Oppenheimer Picks 10 Value Stocks With 'Attractive' Growth Potential

Editors' pick: Originally published April 5.

Looking for value? Investors should consider these 10 buy-worthy stocks, according to Oppenheimer.

The investment banking firm drew the list from companies in the Russell 1000 Value Index that were rated "outperform" by Oppenheimer equity analysts, according to an April 4 note.

Six of the 10 companies pay dividends, and all offer "attractive upside potential" in the view of the equity analyst covering the stock, the note said.

Here is the list, along with commentary from the covering equity analyst at Oppenheimer. Data on the stocks' 52-week-highs are based on closing prices. Oppenheimer used April 1, 2016, closing prices to calculate percentage losses. 

 

 

 

 

 

 

 

 

 

1. First Data
1. First Data

Sector: Information Technology
Oppenheimer Rating/Target Price: Outperform/$16

First Data (FDC - Get Report) is a payments-processing company that went public in October 2015. The company was bought by KKR in a $30 billion leveraged buyout in 2007.

First Data's stock is down 28.9% from its 52-week-high of $17.80 on Nov. 10, 2015. The stock does not pay a dividend.

"Despite its favorable debt maturity schedule (nothing due until 2018) and modest interest rate sensitivity (only approximately 1/4 of debt is floating), FDC appears to have suffered collateral damage in the recent high-yield credit market carnage," Oppenheimer analyst Glen Greene wrote in a Feb. 10 note following the company's earnings results. "Nonetheless, we remain encouraged by FDC's positioning within the payment-processing ecosystem and continue to believe the company is well positioned to benefit from the secular trend toward electronic payments."

With shares trading at approximately 9x the analyst's 2017 expected EBITDA (earnings before interest, taxes, depreciation and amortization) and 6x his 2017 EPS estimates, the stock is attractive, Greene wrote.

2. T-Mobile
2. T-Mobile

Sector: Telecommunication Service
Oppenheimer Rating/Target Price: Outperform/$148

T-Mobile USA (TMUS - Get Report) is a national provider of wireless voice, messaging, and data services capable of reaching over 293 million people, according to its website.

T-Mobile's stock is down 8.5% from its 52-week-high of $43.03 on Sept. 23, 2015. The stock does not pay a dividend.

"T-Mobile's improving cash generation coupled with ongoing subscriber momentum reinforces our outperform rating," Oppenheimer analyst Timothy Horan wrote in a Feb. 17 note to clients following T-Mobile's earnings results. "The company appears on track for 20% EBITDA growth in 2016/17. We continue to believe TMUS's standalone story is attractive with M&A upside [long term]."

3. HCA
3. HCA

Sector: Health Care
Oppenheimer Rating/Target Price: Outperform/$85

HCA Holdings (HCA - Get Report) provides health-care services by operating 168 hospitals in the U.S. and 116 freestanding surgery centers as of Dec. 15, 2015.

HCA's stock is down 16.5% from its 52-week-high of $94.81 on July 13, 2015. The stock does not pay a dividend.

"We are recommending shares of HCA given strong Q4 results, a robust outlook, improved Affordable Care Act enrollment trends, and an attractive valuation," Oppenheimer analyst Michael Wiederhorn wrote in a March 17 note to clients.

"HCA's Q4 beat and bullish FY2016 outlook, released on January 29, 2016, were far in excess of expectations. Nevertheless, the stock has re-traced only a portion of its post-Q3 losses. Besides the Q3 earnings challenges, the market remains concerned with the outlook for the ACA, balance sheet leverage and mixed competitor results, but those concerns appear overblown," Wiederhorn wrote. "The stock is now trading at just 7.1x '16E EBITDA, which is a discount to the company's/industry's historical averages of 7.6x/8.6x."

4. Expedia
4. Expedia

Sector: Consumer Discretionary
Oppenheimer Rating/Target Price: Outperform/$140

Expedia (EXPE - Get Report) is an online travel company that operates through its flagship site as well as trivago, Egencia, eLong, and HomeAway segments. Expedia also recently acquired rival online travel website, Orbitz.

Expedia's stock is down 21.2% from its 52-week-high of $137.31 on Nov. 6, 2015. The stock's dividend yield is currently 0.89%.

Expedia is "our top long-term idea," Oppenheimer analyst Jed Kelly wrote in a March 13 note to clients. His price target of $140 "implies 23% appreciation from current levels," Kelly wrote on March 13.

"The company is well positioned to gain online-travel share from its leading travel brands, solid management execution, and strategic deployment of capital," Kelly wrote as part of his investment thesis. "We believe the HomeAway acquisition is highly accretive, based on leveraging HomeAway's unique inventory with Expedia's online optimization capabilities. As a result, we forecast superior earnings growth that should result in significant shareholder value, in our view."

5. FedEx
5. FedEx

Sector: Industrials
Oppenheimer Rating/Target Price: Outperform/$180

FedEx (FDX - Get Report) provides customers and businesses worldwide with a broad portfolio of transportation, e-commerce and business services, according to its website.

FedEx's stock is down 11.5% from its 52-week-high of $184.98 on June 11, 2015. The stock's dividend yield is currently 0.61%.

