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.
Sector Perform Price $110.47 on July 29
by RBC Capital Markets
Trane Technologies has transformed into a heating, ventilation, and air conditioning pure-play, just as Covid-19 is sparking new HVAC demand in commercial indoor air quality and residential air conditioning.
In the second quarter, Trane handily beat the consensus earnings estimate by 52 cents a share or about 70%. Its approximately 13% organic revenue decline came in at less than half our minus-28% estimate. The stock has also quickly become an environmental, social, and corporate governance favorite. Risk/reward looks mostly balanced here.
Trane has highlighted the Covid-driven long-term secular boost that its commercial HVAC business is seeing from [concerns about air quality within buildings]. While there are no federal mandates yet, many buildings are constructed to Ashrae [American Society of Heating, Refrigerating and Air-Conditioning Engineers] standards, and employees are increasingly demanding more sophisticated and safer HVAC systems.
Trane trades at 22.8 times our 2021 EPS estimate, a 2% discount to peers. Looking ahead, the company has tightened its 2020 sales analysis from down 15% to 25%, year-over-year, to down 10% to 15%. We are raising our 2020/2021 EPS estimates by 95 and 80 cents, to $4 and $4.85, respectively, and our stock price target by $16, to $97.
Horizon Technology Finance
Buy Price $11.57 on July 30
by Maxim Group
HRZN reported second-quarter net investment income of 40 cents a share (aided by income from liquidity events) versus its quarterly dividend of 30 cents (paid at 10 cents a month, and declared through December 2020). [Earnings under generally accepted accounting principles were] 47 cents a share. With GAAP EPS exceeding the dividend, net asset value per share was up 1.4%, to $11.64.
We regard this as outperformance in a Covid-19 environment, and attribute it to HRZN’s focus on technology and life sciences. We maintain our 2021 dividend estimate at $1.20. Over the next four quarters, we expect a dividend yield of 10.4% and stock price appreciation of 8%, to our price target of $12, resulting in about an 18% total return.
Buy Price $129.63 on July 27
by BofA Securities
We assign a $155 price objective to Texas Instruments, based on 26 times estimated 2021 enterprise value/free cash flow. Our target is justified by TXN’s best-in-class profitability and cash flow returns. Diversified peers trade in a range of 14-to-40 times.
Hold Price $166.01 on July 29
by Canaccord Genuity
We are maintaining our Hold rating and $155 price target on Boeing. Until we get better confidence in the pace of 737 MAX deliveries and the broader macro backdrop, the stock will see limited upside. Management sounds relatively cautious on the outlook, and it appears that further cost actions will be necessary beyond the about 10% headcount reduction the company has implemented.
Boeing has come back from the liquidity cliff, and with the U.S. government support, there is a relatively high floor on the stock. However, it will likely be 2023 before we get back to a more “normal” year, given the current uncertainty around airline and leasing company financial health.
Buy Price $228.82 on July 30
AMED’s home health care and hospice volumes recovered strongly in June, providing enough visibility for management to reinstate 2020 guidance nicely above the consensus model. We saw signs of this recovery when we upgraded our rating to Buy in June.
Other than a small rise in missed visits in some new hot spots (e.g., Florida), we see only tailwinds for AMED heading into 2021. They include an increasing share of post-acute admissions, a 2.6% Medicare rate update for both home health care and hospice, and likely home health mergers and acquisition momentum.
Reinstated Ebitda and adjusted EPS guidance is now 15% ahead of our prior model, and we are increasing our stock price target to $250 (from $210).
Market Perform Price $110 on July 30
by Barrington Research
Kadant reported second-quarter results that beat consensus expectations. Adjusted Ebitda and adjusted earnings per share were better than our expectations, while revenue was roughly in line with our expectation. On a consensus basis, the company is trading at 26.1 and 22.3 times fiscal 2020 and 2021 earnings, respectively, and 14.3 times and 12.9 times fiscal 2020 and 2021 Ebitda, respectively. This represents a premium to its peer group, which we believe is warranted.
[However,] we are maintaining our Market Perform investment rating, primarily based on valuation.
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