With traditionally high debt levels and a struggle for profitability, airlines rarely come to mind when one thinks of value investments. But when some players in an industry are unloved by the market, their stock prices can become temporarily depressed. Here we will look at two airlines that fit an undervalued profile.
Unnecessary discount
The news surrounding US Airways (NYSE: LCC ) recently has almost entirely centered on the airline's proposed merger with American Airlines parent company AMR (NASDAQOTH: AAMRQ ) . While this merger would play a major role in shaping the future of US Airways (which would become American Airlines Group upon the merger), the results of the trial determining whether the airlines can merge are not do-or-die.
While US Airways has strong potential upside from a successful completion of the AMR merger, I see US Airways as having limited downside based upon the airline's strong cash and earnings positions. Trading for a price-to-earnings ratio under 7, US Airways has enough earnings to theoretically support the current share price on its own.
Top 10 Up And Coming Stocks For 2015: Caterpillar Inc.(CAT)
Caterpillar Inc. manufactures and sells construction and mining equipment, diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives worldwide. It operates through three lines of businesses: Machinery, Engines, and Financial Products. The Machinery business offers construction, mining, and forestry machinery, including track and wheel tractors, track and wheel loaders, pipelayers, motor graders, wheel tractor-scrapers, track and wheel excavators, backhoe loaders, log skidders, log loaders, off-highway trucks, articulated trucks, paving products, skid steer loaders, underground mining equipment, tunnel boring equipment, and related parts. It also manufactures diesel-electric locomotives; and manufactures and services rail-related products and logistics services for other companies. The Engines business provides diesel, heavy fuel, and natural gas reciprocating engines for Caterpillar machinery, electric power generation systems, marine, petrol eum, construction, industrial, agricultural, and other applications. It offers industrial turbines and turbine-related services for oil and gas, and power generation applications. This business also remanufactures Caterpillar engines, machines, and engine components; and offers remanufacturing services for other companies. The Financial Products business provides retail and wholesale financing alternatives for Caterpillar machinery and engines, solar gas turbines, and other equipment and marine vessels, as well as offers loans and various forms of insurance to customers and dealers. It also offers financing for vehicles, power generation facilities, and marine vessels. The company markets its products directly, as well as through its distribution centers, dealers, and distributors. It was formerly known as Caterpillar Tractor Co. and changed its name to Caterpillar Inc. in 1986. Caterpillar Inc. was founded in 1925 and is headquartered in Peoria, Illinois.
Advisors' Opinion:- [By Ben Levisohn]
After a dismal 2013, Caterpillar (CAT) has found some love so far this year.
AFPCaterpillar’s shares have gained 6.6% in 2014, double its 2013 gain of 3.3%, and besting the 7.7% drop in Deere (DE), the 0.4% rise in Terex (TEX), the 0.3% dip in Cummins (CMI) and the 4.5% decline in Joy Global (JOY).
Can the good times continue? Deutsche Bank’s Vishal Shah thinks they can. He explain:
We have a positive bias towards CAT as we believe investors are overly focused on the decline in resource industries revenue, which will likely trough earlier than expected in 2014, and are neglecting the significant growth opportunities within construction segment over the next 3-4 years as well as consistent execution within the power systems segment. Although we expect mining capex to decline by 55% from 2012 peak and trough in 2016-17, we believe the decline in Resource industries revenue will be smaller (down 45%) and shorter (ending in 2014). We expect the aftermarket business (25% of segment revenue) to mitigate some of the downside risk. We also expect CAT to be among the first construction equipment companies to benefit from the non-resi recovery and expect dealers to start building inventory as early as 2014.
It shouldn’t come as a surprise, then, that Shah thinks Caterpillar is going higher–much higher. He initiated Caterpillar as a Buy with a $122 price target, 25% above its current price.
Cummins and Deere, meanwhile, get Buy ratings, with price targets of $170 and $110, respectively. Buy-rate Terex could hit $52, while Hold-rated Joy Global has a price target of $57.
Shares of Caterpillar have gained 1.1% to $97.25, while Deere has advanced 1% to $85.15, Terex has jumped 2.5% to $43.19, Cummins has risen 0.8% to $141.15 and Joy Global is up 1.1% at $56.50.
- [By Dan Caplinger]
Caterpillar� (NYSE: CAT ) , down 6%
Caterpillar has been the worst-performing stock in the Dow so far this year, as the heavy-equipment maker has faced new challenges on top of some of the problems it has had to deal with for a long time. On top of the sluggishness in the construction and infrastructure industries worldwide, the plunge in commodities like precious metals have crushed the mining sector, hurting prospects for Caterpillar's sales of mining equipment. With multiple reductions to its guidance and recent layoff announcements, Caterpillar could have further to fall before it hits bottom. - [By Johanna Bennett]
The Dow Jones Industrial Average closed at�16,947.08, rising 25 points, or 0.15%, led by gains in shares of Caterpillar (CAT), Merck (MRK) and Johnson & Johnson (JNJ). The benchmark closed above its previous record of 16,945.92 hit on June 10.
