Jefferies seeks unlikely winners from vaccine news across its coverage
Nov. 9, 2020 7:30 PM ET|About: Caesars Entertainment, Inc. (CZR)|By: Jason Aycock, SA News Editor
A market rally spurred by this morning's vaccine news out of Pfizer/BioNTech - however dampened it was by selling into the close, which happened to follow some new election pushback from Sen. Majority Leader Mitch McConnell - points to a broadening rotation, Jefferies says, that points to just how dislocated expectations actually are.
The solid but limited news on the vaccine trial (efficacy above 90% at seven days after the second dose) leaves us knowing neither timing before broad availability, nor the duration of protection.
But even a little return to normal has outsize meaning, with sales and earnings estimates already on the march it says. The firm screened for sectors with bigger disparities between Street expectations and "an incremental return toward normalcy," with an eye to finding some less obvious picks.
Certain consumer stocks unsurprisingly rallied today, depending on their exposure to lockdown measures, and Jefferies says it expects beneficiaries to include a wide variety of retailers, restaurants and leisure space players, calling out Caesars (NASDAQ: CZR), Brinker International (NYSE: EAT), US Foods Holding (NYSE: USFD), Ulta Beauty (NASDAQ: ULTA), Planet Fitness (NYSE: PLNT), and TJX.
Meanwhile, in Staples, it expects on-premise/food service and food-away-from-home names to benefit, highlighting Coca-Cola (NYSE: KO), Post Holdings (NYSE: POST) and Simply Good Foods (NASDAQ: SMPL). In the Energy area, it believes higher crude demand could lift names including Marathon Petroleum (NYSE: MPC), Euronav (NYSE: EURN) and Scorpio Tankers (NYSE: STNG).
Banking is another sector where exposures to COVID-19 impacts vary. Those banks with outsized exposure to impacted sectors and geographies should fare better, and there it highlights Signature Bank (NASDAQ: SBNY) and Sterling Bancorp (NYSE: STL). Blackstone (NYSE: BX) should see its portfolio reflating, the firm says, and risks could subside for Apollo Investment (NASDAQ: AINV) and Compass Diversified (NYSE: CODI).
An effective vaccine should portend a rebound in Healthcare procedures, benefiting Edwards Lifesciences (NYSE: EW), Haemonetics (NYSE: HAE), HCA Healthcare (NYSE: HCA) and Envista Holdings (NYSE: NVST). Contract research organizations could get "back on track," Jefferies says, pointing to PRA Health Sciences (NASDAQ: PRAH) and Syneos Health (NASDAQ: SYNH). And in biotechs, a revenue boost could come to Gilead Sciences (NASDAQ: GILD), Esperion Therapeutics (NASDAQ: ESPR), Epizyme (NASDAQ: EPZM) and Schrödinger (NASDAQ: SDGR).
Among Industrials, stocks levered to commercial aerospace are likely to benefit, including Boeing (NYSE: BA) and Raytheon Technologies (NYSE: RTX) - as well as cyclicals where recovery momentum wouldn't hurt: Kennametal (NYSE: KMT), Middleby (NASDAQ: MIDD), PACCAR (NASDAQ: PCAR), Parker-Hannifin (NYSE: PH) and Terex (NYSE: TEX).
Materials names could see an inflection in the pace of recovery, particularly outside residential construction, the firm says, highlighting Freeport-McMoRan (NYSE: FCX), First Quantum Minerals ( OTCPK:FQVLF), Huntsman (NYSE: HUN) and Trinseo (NYSE: TSE).
Semiconductor stocks with leverage to broad restocking should benefit: Microchip Technology (NASDAQ: MCHP) and ON Semiconductor (NASDAQ: ON). And online travel is poised for a clearer recovery, namely Booking (NASDAQ: BKNG) and Expedia (NASDAQ: EXPE).
In REITs, laggards have included urban-focused residential, office REITs and malls; clear beneficiaries, Jefferies says, would include Equity Residential (NYSE: EQR), Boston Properties (NYSE: BXP), SL Green Realty (NYSE: SLG), Simon Property Group (NYSE: SPG) and Taubman Centers (NYSE: TCO). |
