M12 BARRON’S September 9, 2019
Research Report
HowAnalystsSizeUpCompanies
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Comcast• MCSA-Nasdaq
Outperform • Price $45.52 on Sept. 4
by Oppenheimer
Comcast is trading at its lowest relative
price/earnings ratio to the market ever
and its highest free-cash-flow yield (our
9% estimate versus the Street’s 8%) and
dividend yield relative to Treasuries. It
will delever from three times Ebitda to
two times within two years, driven by very
strong broadband growth and margins,
but we also expect good margin expansion
from Sky and NBCUniversal.
Comcast will have easier comps in 2020,
with two very significant events: the sum-
mer Olympics and U.S. elections. Film also
has easier comps and should benefit from
new installments in both Minions and the
Fast and Furious franchises. Broadband/
Sky are seeing stronger incremental mar-
gins....Comcast is executing well and is
highly diversified, with the ability to slash
expenses to improve margins. Video sub-
scribers are a concern going forward.
However, broadband is as strong as ever,
with rising prices and very high incremen-
tal margins with declining capital intensity.
This is the primary driver of free-cash-
flow growth. Price target: $54.
Royal Dutch Shell• NYSE-RDS/A
Market Perform • $55.89 on Sept. 5
by Cowen
We are downgrading Royal Dutch Shell
from Outperform to Market Perform, re-
ducing our price target from $69 to $60.
RDS has peer-leading exposure to interna-
tional gas prices; lower forecast prices
through year-end 2020 could limit FCF
[free cash flow] growth. Cash generation
through 2020 post-divestments could fall
$8 billion short of shareholder returns, with
dividend increase unlikely before 2021.
Weak international gas prices could
persist through at least 2020, weighing on
RDS’ results, given its peer-leading expo-
sure at 30% upstream production. The
stock has been flat, year to date, on a to-
tal-return basis, in line with its European
peers and modestly worse than the U.S.
integrated oil group. Its 6.7% dividend
yield compares with a 5.2% average since
2000 and a 6% average since 2010, imply-
ing limited compensation for its $10 billion
a year repurchase program. The company
doesn’t expect to increase its dividend un-
til after completing the program by year-
end 2020. We see stable, $15 billion annual
FCF through 2021, after factoring in our
updated gas prices and assuming $60
Brent, resulting in a net cash outflow of
$8 billion post-divestments to fund the re-
purchase program through 2020.
Apple• AAPL-Nasdaq
Overweight • Price $209.19 on Sept. 5
by Piper Jaffray
We expect Apple to ship 5G iPhones in
second-half of 2020. While early to be talk-
ing about devices that will not hit the mar-
ket for over a year, the 5G iPhone’s inte-
gration into the investor narrative around
Apple shares has already begun. Our sec-
ond survey of more than 1,000 U.S. iPhone
owners shows that 23% are interested in
purchasing a 5G iPhone, up from 18% in
our June 2019 survey. We see this as a
high level of interest, given limited 5G
marketing/chatter to date and the high
price point suggested in our survey. Look-
ing at the remainder of fiscal year 2019,
we expect limited excitement around this
year’s iPhones (to be announced on Sept.
10), however, as long as services and non-
iPhone devices continue to perform well,
this should tide investors over until antici-
pation for 5G iPhones intensifies. We are
maintaining our Overweight rating and
$243 price target.
The last “major” iPhone cycle was the
6 Plus, which drove 52% Y/Y iPhone reve-
nue growth in fiscal-year 2015; even the
Nov. 17 release of the iPhone X drove 17%
growth in fiscal 2018. The launch of 5G
iPhones (enabling materially faster data
transfer) should drive upgrades, especially
as the 5G infrastructure improves and
apps leveraging 5G permeate the App
store. We are conservatively modeling 2%
Y/Y iPhone revenue growth in fiscal year
2021 (in line with consensus).
Kraft Heinz• KHC-Nasdaq
Underperform • $25.52 on Sept. 3
by Credit Suisse
Kraft Heinz’s new CEO, Miguel Patricio,
hosted a meeting today with sell-side
research analysts to hear their perspective
and provide some more color on his ap-
proach for developing a multiyear turn-
around plan for the company. Personality-
wise, Patricio is the type of CEO we like to
meet: humble, good-humored, and eager to
listen—but also strategic and assertive.
