MGM Resorts action looks like a winning bet


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These reports, extracted and edited by Barron’s, were recently published by investment and research firms. Reports are a sample of analysts’ thinking; they should not be taken as the opinions or recommendations of Barron’s. Some of the reporters have provided, or hope to provide, investment banking or other services to the companies analyzed.


MGM Resorts International

MGM-NYSE

Surpass Price $ 44.42 on October 11

through


Swiss credit

We take MGM from Neutral to Outperform and increase our target price to $ 68 [from $33]. MGM has undergone a transformation, recently announcing four deals, and we don’t think the market is giving it all the credit. Pro forma, we see three growth drivers: 1) a simplified organization with a more attractive capital structure; 2) The reverse of the numbers (our 2023 consolidated EBITDA, or earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs, is $ 4.4 billion, compared to $ 3.4 billion for the Street); and 3) improve the feeling ….[As a result of the transactions, including the sale of a 42% interest in MGM Growth Properties,] Pro forma consolidated debt will increase from $ 12.7 billion in the second quarter of 2021 to $ 8.5 billion, and pro forma cash will increase from $ 5.6 billion in the second quarter of 2021 to $ 9 billion.


Valvoline

VVV-NYSE

Overweight Price $ 34.75 October 12

by JP Morgan

Valvoline plans to separate its two businesses: a growing retail services business serving domestic fast oil change markets and a slower growing global product business with a large home DIY component. We estimate global operations at seven to nine times EBITDA and retail at 12 to 15 times. We don’t think the retail operation would be valued as much as


Sherwin-Williams

[ticker: SHW] due to its lower market share, but closer to


RPM

[RPM] Where


Scotts

[SMG] due to its comparable gross margin in the upper 30% range. These ranges provide a target stock price range of $ 34 to $ 45, with $ 39 at the midpoint.


Verizon Communications

VZ-NYSE

To buy Price $ 52.18 on October 11

by Edward Jones

We believe Verizon is trading at an attractive price, relative to its long-term growth potential. Verizon occupies a strong strategic position in the wireless market, due to its high quality network and its leadership share in the US subscriber market. Verizon Wireless provides the majority of Verizon’s free cash flow and earnings. Wireless revenue growth had been constrained by the move to unlimited data plans. But Verizon Wireless has managed to migrate through this and is growing revenue again, while aggressively upgrading its network with 5G technology. Verizon shares are trading at around 10 times our estimate of 2021 earnings per share, down from their five-year average of 12.


Marinemax

HZO-NYSE

Surpass Price $ 47.66 on October 13

by Raymond James

We maintain our outperformance rating, but lower our price target from $ 67 to $ 63. While supply chain constraints and low inventories are likely to limit the short-term growth of the competition, the company is poised to continue gaining share in a maritime market that is expected to benefit from an influx. new boaters, with much of the recent improvement in margins likely to be sustainable. Short term. We now include a modest increase expected in fiscal 2022 due to the ongoing acquisition of Intrepid Powerboats, although this appears to be more than offset by the likely negative impact of continued low inventory on sales. current. As a result, we are reducing our EPS estimates by 10 cents in fiscal 2021 and 40 cents in fiscal 2022, to $ 6.45 and $ 6.35.


Charles River Laboratories

CRL-NYSE

Overweight Price $ 408.03 on October 12

by KeyBanc Capital Markets

The company has sold parts of its [gene-therapy manufacturing unit in Sweden] and research models and service companies in Japan. These disposals will initially have a dilutive effect on EPS, but could generate up to $ 141 million in cash, improving CRL’s balance sheet and potentially allowing management to consider accretive acquisitions. We expect CRL to maintain over 10% organic revenue growth over the next several years, with over 50 basis points [each equal to 1/100th of a percentage point] annual expansion of operating margin. Target price: $ 450.


Bank of the First Republic

FRC-NYSE

Neutral Price $ 200.73 on October 12

by Piper Sandler

First Republic reported third quarter 2021 EPS of $ 1.91, although excluding modest stock gains we put the base figure at $ 1.90. This exceeded our estimate of three hundred. Compared to our expectations, commission income was better than expected, mainly due to higher wealth management income, although strong foreign exchange commissions also contributed. Assets under management and administration increased by 4.5%. Growth trends have remained very strong, with loans growing at an annualized rate of 17% and deposits at a very strong 32%. The increase in revenue was offset by higher expenses than we expected. We expect stocks to outperform the group slightly today [Oct. 13], although the rise may be tempered by the stock’s high trading multiple [26.6 times our 2022 EPS forecast]. Target price: $ 210.

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