275 7TH Ave 7th floor New York , NY 10001 firstname.lastname@example.org
Chelsea / Lower Manhattan
Daniel Cullinane CPA p 848-250-9587
CELL TOWERS UP
AUGUST NEWSLETTER 3
With second-quarter earnings reporting all but done, Wall Street pros and investors are looking hard for companies that are poised to do well for the rest of 2017. With the stock market trading at all-time highs, and at very expensive levels, it’s critical to own stocks that can beat estimates or that have substantial tailwinds to drive growth and earnings.
A new RBC research report notes that while demand in technology remained strong in certain areas like personal computers, memory, iPhones and industrial, there was some weakness in automotive, China smartphones, enterprise servers and networking. The analysts at the firm are focused on six companies they feel can beat current expectation and have momentum. All are rated Outperform, and two are top picks.
This technology giant posted big second-quarter results and has raced to all-time highs. Apple Inc. (NASDAQ: AAPL) revolutionized personal technology with the introduction of the Macintosh in 1984, and it is among the leaders in the world in innovation with the iPhone, iPad, Mac, Apple Watch and Apple TV.
Apple’s four software platforms — iOS, OS X, watchOS and tvOS — provide seamless experiences across all Apple devices and empower people with breakthrough services, including the App Store, Apple Music, Apple Pay and iCloud.
RBC thinks the iPhone 8 opportunities are solid, as the firm, like others, feels the product will have significant upgrades. Toss in the easier comparisons and the strong average selling prices, and the new phone is a distinct positive. While the firm does note higher commodity prices are a potential headwind from NAND and DRAM pricing, it sees service growth and acceleration as another distinct positive.
Apple investors receive a 1.75% dividend. The RBC price target for the stock is $168, and the consensus target is $158.95. Shares closed trading on Friday at $156.39.
This is the top pick in the sector and has remained a favorite at RBC for some time. Amphenol Corp. (NYSE: APH) is one of the world’s largest designers, manufacturers and marketers of electrical, electronic and fiber optic connectors, interconnect systems, antennas, sensors and sensor-based products and coaxial and high-speed specialty cable.
Amphenol designs, manufactures and assembles its products at facilities in the Americas, Europe, Asia, Australia and Africa and sells its products through its own global sales force, independent representatives and a global network of electronics distributors. The company has a diversified presence as a leader in high-growth areas of the interconnect market, including: automotive, broadband communications, commercial aerospace, industrial, information technology and data communications, military, mobile devices and mobile networks.
RBC noted this in the report:
Amphenol has 4% exposure to Cisco, which is expected to report on August 16th, mainly in routers. The company posted solid numbers on the quarter and should be fine.
Shareholders receive a 0.98% dividend. RBC has an $81 price target, while the consensus target is $79.73. Shares closed Friday at $77.66.
This stock is a top pick at RBC and across Wall Street, and it derives 20% of its business from Apple. Broadcom Ltd. (NASDAQ: AVGO) has an extensive semiconductor product portfolio that addresses applications within the wired infrastructure, wireless communications, enterprise storage and industrial end markets.
Applications for Broadcom’s products in its end markets include data center networking, home connectivity, broadband access, telecommunications equipment, smartphones and base stations, data center servers and storage, factory automation, power generation and alternative energy systems and displays.
Top Wall Street analysts like the leadership in the mobile, data center and broadband markets, and especially in the radio frequency (RF) arena. Many on Wall Street see a cyclical rebound in industrial and communications demand.
The analysts note that the stock is underowned compared to peers, and the 40% iPhone content growth, combined with the closure of the Brocade purchase, which they feel is accretive, are very positive catalysts. They also feel dividend growth is possible.
Broadcom investors receive a 1.65% dividend. The $270 RBC price target is lower than the $273.81 consensus target. Shares closed Friday at $249.17.
