Here are Friday's biggest analyst calls of the day: Goldman Sachs, Yum! Brands, Microsoft & more

Published Fri, May 15 202010:14 AM EDT

Key Points

BMO upgraded Goldman Sachs to outperform from market perform.
Stifel upgraded Yum! Brands to buy from hold.
UBS upgraded Cardinal Health to buy from neutral.
Citi downgraded Wayfair to sell from hold.
KeyBanc downgraded KB Home and PulteGroup sector weight from overweight.
Citi initiated Microsoft as neutral.
Bank of America downgraded Canada Goose to underperform from neutral.
Guggenheim named Pepsi a best idea.
Cowen upgraded Northrop Grumman to outperform from market perform.
Morgan Stanley downgraded BP to underweight from equal weight.
Mizuho upgraded LabCorp to buy from neutral.
BMO downgraded PayPal market perform from outperform.

(This story is for CNBC PRO subscribers only.) Here are the biggest calls on Wall Street on Friday: BMO upgraded Goldman Sachs to 'outperform' from 'market perform' BMO said in its upgrade of the investment bank that it was well-positioned compared to its peers in the sector. " GS' s strong capital position, relatively small loan book, limited reliance on spread income, and ongoing expense/ funding initiatives leave GS well-positioned versus most of the money center banks. From a credit perspective, we expect GS can withstand the $8 billion (pre-tax) of expected cumulative credit losses (both on and off balance sheet 1Q20A-1Q22E)." Stifel upgraded Yum! Brands to 'buy' from 'hold' Stifel upgraded the fast-food operator of brands including Pizza Hut and Taco Bell, and said it had a durable business model to weather the coronavirus pandemic. "Post-1Q reporting and now with more data to understand the impact of COVID, we are upgrading Yum! Brands (YUM) and Restaurant Brands International (QSR) to Buy from Hold. These changes reflect our increased appetite for investing in fast food companies with durable business models that we expect to show improving consolidated operating performance, with some of the best potential amongst our coverage to re-establish a healthy earnings growth algorithm." UBS upgraded Cardinal Health to 'buy' from 'neutral' UBS upgraded the health care services company and said it sees upside to consensus estimates. "Our estimates are based on channel checks, market data, and recent results from ABC and CAH that point to higher sustainable generic margins and improving mix, that should offset margin pressures from the growth in mail prescription share and COVID related expenses. We also believe that the group's strong and durable cash flow generation (average FCF yields of 10%+) will become increasingly attractive to investors in this market environment, supporting relative multiple expansion." Citi downgraded Wayfair to 'sell' from 'hold' Citi downgraded the online furniture and decor store mainly on valuation. "Since the onset of COVID-19, W declined to a low of $21.70 and rebounded to as high as $197.06 (~800%) with short interest of 29% of float (from 36% in April). Despite our top and bottom-line estimates moving higher on better than anticipated trends, we believe W shares are overvalued and we downgrade our rating to Sell. Our TP increases to $130 from $75." KeyBanc downgraded KB Home and PulteGroup 'sector weight' from 'overweight' KeyBanc downgraded KB Home and PulteGroup and said it had "less comfort" on a recovery for the companies due to the coronavirus crisis. "1) less comfort in a 2H20 COVID-19 recovery despite sustained government stimulus; which 2) creates a higher threshold for a compelling risk-to-return outcome; with 3) transition from book valuation to earnings less clear, in our view. " Citi initiated Microsoft as 'neutral' Citi initiated Microsoft and said the company may see product cycle weakness due to the coronavirus among other things. "Heading into COVID driven macro softness, we see it as almost impossible for MSFT to not to see negative impact, as it is ~15% of WW software spending. Additionally, we note that product cycle strength through most of CY19 and into 1H20 will produce tough comps that may additionally weigh on the transactional business. We do view shares as somewhat defensive in an uncertain environment, however the downside of the product cycle as well as margin impacts of Xbox launch could reverse some of the favorable trends that benefitted numbers in the earlier part of FY20 (upside to high-margin software franchise)." Bank of America downgraded Canada Goose to 'underperform' from 'neutral' Bank of America downgraded the winter clothing manufacturer and said it sees restrained international tourism due to the coronavirus. "We are downgrading Canada Goose to Underperform and lowering our PO to C$21/US$15 