These reports, excerpted and edited by Barron’s, were issued recently by investment and research firms. The reports are a sampling of analysts’ thinking; they should not be considered the views or recommendations of Barron’s. Some of the reports’ issuers have provided, or hope to provide, investment-banking or other services to the companies being analyzed.
Danaher • DHR-NYSE
Buy Price $266.77 on Jan. 26
by Edward Jones
Danaher has a strong and diverse group of businesses in the life sciences, diagnostics, and environmental markets. Spending on healthcare research is robust, and Danaher gained market share during the pandemic due to its scale, diverse product lineup, and expertise. We believe that strategic acquisitions will add to earnings growth. The shares are attractively valued. Danaher trades at 25.8 times our 2022 EPS estimate, which is below peers’ average of 27.7. Danaher deserves to trade at a premium, due to its growth potential and strong management team. The stock has outperformed the Health Care Index and the overall market over the past five years, driven by better-than-expected earnings growth.
Market Perform Price $173 on Jan. 24
by William Blair
During 2021, 3M worked through extensive headwinds from delayed pricing benefits,
significant supply-chain and logistics disruption, and rising legal costs from three primary product liability litigations. The liability litigations, for PFAS [chemicals that allegedly harmed the environment], Combat Arms earplugs, and industrial respirators, all need to be resolved before 3M’s underlying value can be fairly reflected in its share price.
The company is confident that pricing will exceed cost inflation throughout 2022. However, supply-chain disruption could extend into the second quarter for some of its businesses, such as automotive, electronics, and elective healthcare procedures. Regarding litigation, 2021 was a challenging start for the bellwether trials for 3M’s Combat Arms Earplugs lawsuits. The company was vindicated in five of 10 early trials in 2021, but where damages have been awarded, they have been steadily rising. The company plans to appeal cases that it didn’t win. Operating headwinds seem likely to dissipate as 2022 progresses, but the litigation challenges could rise.
Verizon Communications VZ-NYSE
Buy Price $52.96 on Jan. 24
by BofA Global Research
We maintain our Buy rating. Our price objective of $64 a share is based on a 0.6 times relative price/earnings multiple to the SPX (down from 0.8), implying a 12 times (was 13 times) 2022 multiple. Verizon reported 2021 adjusted EPS of $5.39 (or $5.50, excluding 11 cents of acquisition-related intangible amortization). The 2022 [consensus] estimate is $5.40-$5.55 (BofA at $5.51). This excludes 17-19 cents of acquisition-related intangible amortization, but includes 5 cents of additional depreciation for accelerated C-band [5G] deployment.
Charter Communications CHTR-Nasdaq
Buy Price $555 on Jan. 26
We maintain our Buy rating, but are lowering our price target to $900 from $925 because of market conditions. In early August, we substantially moderated [our estimate of] broadband growth through 2025, although we were admittedly naive on market hypersensitivity to any slowdown, even though management maintains that the 2021 softness was more attributable to transient Covid and economic issues than to heightened competition.
Even an extreme inflation breakout or competitive scenario in which pricing power degenerates a permanent 3%, relative to costs, would generate a fair value for the stock around $590, still above yesterday’s closing price. We regard a stall-out in broadband pricing power as a much more dire risk than unit slowdown, although pricing should be supported by about 25%-plus annual consumption growth and improving functionality from new Wi-Fi iterations.
Bankwell Financial BWFG-Nasdaq
Outperform/Moderate Risk Price $32.88 on Jan. 26
by Boenning & Scattergood
Bankwell reported fourth-quarter EPS of 99 cents, versus our estimate of 89 cents and the consensus 87 cents. The upside was driven by [improvements] in net interest income and operating expenses, partially offset by [lower] fee revenue.
The net interest margin increased by four basis points, to 3.43%, due to lower funding costs. We expect further NIM expansion in the first quarter. Loans (ex-PPP) rose by $50 million. The deposit mix improved with noninterest-bearing accounts up to 19%. Fee revenue of $825,000, however, was short of our $1.2 million estimate. Our target price on the stock: $35.
Qualtrics International XM-Nasdaq
Outperform Price $24.01 on Jan. 26
by Evercore ISI
Qualtrics reported strong fourth-quarter results to cap off 2021. Looking ahead to fiscal year 2022, Qualtrics’ organic subscription revenue-growth guidance of around 26% looks conservative. And the continued growth in its international business (now at 29% of the total) points to the broader market opportunity in front of Qualtrics, one of the most attractive risk/reward stories in high-growth software. Our price target is $40.
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