equity Research Americas/United States Top Picks Credit Suisse Top Investment Ideas in the United States May 10,2019 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 108 Top Ideas:We highlight 97 Top Outperform and 11 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?5 New#1 Top Outperforms:2 Additions(AMAT,ESPR)and 3 Upgrades(CRM,INFO,VLO).See recent research:AMAT,CRM,ESPR,INFO,VLO 9 Names Added to Top Outperform Ideas:ADI,AMAT,ESPR,HON,LRCX,PUMP,SSNC,WRK,ZS 10 Names Removed from Top Outperform Ideas:DHI,ETN,FBHS,MPC,MU,NXPI,OI,ORCL,PTCT,SWK 1 Name Added to Top Underperform Ideas:X.See recent research:X 2 Name Removed from Top Underperform Ideas:ABBV,UTHR 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 15 Energy/Utilities 25 Financials 33 Healthcare 41 Industrials 48 Services 55 TMT 57 Valuation Tables 65 4#1 Top Outperforms BASIC MATERIALS Chemicals&Ag Sciences FMC Metals&Mining EAF Paper&Packaging CCK CONSUMER Gaming CZR Household Products&Beverages MNST Leisure HGV Packaged Food NOMD Retail:Hardlines AAP Retail:Softlines&Global Brands BURL Retail:Staples&Distribution USFD ENERGY/UTILITIES Alternative Energy RUN E&Ps Large Cap MRO E&Ps SMID Cap WPX Midstream&MLPs ET Oilfield Services&Equipment HAL Refining&Marketing VLO Utilities EXC INDUSTRIALS Engineering&Construction JEC Machinery DE INDUSTRIALS Aerospace&Defense HRS Airfreight&Ground Transport CSX Airlines UAL Electrical Equipment&Multi-Industry EMR FINANCIALS Asset Managers/Retail Brokers BX Banks JPM Insurance Life VOYA Insurance P&C/Brokers WLTW Mortgage Finance COOP Specialty Finance SYF HEALTHCARE Biotechnology SMID Cap ESPR Life Science Tools&Diagnostics ZTS Healthcare Facilities HCA Managed Care UNH Medical Supplies&Devices SYK Pharmaceuticals MRK TMT Communications&Networking Equipment COMM Consumer Internet GOOGL Datacenter REITs INXN IT Hardware IBM Semiconductors AMAT Software CRM Telecom&Media CMCSA 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 FMC ASH APD Metals&Mining Curt Woodworth EAF CSTM HCC X Paper&Packaging Lars Kjellberg CCK WRK CONSUMER Gaming Ben Combes CZR Homebuilding&Building Products DHI,FBHS,SWK Household Products&Beverages Kaumil Gajrawala MNST CL Leisure Ben Combes HGV Packaged Food Rob Moskow NOMD MDLZ BGS Retail:Hardlines Seth Sigman AAP WSM Retail:Softlines&Global Brands Michael Binetti BURL RL Retail:Staples&Distribution Judah Frommer USFD SYY KR ENERGY/UTILITIES Alternative Energy Michael Weinstein/Maheep Mandloi RUN NEP E&Ps Large Cap Bill Featherston MRO PXD ECA E&Ps SMID Cap Betty Jiang WPX VNOM LPI Midstream&MLPs Spiro Dounis ET 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 Oilfield Services&Equipment Jacob Lundberg HAL WHD PUMP Refining&Marketing Manav Gupta VLO 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 Insurance P&C/Brokers Mike Zaremski WLTW AJG CB Mortgage Finance Doug Harter COOP NRZ STWD Specialty Finance Moshe Orenbuch SYF V AXP HEALTHCARE Biotechnology SMID Cap Martin Auster ESPR SRPT MYOK PTCT,UTHR Life Science Tools&Diagnostics Erin Wright ZTS IQV LH Healthcare Facilities A.J.Rice HCA Managed Care A.J.Rice UNH ANTM Medical Supplies&Devices Matt Miksic SYK EW GMED ZBH Pharmaceuticals Vamil Divan MRK PFE JNJ ABBV 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 HRS HEI NOC Airfreight&Ground Transport Allison Landry CSX UNP CNI GWR Airlines Joe Caiado UAL ALK SAVE Electrical Equipment&Multi-Industry John Walsh EMR HON IR ETN Engineering&Construction Jamie Cook JEC Machinery Jamie Cook DE CAT SERVICES Business Services Kevin McVeigh INFO EFX IRM TMT Communications&Networking Equipment Sami Badri COMM Consumer Internet Stephen Ju GOOGL AMZN FB Datacenter REITs Sami Badri INXN EQIX IT Hardware Matt Cabral IBM NTAP HPE Semiconductors John Pitzer AMAT LRCX ADI MU,NXPI Software Brad Zelnick CRM ZS SSNC ORCL Telecom&Media Doug