Analysts see safety in stocks like Disney and Nike as earnings season continues

Published Wed, Apr 29 20209:51 AM EDT

Key Points

Cowen named Disney a safe haven pick.
BTIG initiated Nike and Lululemon as buy.
BMO downgraded UPS to underperform from market perform.
Piper Sandler downgraded Tyson Foods to neutral from overweight.
Wells Fargo initiated DuPont as overweight.
Susquehanna downgraded Kontoor Brands to neutral from positive.
Benchmark initiated Roku as buy.
Atlantic Equities upgraded TJX Companies to overweight from neutral.

(This story is for CNBC PRO subscribers only.) Despite a dismal earnings season, Wall Street analysts are finding value in stocks like Disney and Nike. Other calls of the day include Lululemon, DuPont and more. Here are the biggest calls on Wall Street on Wednesday: Cowen named Disney a 'safe haven' pick Cowen reiterated its outperform rating on the stock, calling it a "safe haven" due to the "quality of its library, intellectual property, and integrated business model." "Although Disney will see perhaps the most significant near-term earnings pressure in the group due to its Parks business, we also believe the market will treat it as a relative 'safe haven' asset due to its high quality intellectual property; DIS shares have outperformed all other traditional media stocks since the market peak in mid-February." BTIG initiated Nike and Lululemon as 'buy' BTIG said Nike and Lululemon had "sturdy" balance sheets to survive the economic crisis. "Second, we focus on companies with sturdy balance sheets that will allow them to survive the volatility that will likely continue throughout the rest of the year. Cash flow security is paramount to surviving this pandemic with the fewest scars. Also, these companies have robust and flexible supply chains that can handle and accommodate sharp changes in order patterns with little threat to their own cash flow needs." BMO downgraded UPS to 'underperform' from 'market perform' BMO said in its downgrade of UPS that the coronavirus is likely to cause "compression" in the company's operating margins. "The coronavirus led global recession is likely to accelerate the pace of growth in residential deliveries, shift volume mix toward larger customers, and potentially drive unfavorable changes in global trade patterns, including near shoring higher-value goods that typically utilize air cargo. While cyclical headwinds will eventually ease, we believe that there is a structural component to the current compression in operating margins, which will mute the earnings, free cash flow, and ROIC recovery." Piper Sandler downgraded Tyson Foods to 'neutral' from 'overweight' Piper said in its downgrade that the company was likely to face headwinds from food-service exposure and plant closures due to the coronavirus. "There is lots of uncertainty around COVID-19 and its impact on the meat supply chain, but our updated model incorporates the specific costs we are aware of and our estimated impact to sales from restaurant closures and supply disruptions. While Tyson has a meal oriented portfolio that can benefit from stronger retail sales growth and take share from restaurants, it is likely to face headwinds from foodservice exposure (~40% of sales), current plant closures, and higher costs due to COVID-19, though government mandated plant re-openings help the outlook going forward." Wells Fargo initiated DuPont as 'overweight' Wells Fargo initiated the chemical company and said it had a high-quality portfolio and an attractive risk/reward. "We are initiating coverage of Dupont de Nemours , with an Overweight rating and establishing a 12-month price target of $54.00 based on a 2020E EV/EBITDA of ~11.0x, or 2020E P/E of ~17.0x. Our rating is based on our view that DD has a high-quality portfolio of chemicals, materials, and technology businesses that is undervalued given the nutrician and biosciences transaction with International Flavors & Fragrances valued at a mid-teens P/EBITDA, implying the rest of DD is trading ~6.0x EBITDA. ... .We see risk/reward as attractive, given the high-quality portfolio of business, which should fetch a higher multiple implied in our base and bull cases." Susquehanna downgraded Kontoor Brands to 'neutral' from 'positive' Susquehanna downgraded the lifestyle apparel company on valuation among other things. "A central tenet for owning KTB has been the attractive dividend yield, which now appears at risk. Further, the stock has hit our PT. With that said, we think the likely decision to suspend the dividend (~$32M/quarter) is wise in the current Covid-19-impacted environment. The long-term opportunities for Lee and Wrangler remain intact. However, it is likely that for the time being investors will no longer be paid to wait for Lee and Wrangler to hit their stride. Maintaining estimates and PT." Benchmark initiated Roku as 'buy' Benchmark called the digital media streaming company a "long-term winner" during the coronavirus crisis and after. "While we acknowledge that the current share price potentially offers less short-term upside, we believe Roku will be a long-term winner both during and after the COVID-19 crisis. Our premise is based on 3 key factors: 1) Roku should be more insulated from broader advertising pressure near-term and be a significant beneficiary once cost per mille's recover; 2) Despite potential rev share pressure over time, Roku will continue to benefit from SVOD channel growth as well, with significantly lower unsub exposure thanks to their free price tag; 3) International remains a nascent, greenfield opportunity that, while weighing on profit, could become material to revenue as early as 2021." Atlantic Equities upgraded TJX Companies to 'overweight' from 'neutral' Atlantic Equities said the discount retailer had one of the most "fundamentally strong business models." "The current disruption to retail has resulted in the sell-off of a number of high quality stocks. TJX is amongst the most fundamentally strong business models in discretionary retail, with speed and flexibility which will allow it to recover more quickly than most others from the current closures. The off-price model tends to gain even greater market share during difficult economic conditions and we expect the plentiful inventory sourcing opportunities should allow TJX to attract and retain an even greater share from more challenged competing retail segments."

People line up outside a Lululemon Athletica store in London.

Getty Images

(This story is for CNBC PRO subscribers only.)

Despite a dismal earnings season, Wall Street analysts are finding value in stocks like Disney and Nike. Other calls of the day include Lululemon, DuPont and more.

Here are the biggest calls on Wall Street on Wednesday:

Cowen named Disney a 'safe haven' pick

Cowen reiterated its outperform rating on the stock, calling it a "safe haven" due to the "quality of its library, intellectual property, and integrated business model."

"Although Disney will see perhaps the most significant near-term earnings pressure in the group due to its Parks business, we also believe the market will treat it as a relative 'safe haven' asset due to its high quality intellectual property; DIS shares have outperformed all other traditional media stocks since the market peak in mid-February."

BTIG initiated Nike and Lululemon as 'buy'

BTIG said Nike and Lululemon had "sturdy" balance sheets to survive the economic crisis.

"Second, we focus on companies with sturdy balance sheets that will allow them to survive the volatility that will likely continue throughout the rest of the year. Cash flow security is paramount to surviving this pandemic with the fewest scars. Also, these companies have robust and flexible supply chains that can handle and accommodate sharp changes in order patterns with little threat to their own cash flow needs."