If there is one part of the communications industry that many consumers tend to overlook, it is the cell and communications tower operators. At least until they lose their signal. SBA Communications Corp. (NASDAQ: SBAC) reported mixed earnings that looked a bit softer than expected on Monday, but analysts by and large call for more upside in SBA and from its two top rivals. What matters here now is that the cell towers are dividend payers, and combined the top three players have more than $110 billion in market value.
SBA reported a profit of $9.2 million in its second quarter, with net income of $0.08 per share and operating income of $0.19 per share. Wall Street expectations were a tad higher at $0.20 per share from operations. There is a reason the analysts were out in favor of SBA and some its rivals on Tuesday. The operator of communications towers showed a revenue number of $427.3 million in the second quarter. This beat expectations of about $425 million.
Also driving the upside for the tower operators was that SBA increased its full-year outlook and disclosed that it had repurchased a cumulative total of 1.9 million shares in the quarter and since the end of the second quarter.
JPMorgan came out the strongest in the lot, raising targets on all three major communications tower providers. SBA Communications was reiterated as Overweight and the JPMorgan price target was raised to $170 from $140.
JPMorgan also reiterated its Overweight rating on American Tower Corp. (NYSE: AMT) and raised its target price target to $165 from $145 in Tuesday’s call. Back on July 27, Merrill Lynch reiterated its Buy rating on American Tower and raised its price objective to $150 from $140. After American Tower’s earnings, Oppenheimer reiterated its Outperform rating and a higher $155 target. Jefferies had reiterated its Buy rating and $144 price target.
Crown Castle International Corp. (NYSE: CCI) was maintained as a Neutral rating at JPMorgan, but its target price was still raised to $110 from $100. On July 26, Merrill Lynch reiterated its Buy rating and $107 price objective on Crown Castle. On July 20, Jefferies reiterated its Buy rating and $110 price target.
Shares of SBA Communications saw other target hikes on Tuesday as well. Its stock was only up about 0.1% at $137.71 at midday on Tuesday, but here are some of the other positive analyst calls that were seen:
Barclays raised its target price to $150 from $148.
Merrill Lynch reiterated its Buy rating and $145 price objective.
Cowen raised its target price to $147 from $141.
Jefferies raised its target price from $150 to $159.
Stifel raised its target price to $160 from $148.
SunTrust Robinson Humphrey raised its target price from $150 to $154.
SBA Communications shares had been up about 33% so far in 2017, and the 52-week range is $95.66 to $140.38. SBA’s market cap is nearly $17 billion. Jeffrey Stoops, president and CEO of SBA Communications, also talked up the spending climate ahead of spectrum and 5G deployments in the quarters and years ahead. He said after the earnings report:
With substantial spectrum and 5G deployments on the horizon in both the U.S. and internationally, we expect customer demand to remain solid for years to come. Against that demand, we intend to continue to execute well and we expect to continue to favor allocating capital to portfolio growth and stock repurchases. We continue to remain on track to achieve our long term goal of $10 or more of AFFO per share in 2020.
The year-to-date gain of 29% for American Tower was with shares down five cents at $136.28. Its 52-week trading range is $99.72 to $139.50. American Tower has a market cap of almost $58 billion and a dividend yield of 1.85%.
Crown Castle shares were up six cents at $100.64 on Tuesday, in a 52-week range of $79.38 to $104.68. Its market cap is almost $37 billion. Its gain so far in 2017 was about 17%, and its yield is well above 3%.
