5 Stock Strategies From Wall Street: Feb. 1

(Story updated with analyst recommendations on wireless tower shares.)
NEW YORK (TheStreet) -- In today's daily series of investing strategies from Wall Street, analysts focus on the growth potential for mattress companies and fertilizer stocks.1) Solid Earning Potential for North American Fertilizer Producers

Credit Suisse analysts expect strong earnings for North American fertilizer producers this year because of strong grain price fundamentals, especially in corn, and the nitrogen and phosphate pricing advantages they have in this region.

The analysts like nitrogen and phosphate producers with favorable sales volumes trends driven by strong demand from farmers in North America. However, they do warn of the likelihood of increased price volatilities due to the substantial amount of new supplies coming onto the market over the next year or to two. The researchers add that they like potash fertilizer stocks where volume and price expectations are low and valuations look attractive, and that are able to limit downside pricing risks due to discipline approaches.

Credit Suisse experts maintains outperform views on Potash ( POT) and Mosaic ( MOS) due to their attractive valuations, expectations for a strong recovery in potash demand, their strong disciplinary approach to limiting downside pricing risks and the companies' ongoing growth potential thanks brownfield land expansions. The Credit Suisse analysts also reiterate their outperform recommendation for Agrium ( AGU) on a valuation basis. They say that the supplier's retail model and potash growth potential, which should help reduce earnings volatility in the company's nitrogen and phosphate businesses, is underappreciated by the market.

2) Potential Dividend Stories in Software

Other information technology software companies could follow CA's ( CA) lead in announcing dividends after the company's surprise dividend hike last week to $1 from 20 cents annually, which is roughly a 4% yield as of Monday's close, Evercore Partners analysts say. The announcement, of course, had led to a spike in CA shares last week.

While many software companies have avoided paying dividends -- opting for stock buybacks instead -- Evercore analysts think that these companies will increasingly consider the payout of dividends as they find ways to create more value for their investors, as well as attract new ones to their "story."

"More companies are delivering only moderate revenue growth of 5% to 10% and are getting little credit for their strong cash flow -- could force more software management teams to evaluate dividends," say the analysts.

Evercore analysts identify BMC Software ( BMC) and Compuware ( CPWR) as the most likely candidates to either increase their existing yields or implement a dividend based on CA's free cash flow payout ratio.

Evercore equity research analysts say that BMC would only have to pay out 29% of its free cash flow to provide a 3% dividend yield, while Compuware would have to pay out 34% to provide this yield. As "value" names, a move by these companies to offer above-market dividends could potentially open up a new investor base for them, according to the analysts.

3) Mattress Companies Remain a Top Analyst Pick

The mattress industry remains the favorite subsector of KeyBanc stock analysts who see pent-up demand following the recession, a shift toward specialty and premium products and an aging population seeking better mattresses. The analysts say that mattress companies will likely experience strong sales momentum this year, thanks to new product launches and increased advertising. They're reiterating their buy recommendation and raising their price target for Mattress Firm ( MFRM) to $36 from $32; reaffirming their buy view and lifting their price target for Tempur-Pedic ( TPX) to $83 from $73; and reiterating their buy opinion and increasing their price target for Select Comfort ( SCSS) to $30 from $28.

KeyBanc analysts see more "tailwinds" for Mattress Firm as the company focuses on market penetration, with 67% of its new, upcoming stores arriving in existing markets and 33% in new markets. They say the stores in existing markets will experience higher same-store sales, market share and operating margins as they benefit from advertising; while stores in new markets will mainly compete against smaller stores that will be overshadowed by Mattress Firm's strong brand and service standards, say the analysts.

Looking at Tempur-Pedic, the researchers make special note of the company's new, lower-priced Simplicity line, which they believe could ultimately add 25% to 35% to its sales. They believe that Tempur-Pedic's new, lower-priced product is unique enough so that it will not significantly eat into the sales of existing products.

Select Comfort, another one of the KeyBanc analysts' top picks, has plans for a 5% to 7% store unit growth beginning this year, with the potential for an increase to at least 500 stores. In addition, Select Comfort plans to drive greater awareness of its Sleep Number brand and retail locations. The analysts continued to be impressed with the company's new m7 line, priced at $3,199 for a queen mattress set.

4) Met Coal in High Demand

Sterne Agee analysts believe demand for U.S. metallurgical coal will stay robust as iron production improves globally and new coal-heating ovens are commissioned. Furthermore, global benchmark prices for coal will stay higher while lower quality coal discounts will decrease amid hunger for the products from Chinese, Indian and Brazilian steel producers -- combined with unexpected supply disruptions.

The analysts say that U.S. metallurgical coal producers now have a three-to-five year window to generate above average volumes, margins and returns on its assets.

That said, Sterne Agree analysts make special note of Walter Energy ( WLT) , pointing to the company's impressive transformation into the largest, pure North American coking coal producer from being a mere operating subsidiary that mined and shipped met coal. The producer, say the researchers, is well-positioned to benefit from global customer needs. They have a $90 per share price target for the stock and recently upgraded it to neutral from underperform. Risks to their optimistic views for U.S. met coal producers include an unforeseen, larger than previously expected discount to their met coal, and continued operational problems.

5)Wireless Tower Shares Could Appreciate

Evercore Partners analysts believe that there will be further wireless tower shares appreciation this year, driven by persistent wireless data usage growth, the potential launch of an Amazon ( AMZN) smartphone, increased wireless industry spending among national players and Clearwire ( CLWR), and announcements of public safety communications networks.

Given these catalysts, they generally remain positive on the tower stocks, though continue to view Crown Castle International ( CCI) as the one that will have the most near-term upside.

Last year, wireless tower shares appreciated more than 9% in aggregate, driven by accelerating wireless data usage trends.

-- Written by Andrea Tse in New York.

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