Credit Suisse named five stocks that it believes will beat The Street’s expectations going forward – AK Steel (AKS), United States Steel (X), Kellogg (K), Nationstar Mortgage (NSM) and Whole Foods (WFM). The firm kept Outperform ratings on all of those stocks.
WHY STEEL?: The market is underestimating AK Steel’s exposure to the spot steel market, where prices have risen recently, contended Credit Suisse analyst Curt Woodworth. The company’s exposure to the spot market is 30%-35%, the analyst estimated. Moreover, recent production decreases and “limited import availability” should keep U.S. steel prices elevated, predicted Woodworth, who expects the company’s 2016 results to beat expectations and kept a $7 price target on the shares. Also very likely to benefit from rising steel prices is United States Steel, Woodworth believes. Investors do not appreciate the “immense operational leverage” that the company has to rising steel sheet prices, according to the analyst, who says there is a good chance that the steelmaker’s Q2 results will beat expectations. He set a $26 price target on the shares.
WHY KELLOGG?: There is a high degree of certainty that Kellogg’s earnings per share will rise 7%-9% this year, thanks to the company’s zero-based budgeting and cost savings, wrote Credit Suisse analyst Robert Moskow. Meanwhile, higher snack sales to stores and new organic products should cause the company’s performance to improve later this year, the analyst believes. Moskow predicted that other research firms would become more upbeat on the stock and he thinks that Kellogg has one of the best risk/reward ratios among the names he covers. The analyst set an $86 price target on the shares.
WHY NATIONSTAR?: Investors remain skeptical of Nationstar’s profitability, but its servicing profitability has stabilized and should increase if interest rates rise, contended Credit Suisse analyst Douglas Harter. Additionally, the returns of the company’s technology and data unit, Xome, are improving, according to Harter, who kept a $19 price target on the name.
