Notable analyst calls this week: Union Pacific, Lumentum and KBR among top picks

The S&P500 (SP500 [https://seekingalpha.com/symbol/SP500#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link%7Cfirst_level_url%3Anews]) closed in the red on Friday, after a week that saw a significantly hotter than expected July PPI report, more tariff-related headlines, and a strong earnings report from Micron Technology.

For the week, Nasdaq (COMP:IND [https://seekingalpha.com/symbol/COMP:IND]) gained 1.5%, while Dow (DJI [https://seekingalpha.com/symbol/DJI]) advanced 2%.

Wall Street had a slew of upgrades and downgrades from analysts. Here are some of the major calls for the week:

ARGUS DOWNGRADED UNION PACIFIC OVER MERGER CONCERN

Argus lowered [https://seekingalpha.com/news/4483882-union-pacific-is-downgraded-by-argus-on-concerns-over-merger-integration-challenges] its rating on Union Pacific (NYSE:UNP [https://seekingalpha.com/symbol/UNP]) to Hold from Buy on concerns over its merger with Norfolk Southern (NYSE:NSC [https://seekingalpha.com/symbol/NSC]) that would combine the two railroads, forming the first transcontinental railroad in the U.S.

Analyst Kristina Ruggeri said that while the firm ultimately believes that Union Pacific will benefit from the merger, the merged rails giant is seen likely experiencing integration challenges that will negatively impact its profitability in the near term.

"If the merger does not go through, the company could be at a competitive disadvantage without access to East Coast ports. In the meantime, it will also face its own export challenges amid tariffs," highlighted Ruggeri.

LUMENTUM UPGRADED AFTER Q4 RESULTS

BofA upgraded [https://seekingalpha.com/news/4484555-lumentum-rises-after-bofa-upgrades-following-q4-results] Lumentum (NASDAQ:LITE [https://seekingalpha.com/symbol/LITE]) to Neutral from Underperform and raised PT to $135 from $78 after its fourth quarter results and outlook.

Analysts led by Vivek Arya said that Lumentum's results indicate the possibility of hitting both its medium-term ($600M/quarter) and longer-term ($750M/quarter) revenue run-rate two-to-three quarters in advance of BofA's prior model.

"Under its relatively new CEO, LITE is refocusing back to its best-of-breed optical component (high-speed lasers, optical circuit switches) roots while prudently managing its lower margin optical transceiver mix. The result is a faster path towards achieving or beating the target 40% GM [gross margin]," said BofA.

KBR CUT TO NEUTRAL AT BOFA

BofA downgraded [https://seekingalpha.com/news/4484881-kbr-cut-to-neutral-at-bofa-citing-program-cancellations-and-lack-of-new-catalysts] KBR (NYSE:KBR [https://seekingalpha.com/symbol/KBR]) to Neutral from Buy, believing the U.S. Department of Defense's cancellation of the $20B HomeSafe contract - which had been expected to be a key medium-term growth driver, combined with other program cancellations and a lack of near-term new catalysts, will give the market pause.

The brokerage also reduced PT to $55 from $70, with analyst Mariana Perez Mora saying that a change in global energy priorities, delayed liquefied natural gas decisions in the U.S., and the lack of insight on near-term catalysts continue to pressure valuation of KBR's stronger Sustainable Technology Solutions portfolio.

Wells Fargo increased [https://seekingalpha.com/news/4483164-wells-fargo-gets-bullish-on-nvidia-ahead-of-earnings] the price target on NVIDIA (NASDAQ:NVDA [https://seekingalpha.com/symbol/NVDA]) to $220 from $185 ahead of the company's quarterly results later this month. The analysts noted that strong intra-quarter data points and reports of approved licenses to resume H20 chip sales into China, have driven them to increase Q2 estimates above Nvidia's $45.0B +/-2% guidance—they have moved to $48.2B/$1.06 (prior estimate of $45.8B/$1.00). The firm maintained its Overweight rating on the stock.

Meanwhile, Citi maintained its Neutral rating [https://seekingalpha.com/news/4483885-amd-keeps-neutral-rating-at-citi-after-china-ai-chip-sales-deal-with-us] and PT of $180 on ADVANCED MICRO DEVICES (NASDAQ:AMD [https://seekingalpha.com/symbol/AMD]) following a reported deal to give 15% of revenues from Chinese AI chips sales to the U.S. government in exchange for export licenses.

Goldman Sachs upgraded [https://seekingalpha.com/news/4483902-clearwater-analytics-rises-after-rating-upgrade-at-goldman-sachs] CLEARWATER ANALYTICS (NYSE:CWAN [https://seekingalpha.com/symbol/CWAN]) to Buy from Neutral, believing that execution risk tied to the acquisitions is now more than priced in, and the brokerage sees a positive catalyst path for the stock from here.

CIBC upgraded [https://seekingalpha.com/news/4486201-williams-upgraded-at-cibc-as-best-positioned-for-positive-trends-in-natural-gas-demand] energy infrastructure company WILLIAMS (NYSE:WMB [https://seekingalpha.com/symbol/WMB]) to Outperform from Neutral with a $64 price target, raised from $61, citing increasingly bullish natural gas demand trends and the outlook for infrastructure.

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