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While the U.S. and China continue to build momentum towards a trade deal, Wall Street analysts are getting increasingly anxious awaiting a breakthrough.
Analysts say there are several companies who to stand to benefit in the event of the long awaited agreement. They include companies like Tyson Foods, Visa, Mastercard, NXP Semiconductors, Polaris Industries, and Navigator Holdings.
CNBC did a deep dive into recent sell-side research to find which trends analysts are watching for in their respective coverage universes.
Trade talk was definitely in the air at at an agriculture industry conference last week according to analysts at Credit Suisse. Robert Moskow, who covers Tyson Foods for the firm, was at the event and noted increasing chatter surrounding an outbreak of African Swine Fever in China. This “increases the likelihood that China will agree to a deal,” he said in a note to clients.
“ASF is likely to benefit Tyson because it can lead to more exports of U.S. pork and chicken leg quarters to China and because its Keystone business in China will benefit from local demand shifting into chicken and away from pork due to disease fears,” he said.
Shares of Tyson are up 1.73 percent on Thursday.
Credit card issuer’s Visa and Mastercard also stand to benefit on a positive trade outcome according to Loop Capital analyst Joseph Vafi. While the ag and manufacturing industries get all the attention when it comes to tariffs, “U.S. technology and services companies could also end up being a beneficiary,” he said.
If the U.S. can get China to compromise on the issue of intellectual property an, “unlikely ramification,” could be one that helps Visa and Mastercard gain entry in to the country, Vafi said.
Shares of both companies are trading lower.
Polaris Industries, which manufactures powersports vehicles, was upgraded by analysts at KeyBanc earlier this week. They cited, “tariff optionality,” as key reason for their call.
“New product or not, PII is also the largest beneficiary of the ‘tariff trade’ under our coverage, with $1.40+ tied up in tariff costs that could benefit the P&L in various forms,” analyst Brett Andress said in a note to clients.
The stock is up over 1 percent today to $95.98.
Here’s what else analysts are saying about companies waiting for a trade deal:
“Takeaways from last week’s industry conference held by Agribusiness econometric firm EMI pointed to improving near-term conditions for commodity chicken processors and lots of hope for a positive trade deal with China. As we wrote in our report last week, this is a clear-cut positive for Tyson Foods. We are in line with consensus for our 2Q and FY19 EPS estimates. That said, the outlook for capacity expansion in chicken processing and a decline in cattle inventories might pose some challenges beginning in 2020. … .China”s African Swine Fever outbreak in its pig herd increases the
likelihood that China will agree to a deal. Analysts believe that China’s herd reduction is even worse than the 20% its government reported and that it might spread through Europe on a grander scale. To put into context, a herd reduction of that size is equal to the entire pig herd of the U.S. ASF is likely to benefit Tyson because it can lead to more exports of US pork and chicken leg quarters to China and because its Keystone business in China will benefit from local demand shifting into chicken and away from pork due to disease fears.”
“Battle over US intellectual property could end up helping the card payment networks in any trade deal. With the Chinese vice premier in Washington this week, prospects for some sort of trade deal seem better than they have been over the last year. And while manufacturing and agriculture get most of the attention when it comes to tariffs and what could be offered up in a trade deal, US technology and services companies could also end up being a beneficiary. In particular, a key US demand that the Chinese seem somewhat willing negotiate is the issue of IP. The US is demanding that American companies be able to set up wholly-owned subsidiaries in China, without a domestic joint venture partner, as a means to stem IP theft. This concession would clearly help US tech companies looking to expand their businesses in China. But perhaps an unlikely ramification of such a concession by the Chinese would be to help grease the skids for eventual approval of domestic business licenses for Visa (V:$157.64-Buy) and Mastercard (MA:$236.06-Buy), neither of which is currently operating in China to any material degree.”
“With or without a trade deal, we expect revenues to be up; therefore, we are comfortable with the consensus estimate of $1.72 on $2.16 billion. In the absence of a trade deal, we do not expect any major upside to consensus. However, in the event that a trade deal is reached, we would not be surprised to see material upside to consensus, as China inventory starts to refill across all end markets and business segments. In particular, being a large, broad supplier of semiconductor products, we would expect NXPI to benefit in a disproportionate manner in our view in this event.”
“Retail Dented by Weather, Upgrade to OW on New Product and Tariff Optionality. Upgrading PII to OW, a Coiled Spring with Several Ways to Win. … .Despite 1Q19 weather, underlying consumer demand remains intact, and optionality around both MY20 product catalysts and tariff resolution creates a path to earnings power of $9+ in FY20. We weight the probability of each catalyst occurring to drive our updated FY20 valuation framework (next page) of $8.05 in earnings at a ~15.5x multiple, yielding a $125 price target. … .New product or not, PII is also the largest beneficiary of the ‘tariff trade’ under our coverage, with $1.40+ tied up in tariff costs that could benefit the P&L in various forms.”
“We estimate a slight oversupply of LPG vessels in the near term due to macro headwinds, but a resolution of the U.S.-China tariffs and increased capacity out of Marcus Hook should alleviate these bottlenecks during 4Q19. Asian demand for LPG and petchems remains relatively strong due to the East-West arb, and we expect increased Asian imports to commence during 2H19, once clarity around tariffs is known. … .NVGS continues to be our top pick in the maritime sector.”
