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8 Battered Growth Stocks Worth Another Look in 2020

8 Battered Growth Stocks Worth Another LookPosted on Thursday, December 13th, 2018 by Chris Markoch

When the Trump tax cuts went into effect in early 2018, most analysts thought that it would be a jump start for both earnings and stock prices. There’s no doubt that earnings have received a boost. But robust earnings reports haven’t translated to higher stock prices for a number of stocks. In fact, a number of stocks have dropped over 20% in 2018 – that qualifies as a bear market. This is all despite positive earnings reports.

So what’s the deal?

The usual suspects have been the fear of rising interest rates, the trade war with China that still has no clear resolution, and what seems to be prevailing anxiety among investors that the bull market that has been in place for almost 10 years may have run its course.

But when some stocks are down, it can represent a good buying opportunity. We've identified eight stocks that are being bested by the S&P 500 Index but represent a good buying opportunity.

#1 - Federal Express (NYSE:FDX)

FedEx logo

Federal Express (NYSE: FDX) - The major reason that Fed Ex’s stock has tanked in 2018 is the existential threat that investors feel that Amazon represents. The stock is down 22.4% for the year which is in sharp contrast to the S&P 500 ETF which is up 4.65% year to date. As Amazon is making noise about expanding their Amazon Air service, investors are nervous that they will pull market share from Federal Express. That threat, however, appears to be overstated. Amazon accounts for less than 3% of FDX's revenue. In fact, it would seem that the United States Postal Service (USPS) would be hurt more if Amazon were to start its own delivery service. More importantly, Fed Ex is continuing to adapt to the changing retail landscape so that it can compete, and in some cases provided a competitive advantage to Amazon. A good example of this is their latest initiative – a partnership with Walgreen’s Boots Alliance to provide next-day prescription service. Analysts like what they see because 90% are rating them as a buy with forecasted sales to rise by 7% in 2019 and 5% in 2020 and forecasted earnings per share (EPS) to increase 15% in 2019 and 14% in 2020.

About FedEx
FedEx Corporation provides transportation, e-commerce, and business services worldwide. The company's FedEx Express segment offers shipping services for delivery of packages and freight. Its FedEx Ground segment provides business and residential money-back guaranteed ground package delivery services; and consolidates and delivers low-weight and less time-sensitive business-to-consumer packages. The company's FedEx Freight segment offers less-than-truckload and freight delivery services. As of May 31, 2018, it operated approximately 27,000 vehicles and 370 service centers. The company's FedEx Services segment provides sales, marketing, information technology, communications, customer, technical support, billing and collection, and other back-office support services. It also offers FedEx Mobile, a suite of solutions to track packages, create shipping labels, view account-specific rate quotes, and access drop-off location information; FedEx Office, a suite of printing and shipping management solutions for copying and digital printing, professional finishing, document creation, direct mail, signs and graphics, computer rentals, Wi-Fi, and corporate print solutions; and packing services, supplies, and boxes, as well as FedEx Express and FedEx Ground shipping services. The company's Corporate, Other and Eliminations segment offers international trade services in customs brokerage, and ocean and air freight forwarding services; cross-border enablement and technology solutions, and e-commerce transportation solutions; integrated supply chain management solutions; time-critical shipment services; critical inventory and service parts logistics, 3-D printing, and technology repair. This segment also provides international trade advisory services, including assistance with the customs-trade partnership against terrorism program; and publishes customs duty and tax information. FedEx Corporation was founded in 1971 and is headquartered in Memphis, Tennessee.

