Watch These Stocks at J.P. Morgan's High Yield & Leveraged Finance Conference
John is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Hello and welcome, Motley Fool readers. The cold winter months in New York are a great time to attract the Wall Street community to warm and sunny South Florida, and we’ve had an excess of institutional events and conferences in recent months.
This week, J.P. Morgan is hosting its annual High Yield & Leveraged Finance Conference at the Loews Miami Beach Hotel from February 25 - 27.
Readers may ask how to interpret the terms “high yield” and “leveraged finance.” In the context of this week’s conference, high yield refers primarily to the debt obligations of the companies that are presenting. These companies mainly have lower grade scores at the credit rating agencies, due to higher risk of default on their commitments. Therefore, debtholders are offered a higher return for the risk incurred. Many of these businesses are leveraged by nature of a high debt-to-equity ratio, hence the name leveraged finance.
Here are three companies I’m watching at the upcoming High Yield & Leveraged Finance Conference:
Cheniere Energy (NYSEMKT: LNG)
This Houston, TX based energy company is engaged in liquefied natural gas related businesses, hence the LNG ticker symbol. Shares of Cheniere have risen a massive 33% in the last 3 months as Cheniere’s project to build the world’s first liquefied natural gas export terminal is well underway.
The company is partnering with Chevron and French giant Total for its groundbreaking LNG terminal. Our nation has an abundance of clean liquified natural gas, and CEO Charif Souki believes his company will allow the United States to export the fuel worldwide.
On February 21, analysts at Barclays upgraded Cheniere Energy to Overweight from Equal Weight with a $25 price target. Barclays believes a higher price target is warranted given the company’s greater visibility on the LNG export terminal and successful Phase 2 financing.
Cheriere’s website has plenty of reading material regarding LNG, and I would advise readers to take a look for the informational value on our nation’s energy future. Management is presenting at J.P. Morgan’s conference on Monday, Feb. 25 at 4:40 p.m.
Penske Automotive Group (NYSE: PAG)
Readers may be surprised to learn that Penske is the second largest publicly traded automotive retailer in the United States behind AutoNation as measured by total revenue.
The company provides automotive sales and services throughout the United States, the U.K., and Germany. Specifically, 173 auto franchises are located in 18 states and in Puerto Rico while 171 franchises are located outside the U.S., most of which are in the United Kingdom.
On February 6, Penske reported better-than-expected Q4 2012 earnings with $0.57 EPS vs. $0.53 consensus and revenue of $3.4 billion. Same-store retail revenue increased 11.4%, indicating new car buyers are returning to the market.
KeyBanc upgraded Penske ahead of the company’s breakout fourth quarter earnings with a $36 price target. Analysts at the Cleveland, OH based firm anticipated Penske’s outlook through their channel checks, which indicated strong sales trends and potential for gross margin improvement.
During the most recent quarter, gross margin increased to 8.2% per new car sold compared to the prior quarter’s 7.7% gross margin. Revenue has grown 18% in the last 12 months at Penske while earnings have grown 12%.
Penske management is presenting at J.P. Morgan’s conference on Monday, Feb. 25 at 2:00 p.m.
Sealed Air Corporation (NYSE: SEE)
Sealed Air uses its namesake technologies to protect goods in a variety of industrial, health care, commercial, and consumer applications. The $4 billion dollar company operates in four segments: Food & Beverage, Institutional & Laundry, Protective Packaging, and Medical Applications & New Ventures.
Sealed Air acquired Diversey, a cleaning and sanitization supplier, for $4.3 billion during 2011, only to record a massive $1.2 billion impairment charge during Q3 2012.
However, business operations at Sealed Air appear to be improving. On February 19, the company beat consensus Q4 earnings-per-share by 5 cents ($0.34 vs. $0.29), causing shares to spike higher by more than 12% in the after-hours session.
With the stock now trading at 52-week highs, Wall Street has a mixed opinion on Sealed Air’s future prospects. J.P. Morgan and Wells Fargo both downgraded the stock to hold from buy on February 20, however analysts at R.W. Baird actually raised their price target to $26 from $20.
Baird believes Sealed Air is in the early stages of a multi-year turnaround, and I agree. I’ll be looking for any anecdotal comments on Sealed Air’s business transformation at J.P. Morgan’s conference. Sealed Air is scheduled to present at 9:40 a.m. on Monday.
High Yield & Leveraged Finance Conference Agenda
Readers can download an agenda for the three-day conference at the following link.
J.P. Morgan CEO Jamie Dimon will give a keynote luncheon presentation on Monday at 12:20 p.m., albeit from New York via satellite. In contrast, former U.S. Secretary of Defense (2006-2011) Dr. Robert Gates will make an in-person appearance with his own keynote presentation on Tuesday.
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johnmacris has no position in any stocks mentioned. The Motley Fool owns shares of Sealed Air.. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!