based on 20X (from 27X) our F2022 EPS of C$1.05 given our outlook for significant y/y declines in N. America & Europe revenue on restrained international tourism which we expect to continue through at least year end. GOOS is expected to report F4Q EPS on 5/29 which we believe should be in-line as GOOS reiterated F20 guidance on 3/16 (but suspended long-term guidance). Guggenheim named Pepsi a 'best idea' Guggenheim said the beverage maker was best-positioned to weather the coronavirus pandemic. "We think the pandemic will benefit food companies beyond the period of confinement, while beverage companies with the most exposure to on-premise will likely suffer through the end CY20. We are moving PEP to our Best Idea (replacing MDLZ) and increasing the price target to$148 (prev $145) as we think it is best positioned to navigate the pandemic." Cowen upgraded Northrop Grumman to 'outperform' from 'market perform' Cowen upgraded the global aerospace and defense technology company and said it's the "premier defense growth big cap" name. "We're upgrading NOC to Outperform for (1) accelerating "core" organic growth, (2) extended B-21/GBSD visibility, and (3) above-average financial flexibility. These make NOC the premier defense growth big cap among a shrinking number of choices. We're hiking our PT to $370, a 16.5x TEV/EBITDA." Morgan Stanley downgraded BP to 'underweight' from 'equal weight' Morgan Stanley downgraded the oil company and said it expects BP to "reset" its dividend "sharply lower." "This combination - an $8.4bn dividend, $11-12bn in capex and gearing rising to > 40% - is not a tenable outcome for BP in our view. Instead we expect that BP, like Shell, will reset its dividend sharply lower. Following the approach described above, we estimate that BP will design its financial framework such that it will end up spending at least $3 in capex for every $1 in dividend. At the same time, we expect that BP will need to allocate a meaningful share of its FCF - around $3bn - to net debt reduction from 2022 onwards." Mizuho upgraded LabCorp to 'buy' from 'neutral' Mizuho upgraded the diagnostic testing company and called it an "attractive defensive" player. "Only a small percentage of companies can say they are part of the COVID-19 solution; LH is one of those companies. Whether it is the company's diagnostic business (lab testing) or the CRO business (clinical trials), we believe LH is an attractive defensive player in turbulent times. More importantly in the longer term, we do not believe COVID-19 will lead to a negative structural change to either of LH' s business segments." BMO downgraded PayPal 'market perform' from 'outperform' BMO said in its downgrade of the stock that investors should switch to credit-sensitive financials during the recovery side of the economic crisis. "We are downgrading PYPL to Market Perform from Outperform due exclusively to our shift in investment strategy towards credit-sensitive sub-sectors. PYPL has been a great place to invest during the peak of COVID-19 inspired economic uncertainty; however, as we transition to the recovery side of the current crisis, we recommend financial institution group investors switch into credit-sensitive financials (COF, C, and ALLY) that offer higher investment returns than PYPL's current return of only 9%. At 33x two-year-forward P/E, we see limited upside to PYPL's valuation multiple."

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Here are the biggest calls on Wall Street on Friday:

BMO upgraded Goldman Sachs to 'outperform' from 'market perform'

BMO said in its upgrade of the investment bank that it was well-positioned compared to its peers in the sector.

"GS's strong capital position, relatively small loan book, limited reliance on spread income, and ongoing expense/ funding initiatives leave GS well-positioned versus most of the money center banks. From a credit perspective, we expect GS can withstand the $8 billion (pre-tax) of expected cumulative credit losses (both on and off balance sheet 1Q20A-1Q22E)."

Stifel upgraded Yum! Brands to 'buy' from 'hold'

Stifel upgraded the fast-food operator of brands including Pizza Hut and Taco Bell, and said it had a durable business model to weather the coronavirus pandemic.

"Post-1Q reporting and now with more data to understand the impact of COVID, we are upgrading Yum! Brands (YUM) and Restaurant Brands International (QSR) to Buy from Hold. These changes reflect our increased appetite for investing in fast food companies with durable business models that we expect to show improving consolidated operating performance, with some of the best potential amongst our coverage to re-establish a healthy earnings growth algorithm."