Current Price: $163.25
Consensus Rating: Hold
Ratings Breakdown: 13 Buy Ratings, 14 Hold Ratings, 1 Sell Ratings.
Consensus Price Target: $170.58 (4.5% Upside)

#2 - Coty (NYSE:COTY)

Coty logo

Coty (NYSE: COTY) - This battered stock has a negative return of 59% for 2018 as opposed to a positive 12% return in 2017. The selloff accelerated when its most recent earnings report showed disappointing results with revenue down nearly 8% and revenue down over 9%. The company cited supply chain disruptions as the main reason behind its decline in organic sales. However, they also said the disappointing sales results were limited to its consumer beauty segment and not their luxury category which showed growth. This is important because that segment is where the growth is at in the cosmetic industry. The company continues to stand by its forecast of $750 million in cost saving by 2020 from its acquisition of the Cover Girl brand as well as other brands from Procter & Gamble. The question for investors is how long are they willing to wait? Has the stock hit a bottom? Maybe so. But with this stock so beaten down right now, it would seem any positive news on the supply chain issues should turn market sentiment. 

About Coty
Coty Inc., together with its subsidiaries, manufactures, markets, distributes, and sells beauty products worldwide. It operates in three segments: Luxury, Consumer Beauty, and Professional Beauty. The Luxury segment offers prestige fragrances, and skincare and cosmetics products through various retailers, including perfumeries, department stores, and duty-free shops under the Alexander McQueen, Balenciaga, Burberry, Bottega Veneta, Calvin Klein, Cavalli, Chloe, Davidoff, Escada, Gucci, Hugo Boss, Jil Sander, Joop!, Lacoste, Lancaster, Marc Jacobs, Miu Miu, philosophy, Stella McCartney, and Tiffany & Co. brands. The Consumer Beauty segment offers color cosmetics, retail hair coloring and styling products, mass fragrance, and mass skin care and body care products primarily through hypermarkets, supermarkets, drug stores, pharmacies, mid-tier department stores, and traditional food and drug retailers. It provides its products under the Bourjois, Max Factor, Rimmel, Wella, Adidas, Guess, Beckham, Beyonce, Biocolor, Bozzano, Bruno Banani, Clairol, CoverGirl, Enrique, Jovan, Nautica, Mexx, Monange, Paixao, Rimmel, Risque, Sally Hansen, Stetson, Younique, and 007 James Bond brands. The Professional Beauty segment offers hair and nail care products to nail and hair salons, nail and hair professionals, and professional stores under the Wella Professionals, System Professional, OPI, ghd, Clairol Professional, Kadus Professional, Londa Professional, Nioxin, Sassoon Professional, and Sebastian brands. The company also sells its products to third-party distributors, as well as through direct-to-consumer, third party-operated, and own branded Websites. It sells its products to approximately 130 countries. The company was founded in 1904 and is based in New York, New York.

Current Price: $11.24
Consensus Rating: Hold
Ratings Breakdown: 4 Buy Ratings, 8 Hold Ratings, 1 Sell Ratings.
Consensus Price Target: $13.00 (15.7% Upside)

#3 - Whirlpool Corporation (NYSE:WHR)

Whirlpool logo

Whirlpool Corporation (NYSE: WHR) - Whirlpool was one of the big losers when the Trump tariffs were first announced. As their producer prices increased, Whirlpool – along with other appliance manufacturers - had to raise prices on their appliances. Not surprisingly, sales are struggling and were off -0.4% for the most recent quarter. As a result, the stock has been battered down over 20% for the year. However, the company recently got some good news when they were named the official kitchen and laundry appliance of Walt Disney Resort in Florida and Disneyland Resort in California. The agreement means that Whirlpool will provide its refrigerators, dishwashers, ovens, cooktops, microwaves and laundry products to these properties. Considering the number of guests that go through Disney properties on a yearly basis, the exposure should benefit the company and its family of brands. What will also benefit the company is the agreement to work with Disney Digital Network to help provide cooking and food-based content for Disney’s family of networks.

