RBC - Target $17 Fundamentally Undervalued
Good time to buy. We believe the market reaction to the guidance will play itself out in short order, and while we see it as a possible impediment to future multiple expansion, we believe that the stock itself remains fundamentally undervalued. On the current 2016E EV/EBITDA multiple of 3.3x, the stock trades at a material discount to the peer average of 4.3x.
In-line results; Market reacts to reduced disclosure
Despite the in-line Q4 and disclosure decision, we continue to view AC as a fundamentally undervalued stock and one of our top ideas in our Transportation coverage. We point to the long term drivers, including: 1) a meaningful reduction in per unit costs (both operating costs and fuel); 2) a powerful competitive position (particularly in international); and 3) a positive operating environment.
Reiterate
Outperform and lower PT to $17 from $21 largely on higher net debt.