Jefferies sees upside ahead for these stocks — and they pay solid dividends

CNBC

28-05-2025

With earnings season mostly in the rearview mirror, certain names stand out as winners moving forward, according to Jefferies. The firm recently highlighted several buy-rated stocks of companies that beat on earnings and issued solid guidance. It also favors domestic names over foreign, although international stocks are currently outperforming those in the United States. The iShares MSCI All Country World Index ex U.S. ETF (ACWX) has gained about 14% in 2025, while the S & P 500 is fractionally higher so far this year. However, domestically-oriented names are cheap on an absolute basis, as well as relative to names with foreign exposure, U.S. small-mid cap strategist Steven DeSanctis said in a note Tuesday. "Looking across several macro variables and relative performance of Domestic vs. Foreign, performance favors being domestically oriented," he wrote. The strategist added that if oil prices continue to fall and the dollar remains weak, those factors are favorable for domestic names. While the dollar strengthened for the second day on Wednesday, Jefferies thinks the greenback could be in for an extended period of weakness. These names are among those that made the cut; they are mostly mid-cap companies. They also pay dividends, so investors are paid to wait for the stocks to rise. Lamb Weston has 41% upside to Jefferies' $75 price target, as of Tuesday's close, and it has a 2.78% dividend yield. The company, which makes frozen potato products, posted a beat on both the top and bottom lines when it reported fiscal third-quarter results in April. Adjusted earnings were $1.10 per share, versus the 86 cents per share expected from analysts polled by FactSet. Revenue came in at $1.52 billion versus the $1.49 billion consensus estimate. Lamb Weston also reiterated its guidance for the full year. That was "much needed in our view to stem the negative sentiment," said DeSanctis, who acknowledged the company still faces some headwinds. "LW is now engaged with a strategic advisor to explore value creation and operational/cost saving opportunities after an activist got involved in fall '24, with the value of its integrated assets (notably in the US) possibly attractive to potential suitors," he noted. Shares are down 20% year to date. Virtu Financial , on the other hand, is up more than 15% so far this year. Jefferies' $47 price target implies about 14% upside from Tuesday's close. The high-frequency trading company's first-quarter normalized adjusted earnings were $1.30 per share, topping the $1.20 a share consensus estimate, according to FactSet. The results led Jefferies to increase its estimates for 2025 and 2026 earnings to $4.10 and $4.05 per share, respectively, from $3.74 and $3.78 per share. Elevated volatility and increased retail participation have been key drivers of Virtu Financial's recent earnings strength, as well as the company's growth initiatives, Jefferies analyst Daniel Fannon said in an April note after the company's earnings report. "While the sustainability of activity is always an unknown, the diversity of asset class/product contribution to the performance is notable (this quarter, metals were highlighted for the first time in recent history)," he wrote. "The growth and investor participation within Virtu's underlying markets, such as options, ETFs, crypto, and equity ownership more broadly continue to represent longer-term tailwinds to Virtu's growth outlook." The stock pays a 2.33% dividend yield. Lastly, STAG Industrial has a 4.21% dividend yield and is up nearly 5% so far this year. The real estate investment trust, which focuses on industrial properties in the U.S., has 29% upside to Jefferies' $45 price target, as of Tuesday's close. The company's first-quarter core funds from operations came in at 61 cents per share, 1 cent above the FactSet consensus estimate. Its revenue was $205.6 million, above the $201.1 million expected by analysts. Cash-leashing spreads — which is the difference between money collected on new and renewal leases compared to expiring lease — jumped 27.3%, analyst Jonathan Petersen pointed out in an April 29 note, after the company reported earnings. "We expect leasing spreads will continue to trend positively vs coastal peers over the next few years driven by demand related to onshoring of manufacturing and supply chain reconfiguration," he wrote.