These reports, excerpted and edited by Barron’s, were issued recently by investment and research firms. The reports are a sampling of analysts’ thinking; they should not be considered the views or recommendations of Barron’s. Some of the reports’ issuers have provided, or hope to provide, investment-banking or other services to the companies being analyzed.
ZipRecruiter ZIP-NYSE
Strong Buy Price $20.64 on June 17
by Raymond James
We are initiating coverage of ZipRecruiter with a Strong Buy rating and a price target of $36. Our positive fundamental view is based on: 1) a large recruitment total addressable market that is increasingly shifting online; 2) a leadership position with strong brand recognition driving a high degree of organic traffic; 3) unique AI-powered matching technology driving better outcomes for employers and job seekers; 4) our expectation for 15%-plus long-term revenue growth, driven by an increasing number of employers, attracting more job seekers, improving its matching technology, pricing optimization, and global expansion; and 5) our expectation for 30%-plus long-term Ebitda margins.
Lincoln Electric Holdings LECO-Nasdaq
Outperform Price $127.69 on June 22
By Oppenheimer
We are upgrading Lincoln Electric to Outperform from Perform, given confidence in its attractive demand runway, material earnings upside potential, and supportive valuation. Following many years of tentative industrial investment, we anticipate a significant recovery in capex as business confidence improves and companies invest in the technologies required to be more agile, efficient, and resilient going forward. We view Lincoln Electric [a maker of welding products] as a key beneficiary of renewed capital spending, with its $300 million-plus of portfolio “pruning” since 2009 implying stronger and more profitable growth through the new cycle. In our view, Lincoln’s automation and additive strategy remains the most compelling aspect of the story (clear secular underpinning) and a likely source of EPS outperformance and valuation support as growth reaccelerates over the coming quarters. Price target: $147.
KB Home KBH-NYSE
Outperform Price $43.37 on June 23
by Wedbush
We reiterate our Outperform rating on KB. The company’s share-price decline after the earnings release on June 23 may be attributable to KB’s fiscal second-quarter revenue of $1.44 billion, which was below consensus at $1.50 billion. Another reason may be the fiscal third-quarter sales guidance of $1.50 billion to $1.58 billion coming in below the consensus forecast for $1.62 billion. Despite that news, KB raised the midpoint of the fiscal-2021 revenue guidance to $6 billion from $5.9 billion, which suggests to us that fourth-quarter sales should increase over 20% sequentially from the third quarter. The 126% year-over-year increase in second-quarter backlog dollars, to $4.3 billion, and order growth of 145%, exceeding consensus at 122%, are also highlights in our view. Current sales activity is apparently less frenetic than earlier this year, but management is still limiting sales and raising prices to keep orders from outstripping the construction capacity. Price target: $56.
Accenture ACN-NYSE
Positive Price $285.70 on June 24
by Susquehanna Financial Group
While the broader market for information-technology services has improved sharply, Accenture’s new leadership appears to have them doing even better and taking share. The hypergrowth is balanced across all “strategic priorities,” with Cloud, Interactive, Industry X, and Security all showing “very strong double-digit growth.” From a “services” perspective, we were encouraged to see Strategy & Consulting rebound to “high-single digit growth,” as this is typically the funnel and was certainly engaged in landing a record 20 new deals over $100 million. We think that the “next generation growth model” that Accenture’s new management introduced in January 2020 is helping them lean into the recovery. It localizes, and globalizes, the sales and delivery process. We remain Positive rated on the assumption that Accenture continues to take market share next year. We are raising estimates, and our price target follows, to $340.
Clorox CLX-NYSE
Sell Price $172.92 on June 23
by UBS
The debate for Clorox centers on whether habits formed during Covid-19 will lead to accelerated category growth for the company’s portfolio, particularly across cleaning and health/wellness segments. We partnered with the UBS New Analytic Approaches Team to try and handicap this potential. Many categories are still seeing elevated purchase levels, but overall there also appears to be a downward trend back to predicted growth, had Covid not happened, suggesting less “stickiness” longer term. We see lower category growth and price elasticity impacts on volume plus margin headwinds from necessary reinvestment to right-size shared, driving downside to Street EPS estimates. The next catalysts are: 1) Clorox’s fiscal fourth-quarters earnings in July/August, when it will give fiscal-2022 guidance, and 2) market share performance in Nielsen data over the next few months as comps start to normalize and price increases are implemented. Price target: $166.
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