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.
Coca-Cola KO-NYSE
Buy Price $61.08 on March 7
by Edward Jones
Coca-Cola is doing a solid job reinvigorating its core carbonated soda business, with new sugar-free offerings and smaller can sizes. It is a highly innovative company that is improving and expanding its offerings in energy and sports drinks. Coke continues to increase the number of markets for its smaller, faster-growing brands (e.g., Costa Coffee), while also looking for acquisition opportunities. It has a strong management team and an admirable long-term strategy. It is simplifying its internal operations, focusing more on digital marketing and big data, and has recently eliminated many small, slow-growing brands. This should help sales and profits. Coke has a strong presence in growing emerging markets, such as China. As people in emerging markets enter the middle class, they often spend more on prepackaged beverages. Coke does have a tax dispute with the IRS that could be material, but the outcome remains uncertain. Coke had less than 2% of its sales from Russia last year, but that does not change our outlook. [The company has suspended its operations there, in light of the Russian invasion of Ukraine.]
Fifth Third Bancorp FITB-Nasdaq
Outperform Price $44.74 on March 9
by RBC Capital Markets
Overall, the outlook for Fifth Third is positive, due to the positioning of its balance sheet for higher interest rates, growth opportunities in its loan portfolio, and strength in credit quality. The company has been a good steward of capital, which we expect will continue. In 2021, all markets in which FITB has operations experienced household annual growth: Southeast up 6%; Chicago, 4%; Midwest ex Chicago, 2%. The company grew its adjusted noninterest income at a 5% compound annual growth rate from 2015 to 2021, even while relying less on fee revenue from consumers. Additionally, Fifth Third has the lowest reliance on overdraft fees among its peer banks.
Each of the first four 25 basis-point rate hikes [expected from the Federal Reserve] are estimated to add $120 million to $140 million of annual net interest income to the company. The bank has disciplined underwriting and is confident that credit quality will remain strong over the next 12 to 18 months. It is investing in organic growth (people, processes, and technology) to gain market share, continues to pay a strong dividend and to execute on share repurchases. Acquisitions remain a lower priority. Our target price on the stock is $50.
Nokia NOK-NYSE
Four stars out of five Price $4.53 on March 7 by Morningstar
Nokia is a key vendor of hardware, software, and services to communication service providers. CSP-equipment spending provides robust growth during generational wireless upgrade cycles, followed by spending lulls, with 5G being the latest tailwind. It promises to connect billions of wireless devices at incredible speed across more spectrum bands, and to have more uses than 4G. This may offer Nokia more upside than previous wireless generations. However, CSPs typically multisource equipment and possess purchasing power over their vendors. Nonetheless, as spending on 4G infrastructure declines, we expect 5G buildouts to benefit Nokia until the new technology is ubiquitous in early technology-embracing countries.
To maximize 5G’s potential data transmission speed, high-frequency bands will be utilized by the communication service providers. Compared with lower-frequency signals used in existing wireless generations, high-frequency bands travel shorter distances and are more susceptible to interference. To deliver users the highest speeds possible, while not succumbing to the limitations of physics, networks will require an abundant number of small-cell antenna systems. With its small-cell equipment widely regarded as top-notch, Nokia should benefit. Our fair-value estimate for Nokia shares is $5.70.
York Water YORW-Nasdaq
Buy Price $44.69 on March 9
by Janney Montgomery Scott
While York Water’s 2021 revenue met expectations, earnings per share of $1.30 were above our forecast. Looking forward, 2022 (and 2023) should be record years for system-wide investments, which should drive rate base growth throughout our published estimates. We maintain our $55 fair value on the stock. York Water shares remain attractive at a price/earnings ratio of 32 times our 2023 estimate; we believe a 39 P/E is attainable.
CrowdStrike Holdings CRWD-Nasdaq
Buy Price $169.79 on March 9
by BofA Securities
CrowdStrike is a leader in the Endpoint Protection Platform market. EPP solutions help protect enterprises from cyber attacks. CrowdStrike’s platform is one of the few 100% cloud-based architectures and is uniquely positioned to displace incumbents with its breadth, including advanced detection and remediation capabilities. CrowdStrike is positioned to gain EPP market share and expand into other security areas over time. Stock-price objective: $315.
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