Weekly Update - October 23, 2022

Selected highlights of the week

By: Teni Nyca Antenor

PDCO’s Reaffirmation of Fiscal 2023 Guidance

In a press release, Patterson Companies reaffirmed its fiscal 2023 earnings guidance. According to the company, “GAAP earnings are expected to be in the range of $1.96 to $2.06 per diluted share. Non-GAAP adjusted earnings are expected to be in the range of $2.25 to $2.35 per diluted share. Our non-GAAP adjusted earnings guidance excludes the after-tax impact of: Deal amortization expenses of approximately $28.5 million ($0.29 per diluted share). Our guidance reflects the strength of our business and competitive positioning, as well as our expectations for the North American and international end markets in which we operate, which we expect to be affected by inflationary trends, higher interest rates and a potential slow-down in the broader economy. Beyond macroeconomic and geopolitical uncertainty, our guidance further assumes that there are no material adverse developments associated with the pandemic.”

Piper Sandler analyst Jason Bednar trimmed PDCO’s price target to $35 (from $40), citing lower peer group multiples. Bednar reiterated an Overweight rating in his stock forecast. TheFly quoted Bednar, “The news likely removes any near-term risk management cuts guidance when reporting Q2 results and should help shares outperform over the coming weeks “when many other healthcare companies may be trimming their outlooks.””

PPG Receives Price Target Trims From Analysts

On October 19, 2022, PPG Industries, Inc. released its third quarter 2022 financial results. Stamford Advocate noted the following:

Revenue was $4.47B vs. analyst consensus of $4.46B
EPS was $1.39 vs. analyst consensus of $1.67
EPS for the next quarter is expected to be in the $1.05-$1.2 range vs. analyst estimate of $1.33

Stock forecasts:

Wells Fargo Cut PPG price target to $118 (from $120) and reiterated an Equalweight rating.
Mizuho’s Christopher Parkinson trimmed the price target to $146 (from $148) and maintained a Buy rating.
BMO raised the price target to $125 (from $122) and kept an Outperform rating.
Deutsche analyst David Begleiter adjusted the [rice target to $128 (from $130) and reiterated a Buy rating.
KeyBanc analyst Aleksey Yefremov slashed the price target to $125 (from $127) and maintained an Overweight rating.
DA Davidson lowered the price target to $126 (from $166) and kept a Buy rating.
UBS decreased PPG price target to $144 (from $145) and maintained a Buy rating.

Analysts And Investors Negative About FOXA & NWSA Proposed Merger

Nearly a decade after the split between Fox and News Corp, Rupert Murdoch is now proposing to bring them back together. Rupert Murdoch is the chairman of Fox and, at the same time, the executive chairman of News Corp. Lachlan Murdoch, his son, is Fox’s XEO and co-executive chairman of New Corp.

The merger is not definite yet. But News Corp has formed a Special Committee for the possible merger, as reported by BusinessWire. In a Fox news release, FOXA also created a similar committee.

“Inventory analysts battle to cowl the corporate as a result of it straddles such totally different companies. “Most investors have said, ‘Yeah, these are good assets, but why deal with the headache?'”, reported Financial Times.

BofA analyst Jessica Reif Ehrlich adds the merger “raises more questions than answers.”

NWSA stock forecasts:

Loop Capital analyst Alan Gould trimmed its price target to $17 (from $30) and downgraded rating to Hold (from Buy).
Guggenheim cut NWSA price target to $32.

FOXA stock forecasts:

Rosenblatt Securities analyst Barton Crockett lowered FOXA price target to $30 (from $37) and kept a Neutral rating.
Credit Suisse analyst Douglas Mitchelson cut their price target to $36 (from $41) and rating to Neutral (from Outperform).
Loop Capital’s Alan Gould trimmed the price target to $34 (from $50) and rating to Hold (from Buy).

