Thursday, June 4, 2020

UBS Has Five Stocks to Sell Into Volatility

March 4th, 6:13 pm
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The sell-off in the market caused by the aggressive Russian action in Ukraine may or may not have any long-lasting implications. Regardless of how things ultimately turn out, one thing is for sure. In a market that has had gigantic moves over the past 12 months, any sort of geopolitical hiccup like this can send people to the exits. We have closely monitored Wall Street Sell ratings and have noticed what seems to be a pickup in the sheer number of calls from firms that we cover.

The analysts at UBS are following a similar pattern we have seen across Wall Street. Valuation calls seem to dominate many of the overall downgrades. While many firms go from a Buy rating to a Hold on valuations, many seem to be pulling the trigger and going to the actual Sell levels.

Here are some the top stocks on which UBS has current Sell ratings.

AutoNation Inc. (AN) catches a Sell, and a very lackluster January and February for sales may be part of the reason. It also may be a straight valuation call as the stock is trading very close to the top of the 52-week range. Total retail sales of new vehicles increased 0.4% year over year to 19,434 units in January. On a same-store basis, retail new vehicle sales declined 2% from January 2013 to 18,964 units. While certainly not horrible, it may be not enough to justify the current price. The UBS price target for the stock is $39. The Thomson/First Call estimate is at $50.33. AutoNation closed Monday at $52.65.

Hexcel Corp. (HXL) is also a stock to Sell at UBS. The company engages in the development, manufacture and marketing of lightweight and high-performance structural materials for use in commercial aerospace, space and defense, as well as industrial applications. Over the past couple of months, there has been some insider selling, including almost 21,000 shares in December by a senior vice president at the firm Ira Krakower. The UBS price target is $42, and the consensus target is $48.93. Hexcel closed Monday at $44.54.

Lockheed Martin Corp. (LMT) is a Sell-rated stock at UBS. This again, is most likely a straight valuation call by UBS. With the stock trading near 52-week highs and the ability to drive earnings appreciably higher, the money simply may have been made on this name. Investors are paid a 3.3% dividend. The UBS price objective is $137, and the consensus target is $159.65. The stock closed at $163.55.

Sonic Automotive Inc. (SAH) operates as an automotive retailer in the United States. It engages in the sale of new and used cars, light trucks and replacement parts; provision of vehicle maintenance, warranty repair, paint and collision repair services; and arrangement of extended service contracts, financing, insurance and other aftermarket products. Much like the call on AutoNation, automotive retailers have had big runs, and this again may be a straight valuation call, especially after the horrible winter weather has stunted sales in many parts of the country. Investors are paid a small 0.4% dividend. The UBS price target is $20, and the consensus shows up at $26.60. Shares ended Monday at $23.47.

Wendy’s Co. (WEN) is a fast-food name that shows up in the UBS Sell column. Total revenue declined 0.7% year over year to $2.49 billion and also fell short of the consensus estimates by $5.0 million. Comparisons at North America company-operated restaurants were up 1.9%, better than a 1.6% increase in 2012 but marginally lower than management’s expectation of a 2.0% increase. Meanwhile, franchised units saw an increase of 1.7% in comparisons, compared with 1.6% in the prior year quarter. The bottom line is the tepid growth does not thrill the UBS team. The shareholders are paid a 2.1% dividend. The UBS target is $8, and the consensus is at $9.18. Wendy’s closed Monday at $9.35.

While the market volatility has stepped up sharply due to recent events, we were seeing a large number of Sell ratings prior to these overseas issues. Analysts are more than willing to pull the trigger if they feel fundamentals warrant it. We are striving to get all new Sell ratings out as soon as possible.

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