An international group reported they have edited viable human embryos to correct a disease causing defect avoiding problems that plagued previous efforts and stoking concerns that advances in the alb are outpacing public discussion about the ethics of gene editing. Using the gene editing tool Crisper-Cas9, the international team of researchers said they had correccted a mutation that can cause a heart condition called hypertrophic cardiomyopathy or HCM. The condition affecting an estimated 1 in 500 people is best know as a common cause of sudden cardiac death in young athletes. The collaboration, led by researchers at Oregon Health & Science University used embros create from healthy egg donors and sperm donated by an adult male who has the gene mutation and a family history of HCM. Regulatory agencies have been willing to consider testing Crispr-Cas9 therapies that treat diseases in individuals but the US Food and Drug Administration is prohibited by law from using funds to accept applications for research using gene editing of the human germ line. A report published this year from an international ethics committee sponsored by the US National Academy of Seciences and the National Academy of Medicine concluded that germ line editing might someday be permitted under limited conditions. Among the committee's recommendations were tha the technique be used to treat only serious conditions and only when other options are not available
One consequence of Congress's slow progress in advancing a tax reform bill: Lower than expected tax revenue for Uncle Sam. A shortfall in collections has forced the feds to boost their estimate of the 2017 deficit to almost $700 billion, $134 billion higher than initially expected and the largest annual deficit since 2012. Weak tax collections are no surprise given the uncertainty over tax changes that congressional Republican might make. Businesses and investors are waiting to repatriate overseas profits or realize capital gains in hopes of lower tax rates later. Revenues should perk up next year, whether Congress passes any tax cuts or not. Either way, the uncertainty will be gone, and so will the incentative to hold off
If you are putting together a list of the five worst performing groups in 2017, look no further than the S&P 500 Energy Sector. The Index fell 13% in the first half and it hasn’t gotten any better since then.If you had the misfortune of owning crude, the current per barrel price around $46 has fallen 18%. It wasn’t that long ago that a barrel of crude commanded the fat sum of $105. But then it was only last year it was at a lowly $26.The energy world has never seen such volatility in prices. Does this mean that traditional and conservative investors should continue to avoid putting money in this area? Great question, let’s take a look.
The Ripple Effect
There are plenty of people cheering over the present state of energy. Oil plays a key role in the determination of other prices. Lower crude means less inflation; perhaps even deflation. This is good for food prices, transportation and just about everything else. For the average consumer it can be like getting more dough in their paycheck.But investors may not be cheering so fast. Energy earnings are an important component of total corporate earnings. Wall Street is all about earning expectations and one analyst Christine Short who works with Estimaze claims that if oil stays low and energy company earnings are hurt, growth expectations for the market could be cut in half. Let’s hope that Christine turns out to be overly pessimistic.With new highs being marked nearly every week, this would not be good, to say the least.
Fracking: Disrupting The Global Economy
One of the major causes of crude price volatility is hydraulic fracturing or fracking. You will remember from your college course Fracking 101, what is involved is extracting energy from rock using high-pressure injections of water and chemicals.Fracking is environmentally very controversial but that has not stopped the industry of buying its way into mainstream America. Sure it has had something to do with the record number of earthquakes in Oklahoma where fracking has been roaring ahead. And there are those questions about the safety of ground water near the drilling fields.
Facts of daily life like earthquakes and poisonous water are the kinds of things that get called fake news. Powerful industries can get away with it. For backers of the fracking phenomenon, it is changing the world on the way to making America great again.
US Reemerging Oil Exporter
In 2014 the United States began exporting oil for the first time in more than 40 years. Output from fracking is what made this possible. It’s no longer places like Eagle Ford Texas or Bakken, North Dakota that are getting investment attention.
Everyday there are announcements from spots in Pennsylvania, Ohio, Kentucky and elsewhere about new energy initiatives.The economics of hydro fracking are comparatively fast and simple. Compare the time and cost of offshore drilling for energy and you start to appreciate the appeal of fracking.One of it’s advantages is the low cost and short lead time to the start of production. Whereas offshore exploration might need prices of $60-$90 per barrel, experts have place the trigger price for fracking between $40-$50.
It’s More Complicated
It would be more than a bit naïve to suggest that the entire global energy quotient is determined by fracking. However it is worth noting that over the past two years, the trading range of crude has ranged between $43 and $57 and this matches the trigger price for fracking production.
Any boost to corporate profits this year may not be coming from the energy sector. This is just something to keep in mind when trying to figure out this record high equities market
RECOMMENDED STOCK BUYS