Our EquityAnalytics department is always updating price targets and ratings on companies that we cover based on new information. Our price targets and ratings are thoroughly researched and use financial analysis tools to determine stock prices. Today we are updating the following companies from our coverage: Dr. Pepper Snapple (DPS), Ryland (RYL), SAP (SAP) and VF Corporation (VFC).
The chart below shows new ratings, price targets, and buy/sell ranges vs. old ones:
Dr. Pepper Snapple: Upgrade from Hold to Buy, Increase PT From $50 to $52
We upgraded DPS from Hold to Buy due to some increased expectations for the company based on the latest earnings, better valuation currently, increased depreciation and a strong report on guidance. The company was bullish on comps, committed to returning money to investors, and good cost forecast. The company looks very good to continue to increase its value despite continued tough market conditions. Pretty strong results have also been seen from Coca-Cola (KO), PepsiCo (PEP) and that makes us believe that emerging markets will continue to offer solid growth for DPS as they continue to break into those markets.
Ryland: Upgrade from Sell to Buy, Increase PT from $11 to $29
We drastically upgraded Ryland due to the company's strong outlook and improvement YoY that was well outside of our expectations. The company actually looks to be profitable this year, which outpaced our 2013 forecast. The adjustment to our targets gave us a much more bullish picture. The housing scene is starting to improve quite a bit, and RYL will benefit a lot from a better housing picture. Their backlog and new order improved 44% and 46%, respectively. Those figures are outpacing many competitors.
SAP: Maintain at Hold, Increase PT from $59 to $74
SAP is continuing to see a nice amount of business increase as their application software services are continuing to show nice growth. At this point, however, the market is pricing in a lot of this growth. We increased expectations, which was a reason for the PT increase overall. Yet, we are seeing the market pricing in much of that growth in expectations. The acquisition of SuccessFactors (SFSF) is still not providing a ton of growth, but it should in 2013 and forward.
VF: Upgrade from Hold to Buy, Increase PT from $170 to $193
The market is really underpricing Vanity Fair at this point. PE is below 19, and we are expecting about 15% in growth in earnings over the next two years. That level of growth is definitely above the average for the industry, yet VFC is not getting priced with that growth. We believe the company will start to see a nice increase in valuation this year. Our price target was increased due to growth in expectations, lower CAPEX and lower working capital. The company, though, did increase debt and has large debt load.