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These reports, excerpted and edited by Barron’s, were recently published by investment and research firms. The reports are a sample of the analysts’ thinking; they should not be considered Barron’s opinions or recommendations. Some of the issuers of the reports have provided, or expect to provide, investment banking or other services to the companies analyzed.
Allied Financial
ALLY-NYSE
Surpass Price $43.37 on April 13
by RBC Capital Markets
First quarter adjusted earnings per share of $2.03 [beat the consensus estimate of] $1.93. Credit quality remained manageable, with slightly higher net write-offs and lower delinquencies. The company continues to experience solid balance sheet growth, higher loan yields and lower funding costs. Non-interest income also shows consistent and solid trends. Ally repurchased 13 million shares during the quarter and increased its quarterly dividend to 30 cents per share from 25 cents. The updated guidance continues to call for a longer-term return on tangible common shareholders’ equity of 16% to 18%+ (compared to 23.6% in the first quarter of 2022), and a margin of 3% higher net interest on a 2.5% to 3% federal funds rate. Management also expects retail auto finance net charges to remain below 1% for 2022 and to increase 1.4% to 1.6% for 2023 and 2024. If the company can meet these targets, the Ally Financial’s valuation remains very attractive. Price target: $55.
Timken
TKR-NYSE
Surpass Price $55.98 on April 12
by Oppenheimer
We launch Timken cover [known for making bearings and power-transmission products] with an outperform rating, based on our confidence in the company’s value-added portfolio transformation, realistic medium-term earnings outperformance factors, including an up-to-date valuation. We appreciate Timken’s long-term strategic transition, with aggressive investments in renewable energy and automation strengthening its secular positioning and supporting a respectable compound annual growth rate in 2015-21 revenue, despite macroeconomic volatility and significant operational challenges. We believe Timken can at least replicate this performance over the next few years, with sustained demand (still robust trends in most markets), accelerated price recovery and strategic/accelerative capital deployment delivering benefits. Our 12-18 month price target is $75.
Taiwan semiconductor
TSM-NYSE
Neutral Price $105.50 on April 13
by Susquehanna Financial Group
In line with our outlook, Taiwan Semiconductor’s Q1 earnings and future guidance beat expectations and for the most part was driven by the continued rise in mixed wafer ASPs. [average selling prices]. Mixed wafer shipments increased 1% quarter-over-quarter, while ASPs increased 11%. However, we expect flat or declining ASPs in 2023. Given this assumption and our conservative margin profile for 2023, which implies operating margin contraction of 3% to 4%, we argue that our estimate of the 2023 EPS below the consensus of $5.79 is a reliable base. Case. That would be down almost 5% year-over-year, after a 45%-50% year-over-year increase in 2022, but we think that’s reasonable. Our price target is $115, down slightly from $116.
Border Communications
Parent company FYBR-Nasdaq
Overweight Price $28.99 on April 6
by Wells Fargo
We are launching the Frontier hedge with a price target of $37. Our revenue and EPS estimates are $5.8 billion and $1.20 for 2022 and $5.8 billion and $1.27 for 2023. We believe in the fiber-to-the-home strategy of operators of telecommunications, and Frontier represents in our opinion the cleanest game on this subject. The company has reached an inflection point, with fiber broadband net additions exceeding copper losses, which is expected to continue. With sights set on changes in EBITDA growth [earnings before interest, taxes, depreciation, and amortization] in the second half of this year, and revenue in 2023, and a fully funded fibre-to-the-home build plan through mid-2023, the risk-reward ratio deviates positively from the current level.
Chefs’ Warehouse CHEF-Nasdaq
To buy Price $32.62 on April 13
by reference
Our $43 price target on Chefs’ Warehouse shares is based on an enterprise value/EBITDA multiple of 16 times our revised FY2023 Adjusted EBITDA estimate of $132.5 million, a multiple just above the midpoint of the stock’s historical (pre-pandemic) range. 13 to 18 times, reflecting the recovery in the company’s earnings capacity. As we move toward normalizing business trends, the company is expected to be a market share taker, a continued specialty food retail industry consolidator, and a more profitable operation than it was. before the pandemic. As staples (eggs, chicken, flour, avocados) have risen, Chefs’ Warehouse is passing inflationary pressures on to customers in near real time, mitigating most of the impact on its gross profit margin. The increase in revenues should offset the slight pressure on the gross margin.
Helmerich and Payne
HP-NYSE
Neutral Price $48.21 on April 13
by JP Morgan
Shares of Helmerich have risen sharply this year along with those of other land drillers, as investor expectations for U.S. rig count growth and margin expansion have improved. But at current trading levels, optimistic forward expectations are factored into the stock’s valuation. December price target: $50.
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