High-Growth, High-Yield Value Stocks Nearing Trigger Points

Key Points

• Screen for growth, value and yield for market-beating returns in 2023. 
• Morgan Stanley moves into the buy range after analysts lower their targets. 
• Eastman Chemical Company is showing a bottom coincident with analyst sentiment improving. 
• Corning is at an inflection point, which is evident in the chart. 

A screen looking for growth in high-yielding dividend stocks turned up 3 interesting names. These blue-chip stocks trade for less than 20X their earnings outlook, have at least a 5% expected earnings CAGR for the next 2 years and pay more than 3.0%. What makes them attractive is the analysts' chatter and the chart action, which shows them nearing critical trigger points. Technical trigger points are never a guarantee of market action, but they often are, and when they do produce the expected result, it is well worth the effort. Today we’re discussing Morgan Stanley NYSE: MS, Eastman Chemical Company NYSE: EMN and Corning Incorporated NYSE: GLW. 

Morgan Stanley Falters On Analyst Downgrades 

Morgan Stanley stock received several price target reductions and downgrades following the latest earnings report, but the takeaway from the chatter is far from bearish. The sell-side reduced their holdings, not because of poor results but because good results pushed the price action to elevated levels. That was an opportune time to take profits for sell-side investors that would lead to a buying opportunity when the stock reaches more acceptable valuations. That may come soon because the action is heading down to the $77 level, expected to produce a solid bounce that takes this 3.5% yielding stock upward within its established trading range. 

The analysts still rate the stock a Moderate Buy with a price target 12% above the current action. That will help support the price, provided the trend does not continue lower. The latest targets are slightly below the current action and may signal the bottom for the market. Those targets are in the $80 to $85 range and include the recently set low target, which is coincidently near to the $77 target bottom of the trading range. Regarding the dividend, the 3.5% yield comes with a 47% payout ratio and a healthy balance sheet supporting distribution growth. The company has been increasing for the past 9 years at a 26% CAGR although that pace should be expected to slow. 

Eastman Chemical Is About To Rebound 

Eastman Chemical is about to rebound in more ways than 1. The company is expected to return to top and bottom-line growth this year and next, supporting a solid 3.75% dividend yield. The company is paying only 40% of its TTM earnings, which improves the forward payout ratio and the value. The stock is trading at 11X this year’s outlook and only 9.5X next year’s, which supports a healthy outlook for stock price appreciation. 

The analysts haven’t altered their stance since the last earnings report, a firm Hold verging on Moderate Buy with a price target about 20% above the recent action near $98. Mizuho set a low price target of $82 in January, marking the action's bottom. The company will report at the end of this month and may provide a catalyst for analysts and upward price action. The stock is showing support at Mizuho’s $80 target, which is support at a higher level than previously. Assuming the results catalyze a rally and this stock moves above the 150-day EMA, it could reach the $95 to $100 region by year-end. 

Corning Incorporated At Inflection Point 

Deutsche Bank said Corning was at an inflection point when it upped its rating to Buy from Hold. They set a $38 price target consistent with the Marketbeat.com consensus estimate and have the consensus firming. In their view, the company’s optical and display divisions will help balance weaknesses in other areas and support top-line growth in 2023 and top and bottom-line growth in 2024. Regarding the value and dividend, the stock trades at a higher 17X compared to 2023 estimates, but that falls to only 14X compared to next year. The dividend is worth 3.2% and has been growing for 12 years at a double-digit CAGR.