Mitchelson CMCSA 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 ASH,CCK,FMC,WRK APD Consumer AAP,BURL,KR,RL MNST,SYY Energy RUN Financials AJG,LPLA BLK,V Healthcare ESPR GMED,LH,SRPT ANTM,EW,HCA,JNJ,MRK,SYK,UNH,ZTS Industrials SAVE ALK,HEI,HRS,UAL CAT,CSX,DE,EMR,HON,IR,NOC,UNP Services EFX TMT COMM,NTAP ADI,AMAT,AMZN,CMCSA,CRM,EQIX,FB,GOOGL,IBM,LRCX Value Stocks*Basic Materials Consumer CZR MDLZ Energy HAL,MRO,NI,PXD,WPX EXC,NEE,VLO Financials NRZ,PRI,STWD,SYF,VOYA BAC,JPM,MET 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 MATERIALSAir Products&ChemicalsAPDaGraftech International Ltd.EAFaWarrior Met Coal Inc.HCCaaaCrown Holdings Inc.CCKaWestRockWRKaCONSUMERMonster Beverage CorporationMNSTaaHilton Grand Vacations Inc.HGVaaNomad FoodsNOMDaMondelezMDLZaAdvance Auto Parts,Inc.AAPaRalph Lauren CorporationRLaThe Kroger Co.KRaENERGY/UTILITIESSunrunRUNaMarathon Oil CorporationMROaEncana Corp.ECAaWPX Energy Inc.WPXaCactus,Inc.WHDaaaProPetro Holding CorporationPUMPaaaValero Energy CorporationVLOaaFINANCIALSBlackRockBLKaaLPL Financial ServicesLPLAaaJPMorgan Chase&Co.JPMaVoya FinancialVOYAaaPrimericaPRIaaMetLifeMETaArthur J.Gallagher&Co.AJGaNew ResidentialNRZaaSynchrony FinancialSYFaaaVisa Inc.VaCompany NameTickerQualityMomentum Valuation HEALTHCAREEsperion Therapeutics,Inc.ESPRaaMyoKardia,Inc.MYOKaIQVIA Holdings,Inc.IQVaaLabCorp of AmericaLHaHCA HealthcareHCAaaUnitedHealth Group Inc.UNHaaAnthem,Inc.ANTMaaStryker Corp.SYKaEdwards Lifesciences Corp.EWaGlobus Medical,Inc.GMEDaMerck&Co.,Inc.MRKaaJohnson&JohnsonJNJaaINDUSTRIALSHeico CorpHEIaaCSX CorporationCSXaIngersoll-Rand PlcIRaaDeere&Co.DEaCaterpillar Inc.CATaSERVICESIHS MarkitINFOaEquifaxEFXaTMTCommScope Inc.COMMaaaAlphabetGOOGLaaFacebook Inc.FBaaEquinix,Inc.EQIXaInternational Business MachinesIBMaaApplied Materials Inc.AMATaLam Research Corp.LRCXaComcast Corp.CMCSAaaAltice USAATUSa 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 FMC Corporation(FMC)HOLT Lens Price:$78.96 Target:$97.00 Mkt Cap:$10.4B Thesis: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$50mm co target)/asset optimization opportunities are driving ASI margin expansion.CSe$1bln net proceeds from the sales of Composites and Marl(expected close late summer)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.3 Air Products&Chemicals(APD)HOLT Lens Price:$205.31 Target:$221.00 Mkt Cap:$45.1B Our bull thesis is underscored by:(1)$8.1bln of capital committed/spent on projects which we estimate will add$2.00 of EPS through FY22,(2)$8bln of additional capital available(CSe+/-$25/share if deployed,discounted back),(3)a recovery in LNG activity(min$130-150mm benefit to op.income,trough to peak),and(4)a strong dividend yield(2.6%).We expect the former to drive double-digit EPS growth through FY2023,which we believe is underappreciated by the Street.Source:Credit Suisse;Data as of 8-May-19 12 Source:Credit Suisse;Data as of 8-May-19 Top Outperform Rank Company Pricing Rationale 1 Graftech International Ltd.(EAF)HOLT Lens Price:$12.16 Target:$19.00 Mkt Cap:$3.5B Thesis:As the lowest-cost graphite electrode producer globally,attributed to unique vertically integrated position,GrafTech,with locked-in 60-70%EBITDA margins,has the potential to return 75%of its market capitalization in dividends/buybacks through 2020.Barriers to entry(technological know-how and high capital investment)in both needle coke and graphite electrodes,as well as incoming demand from electric vehicles for needle coke,provide large scope for continued capital returns.Potential Catalysts over next 3-6 months:Possibility for a special dividend during 2019 and continued de-levering of balance sheet.Valuation:We note that while lithium and battery stocks currently trade at 11-12x 2019 EV/EBITDA and have 40-50%margins,EAF currently trades at 4.4x 2019 and 2022.Our$19 target price is based