When Johnson Controls completes the historic gap that it now has with rivals, its HVAC stock could outperform over the next months, according to JPMorgan.
Analysts have raised Johnson Controls to overweight from neutral, and their price target has increased by 50%, according to a note issued by Tusa on Tuesday.
“We believe that tangible changes in the level of execution around margins and cash, combined with recent investments that should leverage commercial HVAC market growth potential off of an aged installed base, accelerated by COVID-19/ESG considerations, should drive relative cash earnings outperformance not discounted at current levels,” the note stated.
Part of JPMorgan’s stance stems from the belief that commercial HVAC, which is typically a slower-growing business than residential, could grow faster in the coming years as companies become more conscious of energy efficiency. According to the company, this shift should help Johnson Controls close the valuation gap with its peers.
“Ultimately, we see a convergence in growth versus peers and higher quality earnings as supportive of a higher multiple as JCI moves out of the basement of the HVAC space it has occupied for many years, offering higher quality defensive growth,” according to the note.
JPMorgan raised its price target on Johnson Controls from $50 to $75 per share. The new target is roughly 13% higher than where the stock closed on Monday.
Delta emerged as the most likely airline to profit from the economic rebound, according to an analyst report issued on Tuesday.
“The recovery in domestic leisure travel in the United States has largely concluded, with indications that domestic leisure travel will exceed 2019 levels in the summer.” The next stage of recovery will be linked to corporate and international travel. “Around half of DAL’s sales are corporate, and 50 percent exposure to [small and medium-sized business] travel should drive some share gain as corporate travel resumes,” according to the note.
Given Delta’s extensive exposure to Europe, international travel should be a strong point for the airline, according to Jefferies.
“The upside for DAL stems from an overabundance of exposure to Europe. In May, [average seat miles] from the United States to Europe fell by 70%, compared to an 82 percent drop in ASMs from the United States to Asia. The trend line is more telling, with ASMs into Europe up 48 percent since February and down 2 percent into Asia,” according to the note.
Delta’s price target has been raised to $60 per share from $50. The new target is 30% higher than the stock’s closing price on Monday.
Even when the economy resumes, investors may feel confident placing bets on Target’s performance, according to UBS.
Target’s profitability could stay robust even when the epidemic ends and assistance programs decrease, according to a UBS analyst.
“Skeptics would argue that this is unsustainable and will reverse post-Pandemic.” We would like to point out that our [estimates] already include some discounting returns (we estimate 60-120bps of GM pressure in the coming quarters),” the note stated. “This could be conservative if it can manage its inventory in the face of changing sales conditions.”
According to UBS, Target has looked more like some of the specialty retail success stories in recent years than its traditional rivals in terms of foot traffic.
“We believe TGT has distinguished itself in many ways over the last few years, but most importantly, it has generated 4.8 percent average traffic growth over the last 13 quarters. This is comparable to HD (4.9 percent ) and LOW (4.8 percent ), but higher than COST (4.5 percent ), demonstrating how relevant it has become with consumers,” according to the note.
The firm raised its price target on the stock to $265 per share from $210, implying a nearly 15% gain in the coming year.