"FedEx is lauded for its speed and service in its core FedEx Express segment, where it possesses the leading market share in 'express' parcel delivery in the U.S., as well as a strong position in its emerging FedEx Ground segment, both of which (particularly Ground) are benefiting from an e-commerce tailwind, which we estimate is driving formidable revenue growth in business-to-consumer,"  Oppenheimer analyst Scott Schneeberger wrote as part of his investment thesis in a March 17 note to clients.

"Anticipating a gradual economic recovery in the US/globally, we expect margin expansion via improved efficiencies and capital utilization, coupled with a realignment plan likely to meet/exceed targeting improved annual profitability of $1.65 billion by FY16," he wrote.

6. CVS Health
6. CVS Health

Sector: Consumer Staples
Oppenheimer Rating/Target Price: Outperform/$118

CVS Health (CVS - Get Report) provides integrated pharmacy health care services. It operates through two segments -- pharmacy services and retail. CVS owns more than 9,600 retail stores across the U.S., Puerto Rico and Brazil.

CVS' stock is down 7.6% from its 52-week-high of $113.45 on July 29, 2015. The stock's dividend yield is currently 1.64%.

"The company continues to do well in the PBM (pharmacy benefit management) segment, taking new market share ($12.7 billion net new business) while integrating the newly acquired Omnicare and Target pharmacies," Oppenheimer analyst Mohan Naidu said in a Feb. 9 note to clients.

"We believe that CVS's focus around building solutions that span the continuum of care will resonate well with clients," Naidu wrote. "Near term, the continued strength in new PBM business and acquisition synergies will likely drive the upside. CVS's focus on delivering shareholder returns in multiple avenues -- earnings growth, share buybacks and dividends, makes it very attractive, especially in this turbulent market."

7. Fidelity National Information Services
7. Fidelity National Information Services

Sector: Information Technology
Oppenheimer Rating/Target Price: Outperform/$80

Fidelity National Information Services (FIS - Get Report) is a financial services technology company that offers a range of solutions in retail and enterprise banking, payments, capital markets, asset and wealth management, risk and compliance, treasury, and insurance. It also provides financial consulting and outsourcing services.

Fidelity National's stock is down 11.5% from its 52-week-high of $73.50 on Nov. 2, 2015. The stock's dividend yield is currently 1.64%.

Fidelity completed its acquisition of SunGard, a financial software and technology services company, on Nov. 30.

"The SunGard integration appears ahead of plan; we would not preclude upside synergies (i.e., above $200 million FY17 exit rate). FIS currently trades at approximately 14x our FY17E EPS, which we believe remains attractive," Oppenheimer analyst Glenn Greene wrote in a Feb. 9 note to clients.

8. Coach
8. Coach

Sector: Consumer Discretionary
Oppenheimer Rating/Target Price: Outperform/$50

Coach (COH) is a luxury accessories and lifestyle collections retail chain with stores in the U.S., Europe and Asia.

Coach's stock is down 5.8% from its 52-week-high of $43.03 on April 10, 2015. The stock's dividend yield is currently 3.37%.

"With Creative Designer Stuart Vevers' influence on full-price channel for five quarters and impact on outlet at approximately 90% this [past holiday season], we are starting to see signs of stabilization of Coach brand in North America. All in all, at 17% operating margins (31% just two years ago) and early signs of brand inflection, COH is playing better offense, despite moderation in growth of overall handbag category, and likely stands to benefit from biggest competitor KORS slowing," Oppenheimer analyst Anna Andreeva said in her investment thesis on the stock in a Jan. 26 note to clients.

9. WESCO International
9. WESCO International

Sector: Industrials
Oppenheimer Rating/Target Price: Outperform/$58

WESCO International (WCC - Get Report) distributes electrical, industrial, and communication maintenance, repair, and operating (MRO) products; and original equipment manufacturers' products and construction materials in North America and internationally.

WESCO's stock is down 25.8% from its 52-week-high of $74.19 on June 3, 2015. The stock does not pay a dividend.

"We believe WCC's hires into key strategic leadership positions in recent years support improved guidance rigor and represent a long-term investment in deeper organizational productivity potential across sales & marketing, supply chain, and IT (new CIO most recently)," Oppenheimer analyst Christopher Glynn wrote in a March 21 note to clients.

"WCC remains positioned to drive long-term market share gains in the fragmented U.S. electrical distribution market in our view, as nonresidential and industrial capex markets recover," Glynn wrote as part of his investment thesis in the note. "We note meaningful leverage to a sustained and more broad-based recovery and attractive long-term investment characteristics."

10. Anthem
10. Anthem

Sector: Health Care
Oppenheimer Rating/Target Price: Outperform/$171

Anthem (ANTM - Get Report) is a health benefits company in the U.S. As of December 31, 2015, it served 38.6 million medical members through its affiliated health plans. The company was formerly known as WellPoint Inc. and changed its name to Anthem, Inc. in December 2014.

Anthem's stock is down 17% from its 52-week-high of $171.04 on June 22, 2015. The stock's dividend yield is currently 1.87%.

"Overall, while the Exchanges continue to cause shorter-term pressure, we think improvements to this business, along with the potential accretion from Cigna remain attractive long-term catalysts for the company. As a result, we maintain our Outperform rating" on Anthem, Oppenheimer analyst Michael Wiederhorn wrote in a Jan. 28 note to clients.

 

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