- J.P. Morgan downgrading Yum Brands to neutral from overweight
- J.P. Morgan upgrading Domino's Pizza to overweight from neutral
- Telsey downgrading Booking Holdings to market perform from outperform
- Argus downgrading Boeing to hold from buy
- Sandler O'Neill & Partners downgrading MetLife to hold from buy
Here are the biggest calls on Wall Street on Tuesday:
J.P. Morgan downgrading Yum Brands to 'neutral' from 'overweight'
J.P. Morgan believes the recent run-up in Yum YUM shares leaves little upside to their estimates.
"While we do believe in YUM's long-term earnings algorithm of mid- to high-single-digit system-wide sales growth driven by ~4% unit growth and 2-3% worldwide comps, the 9% YTD run in the share price—and the corresponding multiple increase to 23.3x C20E P/E—leaves little upside to our estimates...":
J.P. Morgan upgrading Domino's Pizza to 'overweight' from 'neutral'
J.P. Morgan is bullish on Domino' DPZ s sales growth.
"We believe DPZ's algorithm to achieve 8-12% system-wide sales growth remains intact... We are focused on its lowest-cost delivery platform and believe recent multiple compression to slower growing peers presents an opportunity...Our DPZ price target remains $270, or 25x C20E EPS, while our YUM price target is $94 or 21.7x C20E EPS with DPZ implying a 3.6% FCF yield at this multiple and YUM a 4.5% yield... We agree with company guidance that DPZ is an 8-12% system-wide sales growth company driven by 6-8% unit growth, 3-6% US comps, and 3-6% international comps... Dunkin DNKN ', McDonalds MCD , and Wendy's growth metrics are much lower, but DPZ offers the best comparison to YUM in our coverage today..."
Telsey downgrading Booking Holdings to 'market perform' from 'outperform'
Telsey believes Europe and growing competition provide challenges for Booking Holdings BKNG .
"With 4Q earnings season over, we have re-evaluated our outlook on the OTA sector and for BKNG in particular... We are lowering our PT to $1,800 and downgrading the stock to MP due to: (1) a weaker European economic outlook; and (2) growing threats from Airbnb and Google GOOGL , which are now encroaching on BKNG's core hotel offering... While BKNG's valuation is not overly stretched, we believe these incremental challenges warrant a move to the sidelines..."
Argus downgrading Boeing to 'hold' from 'buy'
Argus is bullish long-term on Boeing BA but believes management needs to be more pro-active in its response to 737 Max groundings.
"We have been long-time bulls on the BA shares, raising our rating to BUY in May 2012, when the share price was $69... Since our upgrade, the shares have appreciated almost 540%, not including dividends... However, the shares have fallen almost 17% from their highs in the wake of the second fatal crash of a Boeing airplane.... We think the long-term outlook for Boeing is bright and are maintaining our five-year BUY rating... If the cause of the crashes turns out to be a mechanical or an engineering issue, Boeing can correct the problem and the industry, which is heavily dependent on the plane, the 737 Max jet, can move on...."
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Sandler O'Neill & Partners downgrading MetLife to 'hold' from 'buy'
Sandler O'Neill believes management changes create uncertainty for MetLife MET .
"1) The company will have a new chief executive officer beginning with 1Q19 earnings... We believe this increases the possibility of execution risk after replacing a long-time, well-known executive at the company... 2) With a new CEO coming in along with the company increasingly talking about building up a sizeable asset management operation in recent years, we believe this increases the potential for an asset management acquisition the investment community does not greet with enthusiasm.... 3) We believe shares are currently appropriately valued trading at 7.7x 2020 and 92% book value ex-AOCI as compared to the peer group average of 7.6x and 124% considering we anticipate MET's operating ROE ex- AOCI in 2020 of 10.7% to be well below the peer group average of 14.6% and median of 12.8%... And especially so given our expectation for earnings to grow in 2019 vs. 2018 by 0.2%... 4) More specifically, we believe shares of PRU at 7.1x 2020 and 111% book value ex-AOCI with an operating ROE ex-AOCI of 13.7% are currently more attractively valued than MET..."
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