- [By John Maxfield]
Given the news out of China, it should be no surprise that the Dow's worst-performing stock this afternoon is Caterpillar (NYSE: CAT ) . The heavy-machinery company looks to China for a considerable portion of sales and depends on global growth more generally to fuel demand for its products. In addition, as my colleague Dan Caplinger noted earlier today, the fall in gold prices could also have a negative impact on mining activity, an important source of demand for Caterpillar equipment.
5 Best Undervalued Stocks To Own For 2014: Tupperware Corporation(TUP)
Tupperware Brands Corporation operates as a direct seller of various products across a range of brands and categories through an independent sales force. The company engages in the manufacture and sale of kitchen and home products, and beauty and personal care products. It offers preparation, storage, and serving solutions for the kitchen and home, as well as kitchen cookware and tools, children?s educational toys, microwave products, and gifts under the Tupperware brand name primarily in Europe, Africa, the Middle East, the Asia Pacific, and North America. The company provides beauty and personal care products, which include skin care products, cosmetics, bath and body care, toiletries, fragrances, nutritional products, apparel, and related products principally in Mexico, South Africa, the Philippines, Australia, and Uruguay. It offers beauty and personal care products under the Armand Dupree, Avroy Shlain, BeautiControl, Fuller, NaturCare, Nutrimetics, Nuvo, and Swissgar de brand names. The company sells its Tupperware products directly to distributors, directors, managers, and dealers; and beauty products primarily through consultants and directors. As of December 26, 2009, the Tupperware distribution system had approximately 1,800 distributors, 61,300 managers, and 1.3 million dealers; and the sales force representing the Beauty businesses approximately 1.1 million. The company was formerly known as Tupperware Corporation and changed its name to Tupperware Brands Corporation in December 2005. The company was founded in 1996 and is headquartered in Orlando, Florida.
Advisors' Opinion:- [By Monica Gerson]
Tupperware Brands (NYSE: TUP) is expected to report its Q3 earnings at $1.03 per share on revenue of $623.34 million.
Varian Medical Systems (NYSE: VAR) is projected to post its Q4 earnings at $1.12 per share on revenue of $779.02 million.
5 Best Undervalued Stocks To Own For 2014: Schlumberger N.V.(SLB)
Schlumberger Limited, together with its subsidiaries, supplies technology, integrated project management, and information solutions to the oil and gas exploration and production industries worldwide. The company?s Oilfield Services segment provides exploration and production services; wireline technology that offers open-hole and cased-hole services; supplies engineering support, directional-drilling, measurement-while-drilling, and logging-while-drilling services; and testing services. This segment also offers well services; supplies well completion services and equipment; artificial lift; data and consulting services; geo services; and information solutions, such as consulting, software, information management system, and IT infrastructure services that support oil and gas industry. Its WesternGeco segment provides reservoir imaging, monitoring, and development services; and operates data processing centers and multiclient seismic library. This segment also offers variou s services include 3D and time-lapse (4D) seismic surveys to multi-component surveys for delineating prospects and reservoir management. The company?s M-I SWACO segment supplies drilling fluid systems to improve drilling performance; fluid systems and specialty tools to optimize wellbore productivity; production technology solutions to maximize production rates; and environmental solutions that manages waste volumes generated in drilling and production operations. Its Smith Oilfield segment designs, manufactures, and markets drill bits and borehole enlargement tools; and supplies drilling tools and services, tubular, completion services, and other related downhole solutions. The company?s Distribution segment markets pipes, valves, and fittings, as well as mill, safety, and other maintenance products. This segment also provides warehouse management, vendor integration, and inventory management services. Schlumberger Limited was founded in 1927 and is based in Houston, Texas.
Advisors' Opinion:- [By Seth Jayson]
Schlumberger (NYSE: SLB ) reported earnings on July 19. Here are the numbers you need to know.
The 10-second takeaway
For the quarter ended June 30 (Q2), Schlumberger met expectations on revenues and beat expectations on earnings per share. - [By Editor , DividendChannel.com]
ENB operates in the Oil & Gas Equipment & Services sector, among companies like Schlumberger (SLB), and Enterprise Products Partners L.P. (EPD).
5 Best Undervalued Stocks To Own For 2014: Dollar Tree Inc.(DLTR)
Dollar Tree, Inc. operates discount variety stores in the United States and Canada. Its stores offer merchandise primarily at the fixed price of $1.00. The company operates its stores under the names of Dollar Tree, Deal$, Dollar Tree Deal$, Dollar Giant, and Dollar Bills. Its stores offer consumable merchandise, including candy and food, and health and beauty care, as well as household consumables, such as paper, plastics, household chemicals, in select stores, and frozen and refrigerated food; variety merchandise, which includes toys, durable housewares, gifts, party goods, greeting cards, softlines, and other items; and seasonal goods, such as Easter, Halloween, and Christmas merchandise. As of April 30, 2011, it operated 4,089 stores in 48 states and the District of Columbia, as well as 88 stores in Canada. The company was founded in 1986 and is based in Chesapeake, Virginia.
Advisors' Opinion:- [By Lawrence Meyers]
This isn�� some growing new industry set to take the world further into the 21st century. It�� an old concept that hasn�� innovated, won�� innovate, and will slowly but surely die out over this century. When I walk into a Walgreens, I see a miniature Target (TGT), a more expensive Dollar Tree (DLTR), and a provider of prescriptions in a world where everything is becoming mail order.
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