About Whirlpool
Whirlpool Corporation manufactures and markets home appliances and related products. It operates through four segments: North America; Europe, Middle East and Africa; Latin America; and Asia. The company's principal products include refrigerators, freezers, ice makers, and refrigerator water filters; laundry appliances and related laundry accessories; cooking appliances and other small domestic appliances; and dishwasher appliances and related accessories. It also produces hermetic compressors for refrigeration systems. The company markets and distributes its products primarily under the Whirlpool, Maytag, KitchenAid, JennAir, Amana, Roper, Admiral, Affresh, Gladiator, Estate, Inglis, Speed Queen, Hotpoint, Bauknecht, Indesit, Ignis, Laden, Privileg, KIC, Consul, Brastemp, Acros, Ariston, Sanyo, Diqua, and Royalstar brands. It sells its products to retailers, distributors, dealers, builders, and other manufacturers. The company was founded in 1898 and is headquartered in Benton Harbor, Michigan.

Current Price: $147.19
Consensus Rating: Hold
Ratings Breakdown: 3 Buy Ratings, 5 Hold Ratings, 1 Sell Ratings.
Consensus Price Target: $159.43 (8.3% Upside)

#4 - Pacific Gas & Electric (NYSE:PCG)

PG&E logo

Pacific Gas & Electric (NYSE: PCG) - The California utility has had a very rough news cycle. With some speculation that it could be held liable for one of the California wildfires, some investors have justifiably headed for the exits. That news is largely the reason the stock is down over 45% since early November. However, other investors are seeing the decline as a buying opportunity specifically when the California Public Utilities Commission made statements that eased concerns of insolvency by the utility. The question for investors is whether they believe policymakers in California will follow through on 2018 regulations or respond to public demand that there be a scapegoat. But while the legal proceedings to determine fault may take months to resolve, the impact is most likely already priced into the stock. That’s why even though analysts from Wells Fargo recently cut the price target on PCG to $47 from $60, they affirmed an outperform rating for the stock. Value investors looking to buy the stock for dividends should look elsewhere. The company suspended its dividend program and is unlikely to resume it anytime soon.

About PG&E
PG&E Corporation, through its subsidiary, Pacific Gas and Electric Company, engages in the sale and delivery of electricity and natural gas to residential, commercial, industrial, and agricultural customers in northern and central California, the United States. The company's electricity distribution network consists of approximately 107,000 circuit miles of distribution lines, 50 transmission switching substations, and 769 distribution substations; and electricity transmission network comprises approximately 18,000 circuit miles of interconnected transmission lines and 84 electric transmission substations. Its natural gas system consists of approximately 43,100 miles of distribution pipelines, approximately 6,400 miles of backbone and local transmission pipelines, and various storage facilities. The company also owns and operates nuclear, hydroelectric, fossil fuel-fired, and solar electricity generation facilities. PG&E Corporation was incorporated in 1995 and is based in San Francisco, California. On January 29, 2019, PG&E Corporation Inc. filed a voluntary petition for reorganization under Chapter 11 in the U.S. Bankruptcy Court for the Northern District of California.

Current Price: $17.92
Consensus Rating: Hold
Ratings Breakdown: 2 Buy Ratings, 8 Hold Ratings, 0 Sell Ratings.
Consensus Price Target: $16.87 (-5.9% Upside)

#5 - L. Brands (NYSE:LB)

L Brands logoL. Brands (NYSE: LB) - L. Brands has been one of the most punished stocks in 2018, showing a YTD decline of 46.93%. Fortunes of the parent company for Victoria’s Secret and Bath & Body Works may be looking up. The company reported sales of $1.596 billion for the four weeks ending December 1, which included record Cyber Monday sales from their Victoria’s Secret brand and 18% same-store sales growth from Bath & Body Works. The sales numbers were up from $1.267 billion for the same year in the prior period. This was particularly encouraging coming off the company’s 8% growth in sales for the last quarter. In the past three months, the stock price has risen an encouraging 13.49%. Some analysts cite that much of the sales for Victoria’s Secret is promotionally driven and that margins fell for Bath & Body Works for the first time since June. However, the company says their products are being well accepted. In retail, having products that resonate with consumers is a positive sign.