Morgan Stanley Upgrades Household Products CHD And CLX

Morgan Stanley analyst Dara Mohsenian upgraded Clorox and Church & Dwight to Equal Weight (from Underweight). Mohsenian has a $130 and $82 price target on CLX and CHD, respectively.

Investing.com quoted the Morgan Stanley analysts, “Our upgrades of CHD and CLX fit with our less selective household products stance, with: a) potential margin upside in FY23 as a spot commodity cost drop-off flows through with pricing mostly sticking, b) after pronounced stock underperformance, valuation looks reasonable with CHD/CLX underperforming staples peers by -1,800/-1,400 bps YTD vs EPC at +2,400 bps in the LTM, and c) both stocks’ US centric mix offers a defensive hedge in a difficult macro/FX environment.”

According to Morgan Stanley, CHD could be more attractive if the company sets lower 2023 expectations or a more conservative 2022 profit/EPS base.

Meanwhile, the firm expects CLX to be a positive trade this quarter with a clear EPS upside.

Analyst Calls Ahead CDW Q3 2022 Results

CDW Corporation announced the release of its Q3 2022 results on November 2, 2022. The corporation will host a webcast conference for the announcement, reported Business Wire.

Ahead of the announcement, two analysts have issued their stock forecast.

Morgan Stanley analyst Erik Woodring lowered his price target on CDW to $200 (from $227) and kept an Overweight rating. Investing.com reported, “the analysts explained that consumer and enterprise checks deteriorated in the third quarter, suggesting further downside to estimates, with valuation multiples lower but not at troughs.”

Morgan Stanley highlights CDW, alongside AAPL, as one of their highest conviction OW names.

Evercore analyst Amit Daryanani added CDW to their Tactical Outperform List. According to TheFly, Daryanani “expects CDW to report inline results, with potential for upside, despite investor concerns around PCs, supply chain, and macro uncertainty.”

Daryanani reiterated a $210 price target and Outperform rating on CDW.

Deutsche Downgraded PKG And IP Saying Containerboard Prices Will Fall

Deutsche analyst Kyle White has downgraded International Paper and Packaging Corp. White has turned bearish on the paper and packaging products companies over containerboard prices concerns:

Deutsche cut IP’s price target to $29 (from $44) and rating to Sell (from Hold).
Deutsche lowered PKG’s price target to $104 (from $144) and downgraded the rating to Sell (from Neutral).

“Given weakening demand and upcoming capacity additions, we anticipate containerboard prices will fall by $100 per ton in total over the next year,” said White, as covered by Morningstar. “This would bring domestic kraftliner prices down to $835 per ton for a 10.7% reduction from current levels at $935.”

Analysts Cut GNRC Stock Forecasts After Guidance Drop

Industrial stock Generac Holdings has updated its full-year sales guidance.

“Management now expects sales in 2022 to grow between 22% and 24% compared with 2021. That isn’t bad growth, but prior expectations had called for 36% to 40% growth. The cut amounts to about $560 million in lost sales or almost 11% of Wall Street’s $5.2 billion estimate for 2022 Generac’s top-line revenue,” Barron’s reported.

In response to the guidance drop, analysts cut their stock forecasts:

Keybanc analyst Jeffrey Hammond downgraded GNRC to Sector Weight (from Overweight).
Baird analyst Michael Halloran cut his price target to $131 (from $208) and kept an Outperform rating.
Canaccord’s George Gianarikas slashed the price target to $104 (from $485) and the rating to Hold (from Buy).
Credit Suisse analyst Maheep Mandloi trimmed GNRC’s price target to $181 (from $395) and retained an Outperform rating.
Roth analyst Philip Shen lowered the price target to $75 (from $320) and rating to Sell (from Buy).
Truist trimmed the price target to $225 (from $365) and reiterated a Buy rating.
Piper Sandler’s Kashy Harrison slashed GNRC’s price target to $210 (from $305) and kept an Overweight rating.