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Wells Fargo upgraded Lennox (LII) to Overweight from Equal Weight with a price target of $300, up from $238. The firm believes earnings resilience in a residential HVAC slowdown and a path to best-in-class margins can restore the historical relative valuation premium and drive Lennox outperformance.
Barclays upgraded Pentair (PNR) to Overweight from Equal Weight with a price target of $55, up from $48. The firm continues to have a neutral view on U.S. multi-industry stocks into 2023, although the firm is more optimistic than many investors. The firm favors stocks exposed to U.S. residential construction, companies offering value from portfolio change and beneficiaries of easing supply chains. The firm believes Pentair will benefit from easing supply chains and says the stock is among the firm's key picks for residential exposure.
Downgrades
Wolfe Research downgraded Vontier (VNT) to Peer Perform from Outperform without a price target. The firm notes Vontier is too cheap with the bear case arguably priced in, and the firm struggles to see credible catalysts for multiple expansion.
Morgan Stanley downgraded Synchrony Financial (SYF) to Underweight from Equal Weight with a price target of $29, down from $31. The firm is cautious on the consumer finance sector heading into 2023. The firm expects higher credit losses, driven by a consumer cash flow squeeze from high inflation, rising unemployment and less excess savings. With 22% of loans out to the bottom 40% of income earners, the firm notes consumer loan delinquencies and net charge-offs will accelerate over the coming quarters.
Exane BNP Paribas downgraded Pearson (PSO) to Neutral from Outperform. The says the stock's elevated valuation multiple does not reflect expectations of increasing cost inflation and operating margin pressure in 2023.
Others
Citi resumed coverage of ADT Inc. (ADT) with a Buy rating and $11 price target. The firm notes ADT's new partnership with State Farm, including exposure to the brand's 14M customers, seems highly logical to us given the opportunity for cross selling. The firm also thinks State Farm's equity investment/ tender process alleviates a degree of PE overhang for ADT.
Goldman initiated coverage of Aclaris Therapeutics (ACRS) with a Buy rating and $25 price target, which represents 64% upside potential. The firm has a positive view on the clinical outlook for the company's lead drug, zunsemetinib, ahead of proof-of-concept data in rheumatoid arthritis expected in 2023. The firm also anticipates initial clinical data from Phase 2a studies of zunsemetinib in potential expansion indications in the first half of 2023 to begin to prove out the drug's pipeline-in-a-product potential.
JP Morgan initiated coverage of Sapiens (SPNS) with an Underweight rating and $20 price target. The firm notes the company has an uneventful outlook for revenue growth and the stock deserves to trade at a discount to peers given its revenue mix. The firm also flags currency headwinds from Sapiens' non- U.S. exposure and low stock liquidity.
