Lots of Downgrades Raymond James analyst Stephen Boland aggressively cut his price target on Dye & Durham Ltd but is still recommending the stock, which fell to all-time lows last week. He is keeping an “outperform” rating while slashing his price target to C$15 from C$25.
Dye and Durham reported first quarter results on Monday, with revenue of $120.1 million coming in above consensus of $117.4 million. The company reported adjusted EBITDA of $68.7 million versus consensus at $66.1 million.
But the stock reacted by rising only 1.3%. Mr. Boland urges investors to be patient.
DND’s stock has been under pressure in recent weeks as concerns over the company’s leverage has driven the share price down to all-time lows.
To alleviate these concerns, management announced a number of initiatives to help reduce the company’s debt levels and drive the company’s leverage below 4.0x, Mr. Boland noted. That includes a commitment to pause merger and acquisition activity and plans to utilize any excess free cash flow to pay down the company’s debt. In addition, DND announced a new strategic plan that is expected to generate $70-million or more in annual free cash flow savings. These improvements will be achieved through further price increases, capex reductions, operating expense savings and lower acquisition and restructuring costs.
On Monday it also announced a refinancing plan for a large chunk of its convertible debentures.
“We believe these announcements and the company’s increased focus on deleveraging will be welcomed by many investors. That said, it may take time for the shares to fully recover as investors wait for evidence that management’s plan is taking hold. Regardless, the stock remains heavily depressed, and we see upside in the shares assuming investor confidence in the name is eventually restored and the economic environment stays healthy,” Mr. Boland said.
Elsewhere, CIBC cut its target price to C$25 from C$26 and BMO cuts its target price to C$18 from C$25.
The average analyst target is now C$22.86, down from C$26.14 a month ago.