About L Brands
L Brands, Inc. operates as a specialty retailer of women's intimate and other apparel, beauty and personal care products, home fragrance products, and accessories. The company operates in three segments: Victoria's Secret, Bath & Body Works, and Victoria's Secret and Bath & Body Works International. Its products include loungewear, bras, panties, athletic attire, shower gels and lotions, aromatherapy, body care, soaps and sanitizers, handbags, jewelry, and personal care accessories. The company offers its products under the Victoria's Secret, PINK, Bath & Body Works, La Senza, Henri Bendel, White Barn, C.O. Bigelow, and other brand names. L Brands, Inc. sells its merchandise through company-owned specialty retail stores, which are primarily mall-based; through its Websites; and through franchises, licenses, and wholesale partners. As of February 27, 2019, the company operated 2,943 company-owned specialty stores in the United States, Canada, the United Kingdom, Ireland, and Greater China, as well as sold its brands through approximately 600 franchised locations and online worldwide. The company was formerly known as Limited Brands, Inc. and changed its name to L Brands, Inc. in March 2013. L Brands, Inc. was founded in 1963 and is headquartered in Columbus, Ohio.

Current Price: $24.07
Consensus Rating: Hold
Ratings Breakdown: 7 Buy Ratings, 14 Hold Ratings, 2 Sell Ratings.
Consensus Price Target: $22.95 (-4.6% Upside)

#6 - Kraft Heinz Co. (NASDAQ:KHC)

Kraft Heinz logo

Kraft Heinz Co. (NASADAQ: KHC) - When a venerable name like Kraft Heinz delivers a disappointing earnings report, investors take notice. Although the company delivered a top-line number that pleased analysts, their profit and earnings per share were below expectations. The earnings report showed what appears to be a shift towards showing improvement in the top line at the expense of margin. However, this shift appears to be a trend in the overall sector and not isolated to Kraft. If so, these results may be par for the course. However, KHC claims that the reduction in margins is only temporary. Either way, it seems that the stock, which is down nearly 38% YTD, may be a good defensive play. Currently, 61% of analysts rate the stock as a buy and 91% rate it either a buy or a hold. The consensus stock price target is $68.85 per share which would represent a 17% upside from the stock’s current level.

About Kraft Heinz
The Kraft Heinz Company manufactures and markets food and beverage products in the United States, Canada, Europe, and internationally. Its products include condiments and sauces, cheese and dairy products, meals, meats, refreshment beverages, coffee, and other grocery products. The company offers its products under the Kraft, Oscar Mayer, Heinz, Philadelphia, Lunchables, Velveeta, Planters, Maxwell House, Capri Sun, Ore-Ida, Kool-Aid, Jell-O, Cracker Barrel, P'Tit Cheese, Tassimo, Classico, Plasmon, Pudliszki, Honig, HP, Benedicta, ABC, Master, Quero, Golden Circle, Wattie's, Glucon D, and Complan names. It sells its products through its own sales organizations, as well as through independent brokers, agents, and distributors to convenience stores, drug stores, value stores, bakeries, pharmacies, mass merchants, club stores, foodservice distributors and institutions, including hotels, restaurants, hospitals, health care facilities, and certain government agencies, as well as to chain, wholesale, cooperative, and independent grocery accounts. The company was formerly known as H.J. Heinz Holding Corporation and changed its name to The Kraft Heinz Company in July 2015. The Kraft Heinz Company was founded in 1869 and is headquartered in Pittsburgh, Pennsylvania.

Current Price: $27.26
Consensus Rating: Hold
Ratings Breakdown: 0 Buy Ratings, 15 Hold Ratings, 4 Sell Ratings.
Consensus Price Target: $30.21 (10.8% Upside)

#7 - American Airlines (NASDAQ:AAL)

American Airlines Group logo

American Airlines (NASDAQ: AAL) - One of the great contradictions of the airline industry is that lower oil prices, which reduce fuel costs, are generally considered a negative sign. In the past, having these lower fuel costs have led to undisciplined capacity growth which in turn hurts revenue. So it’s not surprising that American Airlines, along with other airline stocks has been getting punished lately. Although oil prices have stabilized, and even increased a little bit, the stock is still down just under 35% for the year. However, the decline of the index for the airline sector is on pace with the Dow Jones Industrial Average. Analy1sts seem to be shrugging off the recent bad news and are forecasting a consensus price of $50.88 for the stock, up from its current $33.91. The airline weathered some bad news earlier this year when the stock dropped on reports that United was expanding their operations. The stock is not without risk particularly if the economy rolls over as some expect it might do. If the market weathers the recent correction and moves forward, this stock looks undervalued, however right now the stock is extremely volatile, with options traders causing the volume to spike.

