Some investment firms stand higher than the others, judging by results. The premier Canadian bank RBC is one of these, rated in the top five of Wall Street’s stock research firms.
Recently, RBC’s analysts have turned their gaze on a variety of companies, large and small, from the chemical industry to retail staples, and they are finding opportunities for investors.
The stocks that have caught RBC’s attention show considerable upside for the coming year. We’ve ran them through TipRanks database to see what other Wall Street’s analysts have to say about them.
Axalta Coating Systems (AXTA)
First on our list of RBC picks is Axalta Coating, a company in the automotive coatings industry. Modern coatings are a high-tech treatment, more than just paints and wax finishes, they provide sealant and weather-proofing protection for vehicle surfaces. The company also produces coatings for industrial applications, and boasts 10 different brands in its product line.
Axalta saw both hard times and a strong rebound in 2020. Earnings slipped in Q1, and turned negative in Q2 – but the recent Q3 report showed 59 cents per share profit. This was a major increase from the previous quarter’s 15-cent net loss – and was 13% higher than the year-ago quarter. Revenues, at $1.03 billion, were the highest since 4Q19.
RBC’s Arun Viswanathan, a 5-star analyst, writes of this company, “AXTA’s recovery is under way and we believe conditions will continue to slowly improve, which should benefit profitability as volumes return and restructuring programs are implemented… We believe AXTA’s cost-reduction programs, and the gradual return of volumes should benefit AXTA for several quarters. We also believe AXTA can generate sufficient FCF to deliver its balance sheet and maintain healthy financial flexibility.”
In line with these comments, Viswanathan rates the stock as Outperform (i.e. Buy). His price target of $34 suggests the stock has room for 28% growth to the upside in the next year. (To watch Viswanathan’s track record, click here)
Axalta has a Strong Buy analyst consensus rating, based on 9 recent reviews breaking down to 7 Buys and 2 Holds. The stock is priced at $26.67, and its $31.89 average price target implies a 19.5% one-year upside. (See AXTA stock analysis on TipRanks)
Rayonier Advanced Materials (RYAM)
Next up is a small-cap player in the chemical industry. Rayonier specializes in cellulose-based fiber products for the cosmetic, food, paint, and pharmaceutical industries. The company’s products are used in paper and other packaging, and it operates manufacturing facilities in US, Canada, and France.
Rayonier’s stock performance has shown a clear recovering from the difficulties of early 2020. The shares started falling before the big market crash in February/March, but has since rebounded and regained its lost value. RYAM is currently up 14% year-to-date.
Earnings have shown sequential improvement from -39 cents in the first quarter to -20 cents in the second, while turning the corner in Q3 with 45 cents gain. The company has beaten the estimates in the last three quarters.
Looking at this stock for RBC, 5-star analyst Paul Quinn sees a clear path forward for Rayonier, saying, “Rayonier Advanced reported Q3 results that were above RBC/consensus expectations due to much better-than-expected High Purity Cellulose segment results, with Cellulose Specialties in particular exceeding our estimates. In our view, negative trends in the company’s core Cellulose Specialties business have weighed on the share price over the last few years; while just one data point, positive trends and (slowly) falling leverage make Rayonier Advanced an attractive investment, in our view.”
To this end, Quinn rates RYAM shares an Outperform (i.e. Buy) along with a $5.5 price target. This figure implies a 26% upside from current levels. (To watch Quinn’s track record, click here)
The Gap, Inc. (GPS)
Last up is The Gap, a familiar name in retail. The company is a staple of the shopping mall scene, and the decline in brick-and-mortar retail during 1H20 hit hard. The Gap’s earnings remained stable in Q1, but fell drastically in Q2, to a $2.51 net loss. In Q3, the results were better, with the EPS loss mitigating to a mere 5 cents. Revenues rose sequentially from $2.1 billion to $3.3 billion.
The share performance has been good for investors since late March. The stock has rebounded from the mid-winter losses, regaining all of its losses, and is now trading with a year-to-date gain of 30%.
The Gap has managed this turnaround while also shoring up liquidity and plotting a course forward. The company paid off half a billion dollars in outstanding debt during the spring, and raised $2.25 billion in capital through a secured note issue. A new revolving credit facility, for $1.87 billion, completed the company’s liquidity moves.
RBC’s retail expert Kate Fitzsimons is upbeat on Gap’s ability to chart its course forward. She rates the stock Outperform (i.e. Buy), and sets a $28 price target implying a 28% upside for the year ahead. (To watch Fitzsimons’s track record, click here)
Supporting her stance, Fitzsimons writes, “We [are] incrementally positive on Gap Inc.’s ability to emerge from the COVID crisis a more profitable company with expense actions at Gap and Banana Republic shoring up profitability at those brands, and with viable growth and margin trajectories at Old Navy and Athleta… With persisting questions about the fundamental health of the mall post-COVID-19, we note that Gap’s store footprint is undergoing significantly accelerated rightsizing, and the current crisis presents an opportunity for the team to reoptimize its cost structure through a combination of store closures, rent reductions, and headcount rightsizing at HQ.”
Overall, GPS holds a Moderate Buy rating from the analyst consensus. The stock has received 16 recent reviews, including 4 Buys and 12 Holds. The average share price is $21.31, suggesting a 3% downside from the current share price of $21.94. (See GPS stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
