These U.S. stocks have the most on the line in Ukraine.
The Ukraine conflict has generated extreme volatility in financial markets around the world. The U.S. is only one of a number of countries that have imposed sanctions on Russia in retaliation for its invasion of Ukraine. Russia’s economy is already feeling the pain. Goldman Sachs recently estimated Russia’s gross domestic product will contract by 10% this year. The good news for U.S. investors is that most major U.S. stocks have relatively little business exposure to Russia and Ukraine. However, the conflict has created a handful of big winners and losers in the U.S. market so far. Here are eight U.S.-listed stocks to buy with direct or indirect exposure to the Ukraine conflict.
EPAM Systems Inc. (ticker: EPAM)
EPAM Systems is a digital engineering and consulting platform that generated about 4% of its revenue from Russia and Ukraine prior to the invasion. After downgrading EPAM in February following the initial Ukraine invasion, Bank of America analyst Jason Kupferberg upgraded the stock in early May following what he called a “very impressive” first-quarter earnings report. Kupferberg projects the percentage of EPAM’s employees in Ukraine, Russia and Belarus will fall from nearly 60% at the end of 2021 to around 30% by the end of 2022. Through May 23, EPAM shares are down about 25% since the invasion began, but Bank of America has a “buy” rating and $400 price target for EPAM stock, which closed at $314.66 on May 23.
Expedia Group Inc. (EXPE)
Expedia is one of the world’s largest online travel services companies, and its platforms include Expedia.com, Hotels.com and Hotwire. Expedia shares took a big hit in early May when the company reported a first-quarter bookings miss and said Ukraine and the omicron variant of COVID-19 weighed on global travel. Bank of America analyst Justin Post said Ukraine was “a factor” in the first quarter. However, he remains bullish on Expedia given multiple signs of pent-up travel demand, including positive trends from airlines, hotels and credit card companies. As of May 23, Expedia shares are down 39% since the Ukraine invasion began, but Bank of America has a “buy” rating and $225 price target for EXPE stock, which closed at $121.63 on May 23.
CF Industries Holdings Inc. (CF)
CF Industries is the largest North American producer of nitrogen fertilizer products. Russia was the top global exporter of nitrogen in 2019, accounting for 17% of the world’s market share. Fertilizer prices have skyrocketed since the Ukraine invasion, which has sent CF industry shares higher by 36% through May 23. Bank of America analyst Steve Byrne says CF is a great play on tight global nitrogen supplies. He says CF is also taking advantage of the opportunity to buy back shares of stock and invest in clean energy initiatives. Bank of America has a “buy” rating and $122 price target for CF stock, which closed at $101.09 on May 23.
Valero Energy Corp. (VLO)
Valero Energy is a leading North American independent petroleum refiner and marketer with a large presence in the U.S. Gulf Coast region. With Russia’s oil and natural gas production essentially cut off from the world, the energy sector has been one of the biggest winners from the Ukraine invasion. Bank of America analyst Doug Leggate says U.S. refiners are well-positioned for a record second quarter as the industry enters a new “golden age.” Valero is Leggate’s top refiner stock pick, and through May 23, shares are up 45% since the Ukraine invasion began. Bank of America has a “buy” rating and $140 price target for VLO stock, which closed at $123.96 on May 23.
Northrop Grumman Corp. (NOC)
Northrop Grumman is one of the largest U.S. defense contractors. Investors and analysts are anticipating a ripple effect from the Ukraine invasion will boost global defense budgets in coming years, and, through May 23, Northrop shares are understandably up 19% since the war began. Analyst Ronald Epstein says Northrop’s B-21 Raider and Ground Based Strategic Deterrent programs will be the company’s primary revenue drivers in coming years. However, he says the Ukraine war will likely also boost demand for missile systems and space technology. Bank of America has a “buy” rating and $550 price target for NOC stock, which closed at $456.77 on May 23.
Equinor ASA (EQNR)
Equinor is a large oil and gas producer that operates offshore in Norway and is a leading European natural gas supplier. Equinor is one of Bank of America’s top stock picks to play the emerging theme of European energy independence. The firm anticipates European natural gas prices will remain elevated, and Equinor is by far the best-positioned company to benefit. Analyst Mehdi Ennebati says Equinor will deliver industry-leading free cash flow yields through at least 2023. Through May 23, Equinor shares are up 14% since the Ukraine invasion began. Bank of America has a “buy” rating and $47.22 price target for EQNR stock, which closed at $35.21 on May 23.
PVH Corp. (PVH)
PVH is one of the world’s largest apparel companies and owner of popular brands Calvin Klein, Tommy Hilfiger and Heritage. Prior to the war, PVH generated about 3.6% of its revenue from Russia and Ukraine. Through May 23, PVH shares are down about 34% since the invasion began, but Bank of America analyst Christopher Nardone says the company has plenty of growth opportunities ahead to help it overcome its Ukraine headwinds. PVH management is bullish on the company’s long-term expansion potential in Europe, and the company has a multiyear opportunity to improve North American margins. Bank of America has a “buy” rating and $144 price target for PVH stock, which closed at $64.21 on May 23.
Carnival Corp. (CCL)
Carnival is the world’s largest cruise line operator. Carnival investors experienced a near worst-case scenario when the entire cruise industry was completely shut down for more than a year during the worst stages of the pandemic. Unfortunately, Carnival also generates about 3.6% of its revenue from Russia and Ukraine, meaning investors have had a brand-new headache in 2022. Through May 23, Carnival shares are down about 35% since the invasion began, and Bank of America analyst Geoffrey d’Halluin remains cautious on the stock given uncertainties tied to Ukraine, rising fuel prices and Carnival’s elevated debt levels. Bank of America has a “neutral” rating and $22 price target for CCL stock, which closed at $13.11 on May 23.
8 stocks affected by the Russia-Ukraine war:
— EPAM Systems Inc. (EPAM)
— Expedia Group Inc. (EXPE)
— CF Industries Holdings Inc. (CF)
— Valero Energy Corp. (VLO)
— Northrop Grumman Corp. (NOC)
— Equinor ASA (EQNR)
— PVH Corp. (PVH)
— Carnival Corp. (CCL)
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8 Stocks Affected by Ukraine Conflict, Russia Sanctions originally appeared on usnews.com
Update 05/24/22: This story was published at an earlier date and has been updated with new information.