About American Airlines Group
American Airlines Group Inc., through its subsidiaries, operates as a network air carrier. It provides scheduled air transportation services for passengers and cargo. As of December 31, 2018, the company operated a mainline fleet of 956 aircraft. It serves 350 destinations in approximately 50 countries, principally from its hubs in Charlotte, Chicago, Dallas/Fort Worth, London Heathrow, Los Angeles, Miami, New York, Philadelphia, Phoenix, and Washington, D.C. The company was formerly known as AMR Corporation and changed its name to American Airlines Group Inc. in December 2013. American Airlines Group Inc. was founded in 1934 and is headquartered in Fort Worth, Texas.

Current Price: $27.82
Consensus Rating: Hold
Ratings Breakdown: 6 Buy Ratings, 3 Hold Ratings, 4 Sell Ratings.
Consensus Price Target: $34.75 (24.9% Upside)

#8 - Cimarex Energy Co. (NYSE:XEC)

Cimarex Energy logo

Cimarex Energy Co. (NYSE: XEC) - Mergers and acquisitions are commonplace in the energy sector. However, when these events occur it can be hazardous to the stock price. That’s a key factor that’s weighing on the stock price of XEC. They announced an acquisition of Resolute Energy Company in a cash and stock transaction that is valued at $1.6 billion. According to Cimarex CEO Thomas Jorden, “The Resolute assets are expected to generate free cash flow in 2019, basically funding any additional developmental capital from the start.” Shares of XEC are down nearly 40% year-to-date which is far below the SPDR Energy Select Sector ETF which is down 7% and the S&P 500 Index which is posting a gain of around 2%. Still, analysts are expressing optimism. 67% of analysts surveyed gave the stock a buy rating and the consensus price target of $123.50 gives investors plenty of upside growth from current levels which are close to its 52-week lows. XEC has a market cap of $6.91B and a P/E ratio of 10.58.

About Cimarex Energy
Cimarex Energy Co. operates as an independent oil and gas exploration and production company primarily in Oklahoma, Texas, and New Mexico. As of December 31, 2018, it had a total proved reserves of 591.2 million barrels of oil equivalent, consisting of 1.59 trillion cubic feet of natural gas; 146.5 million barrels (MMBbls) of oil; and 179.4 MMBbls of natural gas liquids primarily located in the Permian Basin and Mid-Continent regions. The company also owned interests in 2,902 net productive oil and gas wells. Cimarex Energy Co. was founded in 2002 and is headquartered in Denver, Colorado.

Current Price: $42.49
Consensus Rating: Buy
Ratings Breakdown: 10 Buy Ratings, 7 Hold Ratings, 1 Sell Ratings.
Consensus Price Target: $64.88 (52.7% Upside)

Stocks are in correction territory and there’s no clear indicator of where the broader market is headed for 2019. There is sufficient reason for the lack of direction including a concern about a potential government shutdown, rising interest rates and the ongoing trade dispute with China.

However, it’s fair to ask if, after a brutal October and November, this uncertainty has already been priced into the market. Many companies are still strong earnings reports, but those that have not are being punished. However, for the stocks in this presentation, it may be fair to ask if they have been punished too much.

Many investors trade on the news and between mergers, uncertainty regarding the effect of tariffs, or changing business models, these stocks have been battered in 2018. However, analysts are taking the longer view and they are betting that these oversold stocks will rise off the mat and allow investors to profit.

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