on 6.0 x our 2019 estimated EBITDA.2 Constellium(CSTM)HOLT Lens Price:$9.25 Target:$20.00 Mkt Cap:$1.1B CSTM has a highly visible growth trajectory,is seeing better execution at UACJ,and currently trades at a substantial discount to its peers.The FCF inflection point has arrived in 1Q-19 yet the multiple appears to especially depressed.Solid growth expected to be seen in aerospace and defense end markets with as narrow body build rates accelerate,CSTM recovers share at Airbus,and CSTM leverages Airware growth from strong A-220 demand.BiW volumes to increase significantly at UACJ and Neuf-Brisach,with full utilization expected in 2020.Auto structure nominations to remain strong with a mix shift driving margin upside in the AS&I segment through 2020.Particularly strong price dynamics across shorter cycle in Transportation,Industry,&Defense(TID)and spot aerospace/industrial sheet markets.3 Warrior Met Coal Inc.(HCC)HOLT Lens Price:$28.08 Target:$34.64 Mkt Cap:$1.4B Seaborne met coal market to remain tight over 2019,falling slightly throughout the year but increasing in 4Q19 as Indian purchasers return from the monsoon season.Warrior is highly leveraged to the met coal market,which we view as attractive,allowing it to have a strong capital return profile,which will continue to drive strong EBITDA and free cash flow generation through the year.Curt Woodworth curt.woodworthcredit-(212)325-5117 Basic Materials Metals&Mining 13 Source:Credit Suisse;Data as of 8-May-19 Top Underperform Rank Company Pricing Rationale 1 United States Steel Corp.(X)HOLT Lens Price:$15.40 Target:$11.00 Mkt Cap:$2.7B US Steel is facing clear challenges to its business model,as demonstrated through announcements to spend$1.4bn for new Fairfield EAF/Mon Valley upgrade,which simply reflect the need to lower costs to remain competitive within the industry.In past two years,X spent total of$4.3bn on capital and maintenance/outage expense,a substantial increase from$2.8bn seen in 2015-16,which begs the question whether X will ever get adequate ROI on this spend given its history of unplanned outages,loss in auto,and unexpected reinvestment spend.In our view,X should be preparing itself for a 2015-16 type environmental now,as the upcoming Sheet Tsunami will drive a structural rerating lower in fair value HRC prices/industry margins.Curt Woodworth curt.woodworthcredit-(212)325-5117 Basic Materials Metals&Mining 14 Source:Credit Suisse;Data as of 8-May-19 Top Outperform Rank Company Pricing Rationale 1 Crown Holdings Inc.(CCK)HOLT Lens Price:$59.03 Target:$65.00 Mkt Cap:$8.0B Thesis:We see three principal factors behind our positive view:(1)Can volumes in weak geographies(a drag on 2018 performance)stabilizing and continued growth in key markets(SE Asia,Latam and Europe),where CCK is well positioned to grow ahead of the market from recent and ongoing expansionary investments.Geographic and product diversification and exposure to growth markets have seen CCK deliver progressive operating income in 14 of the past 15 years(2012 only down year);(2)scope for margin expansion in North America from positive contribution from PPI escalators mitigating cost inflation and a better balance in CCKs US beverage can offering;(3)Signode(20%of revenues)is delivering the expected high cash conversion(92%,YTD)and CCK is on target to de-lever by 0.5x/year.Valuation remains attractive,in our view.We see scope for incremental target price increases and justification for a continuation of the gradual rerating of the share that commenced in Q4 as balance sheet metrics improve and CCK actions drives medium term earnings growth.See recent research:Cans and Glass Packaging:Defensive Growth We Like It Potential Catalysts over next 3-6 months:Q2 19 results on July 2019.Valuation:Our$65 target price is based on the average of our DCF val