BOSTON ( TheStreet) -- Barclays' ( BCS) investment-banking business has been raising share-price targets on its "global top picks" for 2011 in recent weeks, based on robust corporate profits.
At the start of the year, Barclays advised its U.S. investors to take a "more aggressive sector stance" that includes paring exposure to emerging-markets stocks in favor of developed-world companies with significant business in emerging markets. Earnings-per-share results have beaten analysts' estimates at 72% of the 425 companies in the S&P 500 Index that reported results since April 11.
Barclays recommends U.S. industrial, technology and energy stocks on the view toward an "improving domestic growth outlook," and that advice seems to be holding up. The S&P 500 Index of the biggest U.S. stocks is up 7.7% this year through May 10, and 31% over the past 12 months. Barclays said it expects the materials sector to post 30% growth this year, followed by industrials, at 16%, and energy, at 12%. On the bottom, the utilities sector is expected to fall 1%. Here are five of Barclays' stock picks with recently updated price targets. The list of 122 global picks for 2011 offer potentially generous premiums: Cardinal Health ( CAH), a leading distributor of pharmaceuticals and medical supplies, is one of Barclays' nine health-care-industry picks. The company's operations include procurement, inventory-management and logistics services, and it serves customers such as CVS Caremark ( CVS) and Walgreen ( WAG). Barclays says Cardinal Health is seen as having a renewed sense of focus, helped by acquisitions in the second half of last year. The purchased companies pushed Cardinal Health into faster-growing areas, including a wholesale business that includes new generic products. "In our view, strengthening Cardinal's generic strategy with the addition of Kinray sets the stage for improved margins as a wave of generic drugs hits the market over the next two to four years," Barclays said. "We see the opportunity for margin expansion in Cardinal's drug segment to drive potential upside in 2011." Barclays expects Cardinal will earn $2.52 per share in 2011, giving it a projected price-to-earnings ratio of 14.5, but that is seen dropping to a 12.7 P/E ratio in 2012 on earnings of $2.87 per share. Barclays' current price target of $51 was set April 29. Cardinal's shares are currently trading at $44.80, giving a potential 14% upside. Shares are up 19% this year, making for a market value of $15 billion.
The main thrust of the order appears to be easing regulatory hurdles to drug approvals, which could lower the cost of bringing new treatments to market and thus lower prices.
Generic drugmakers are likely to limit themselves to acquisitions of small- and mid-sized companies in the immediate future because of over-leveraging and turmoil in the executive ranks..
