Buy these stocks in January.
The S&P 500 had a bumpy ride in 2020 but closed out the year at all-time highs on the strength of investor optimism surrounding a new administration in the White House, the rollout of multiple coronavirus vaccines and another round of economic stimulus. Analysts are anticipating a strong rebound in earnings in 2021 as the economy continues its recovery. The market has rallied significantly off its March lows, but the CFRA analyst team still sees plenty of opportunities for investors heading into 2021. Here are CFRA's nine most recently upgraded stocks to buy in January.
FedEx Corp. (ticker: FDX)
FedEx had a huge year in 2020, gaining about 70% as online shopping surged. But instead of recommending investors cash out their FedEx profits, analyst Colin Scarola recently upgraded FedEx. Scarola says lower fuel prices and higher package volume helped nearly double FedEx's operating margins from 3.6% a year ago to 7.1% last quarter. FedEx also generated $2.4 billion in free cash flow in the first half of fiscal 2021 compared with $1.6 billion in cash burn from fiscal 2018 through fiscal 2020. CFRA has a "buy" rating and $327 price target for FDX stock.
Chart Industries (GTLS)
Chart Industries manufactures equipment used to cool gases to cryogenic liquid temperatures. Analyst Richard Wolfe upgraded Chart and says the stock deserves a premium valuation relative to peers, given its efforts to expand its high-growth businesses. Wolfe says the company is well-positioned in the energy space ahead of a large-scale, long-term shift to clean energy. Chart Industries shares are up about 170% in the past six months, and Wolfe says that momentum will continue. He is projecting 7% revenue growth and 34.5% earnings growth in 2021. CFRA has a "buy" rating and $130 price target for GTLS stock.
Creative content software leader Adobe was a top performer of 2020, gaining about 50%. Analyst John Freeman upgraded the stock in December and says it's not too late for investors to add Adobe to their portfolios. Freeman says Adobe shares trade at an attractive valuation, and he is projecting three-year compound annual revenue growth of 19%. In the longer term, Freeman says Adobe is well-positioned as the dominant player in its software niche and could potentially maintain annual revenue growth rates of around 15% far beyond 2023. CFRA has a "strong buy" rating and $601 price target for ADBE stock.
Whirlpool Corp. (WHR)
Whirlpool is the world's largest home appliance manufacturer. Analyst Kenneth Leon says the company is regaining sales momentum thanks in part to more Americans working from home and a red-hot U.S. housing market. The social distancing environment will likely ease in 2021, but a recent Whirlpool survey indicates 25% of U.S. and U.K. respondents hope to continue to spend more time cooking and eating with family this year. Leon is projecting revenue growth will rebound to 5% in 2021 and earnings will increase by 11.1%. CFRA has a "buy" rating and $210 price target for WHR stock.
Salesforce is a software as a service leader in cloud-based customer relationship management software. Salesforce is yet another beneficiary of the remote work environment, but Freeman says the stock's big 2020 rally still has legs heading into 2021. Freeman upgraded the stock and says Salesforce remains one of the most disruptive names in the entire software space. In addition, Freeman says workplace communication platform Slack was a "great but expensive" acquisition. He is projecting 22% compound annual revenue growth for Salesforce over the next three years. CFRA has a "strong buy" rating and $309 price target for CRM stock.
Patterson Cos. (PDCO)
Patterson delivers dental and animal health supplies. Analyst Sel Hardy says the company's recession-resistant Animal Health segment has been particularly resilient in 2020. Animal Health revenue was up 8% in fiscal 2020 and represents nearly 60% of total sales. In addition, Dental revenue was up 12% in the October quarter, and patients will likely continue to get more comfortable returning to the dentist as coronavirus vaccines roll out in 2021. Hardy is projecting $1.89 in 2021 earnings per share. CFRA has a "buy" rating and $35 price target for PDCO stock.
Cummins is an industrial stock that manufactures truck engines, power equipment and other machinery. Analyst Elizabeth Vermillion upgraded the stock and says truck electrification initiatives under President-elect Joe Biden should serve as a bullish catalyst for Cummins, given the company's cutting-edge technology and growing market share. Vermillion says the new administration will likely invest heavily in research and testing of battery-electric vehicles. A difficult 2020 environment weighed on Cummins' margins, but Vermillion says margins will stabilize and revenue growth will rebound to around 11% in 2021. CFRA has a "buy" rating and $261 price target for CMI stock.
Deere & Co. (DE)
Deere is the world's largest manufacturer of farm equipment and a leader in farm equipment technology. Vermillion upgraded Deere and says revenue growth will recover to between 5% and 8% in fiscal 2021. Vermillion projects at least 10% Agricultural & Turf revenue growth and 5% Construction and Forestry revenue growth in 2021. In the longer term, aging U.S. infrastructure will further contribute to construction equipment demand. Inventory levels were relatively low to close out fiscal 2020, which Vermillion says is bullish for Deere's near-term outlook. CFRA has a "buy" rating and $298 price target for DE stock.
CarMax is the largest U.S. used vehicle retailer and a unique pure-play investment in used car sales. With CarMax priced at about 20 times CFRA's projected 2021 earnings per share, analyst Garrett Nelson says CarMax has an extremely attractive valuation. Nelson says the outlook for used car sales is more favorable than for new car sales. CarMax also has multiple growth opportunities in its omnichannel sales initiatives and its new store openings. Nelson says the company's robust balance sheet should help it navigate any unexpected economic downturns. CFRA has a "strong buy" rating and $125 price target for KMX stock.
Buy these upgraded stocks:
-- FedEx Corp. (FDX)
-- Chart Industries (GTLS)
-- Adobe (ADBE)
-- Whirlpool Corp. (WHR)
-- Salesforce.com (CRM)
-- Patterson Cos. (PDCO)
-- Cummins (CMI)
-- Deere & Co. (DE)
-- CarMax (KMX)