However, we didn’t hear anything to alter
our concern about the significant challenges
facing the company longer term and the
likelihood of a dividend cut in the near term.
Fitch and Standard & Poor’s have re-
duced their outlooks on Kraft and issued
warnings that if the company’s Ebitda
stays at $6 billion, it will need to make sig-
nificant asset sales to pay down debt and/
or cut its dividend in order to meet their
thresholds for an investment-grade rating.
Patricio’s decision to pause asset sales
while withdrawing Ebitda guidance was
the primary catalyst for the outlook revi-
sions. Price target: $23.
INSIDER TRANSACTIONS RATIO
0
10
20
30
40
50
60
S O N D J F M A M J J A
Ratio of Insiders Sales to Buys. Readings under 12:1 are Bullish. Those over 20:1 are Bearish.
The total top20 sales and buys are 347, 036 ,175 and 29, 466 ,421 respectively; Source: Thomson Reuters
Bearish
Bullish
Ratio = 12
INSIDER TRANSACTIONS: Recent Filings
Purchases
$Val
Company/Symbol Insiders Shares (000's)Pvh PVH 1 133,155 9,986
Coty COTY 2 312,000 2,976NewMediaInvestment NEWM 3 295,000 2,589
CommunityHealthSystems CYH 1 1,200,000 2,382EastWestBancorp EWBC 7 44,440 1,727LibertyLatinAmerica LILAK 1 81,407 1,304
ProspectCapital PSEC 1 201,548 1,288
Intra-CellularTherapies ITCI 1 125,000 1,065VtvTherapeutics VTVT 1 606,061 776Intel INTC 2 16,376 748Cannae CNNE 1 20,000 570Corteva CTVA 1 18,393 552
Abbvie ABBV 1 7,525 498SallyBeauty SBH 1 40,500 495HorizonGlobal HZN 1 120,293 473Unitedhealth UNH 1 2,000 455UsXpressEnterprises USX 3 104,177 441
EldoradoResorts ERI 2 12,000 440
StateStreet STT 1 7,000 353ApellisPharmaceuticals APLS 1 11,699 348Sales
$ Val
Company/Symbol Insiders Shares (000's)Anterix ATEX 1 1,000,000 43,500
Oracle ORCL 1 787,500 40,793
ConstellationBrands STZ 2 189,018 38,666TandemDiabetesCare TNDM 3 410,297 28,921IacInteractivecorp IAC 2 112,402 28,547NovocureLtd NVCR 3 246,181 22,424AutomaticDataProcessing ADP 8 117,125 19,672
WecEnergy WEC 2 153,115 14,732TylerTechnologies TYL 2 55,592 14,261RestaurantBrandsInternational QSR 3 164,072 12,744Facebook FB 2 67,267 12,291BurlingtonStores BURL 1 50,000 10,084
FairIsaac FICO 2 25,000 8,784
RepublicServices RSG 1 95,126 8,561DellTechnologies DELL 1 167,275 8,559EsteeLauderCos EL 3 38,158 7,678
Salesforce.Com CRM 5 47,647 7,388OsiSystems OSIS 3 64,963 6,877
NexteraEnergy NEE 2 28,737 6,420AirLease AL 2 150,106 6,135Aninsiderisanyofficer,directororownerof10%ormoreofaclassofacompany'ssecurities.Inmostcases,aninsidermustreportanytradeto
theSECwithintwobusinessdays.ThetableshighlightcompaniesthatfiledwiththeSECthroughlastWednesday.Thetablesdonotinclude
pension-planoremployeestock-optionactivity,tradesbybeneficialownersof10%ormore,tradesunder$2pershareortradesunder100
shares.The"Purchases"columnincludesonlyopen-marketandprivatepurchases;the"Sales"columnincludesonlyopen-marketandprivatesales,
andexcludestradesprecededbyoptionexerciseinthe12monthspriortothereportedevent. Source:ThomsonReuters