Credit Suisse gives its best contrarian trades for earnings season

Published Tue, Oct 11 20165:00 AM EDT

Credit Suisse gave clients its best trade ideas for the earnings season which begins this week. "This report identifies companies where our analysts stand apart from the consensus view, companies where our analysis reveals opportunities that the market has not yet priced in," read Monday's note. Analysts at the investment bank identified 10 contrarian ideas where they hold an out-of-consensus view from the rest of Wall Street, in regard to ratings, earnings projections and price targets. Among these companies, they selected the best stories where they feel they have an edge and their conviction level is high. Here are three of the stocks that made the cut: Source: FactSet Analysts at Credit Suisse believe there's an opportunity "investors do not want to miss" in this food retailer, as an inflection point in comps could send the shares higher. "We continue to see a unique opportunity to own this once high-flying specialty food stock in the early stages of a repositioning. The company's turnaround plan makes sense and has the potential to yield material upside to the stock. We view downside as limited given desperately poor sentiment," according to Credit Suisse. Credit Suisse has an outperform rating on Whole Foods with a 12-month price target of $40, implying a gain of 39 percent from Monday's close. The earnings release is scheduled for Nov. 2. Source: FactSet Credit Suisse projects shares of the steel producer could rally from here as the company's management cleans up the balance sheet and seasonal demand for metals picks up. "In our view, X's significant improvement to its cost structure, smaller footprint, substantial de-risking of the balance sheet (net debt and unfunded pension), coupled with structural changes to the U.S. flat rolled industry (five year trade relief and structural capacity takeout) all warrant a higher through the cycle valuation," according to research by the investment bank. In the next 12 months, Credit Suisse predicts shares of United States Steel could trade as high as $29, implying a gain of 62 percent from Monday's close. The stock is rated outperform. Earnings are scheduled for Nov. 1 after the close. Credit Suisse believes shares of the soft drink maker will rally as investors realize the growth potential behind Allied Brands, the company's partnership business with smaller, independent beverage makers. "In our view, the market is undervaluing the role of the Allied Brands as the primary driver of growth and margins going forward, contributing incrementally to an already consistent financial algorithm. Our sales and EPS estimates are 2 percent above consensus for FY17/18 [fiscal year] as we see a clear opportunity to deliver incremental growth with Allied Brands. DPS is the cheapest stock in our coverage," read Monday's note. The investment bank has an outperform rating on Dr. Pepper Snapple with a 12-month price target of $108, implying a gain of 23 percent from Monday's close. The earnings release is scheduled for Oct. 27 before the market opens. Apart from the three stocks mentioned above, Credit Suisse analysts are also bullish on KLA-Tencor (KLAC) and Patterson Companies (PDCO), predicting 12-month percent gains of 20 percent and 16 percent, respectively.

A person shops in a Whole Foods Market in Brooklyn, New York.

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Credit Suisse gave clients its best trade ideas for the earnings season which begins this week.

"This report identifies companies where our analysts stand apart from the consensus view, companies where our analysis reveals opportunities that the market has not yet priced in," read Monday's note.

Analysts at the investment bank identified 10 contrarian ideas where they hold an out-of-consensus view from the rest of Wall Street, in regard to ratings, earnings projections and price targets.

Among these companies, they selected the best stories where they feel they have an edge and their conviction level is high.

Here are three of the stocks that made the cut: