SPAR Spartan Motors initiated with an Outperform at Barrington- tgt $13 (9.70 )
Barrington initiates SPAR with an Outperform and a $13 tgt saying they believe that SPAR is continuing to make improvements to the military chassis operation. However, they expect that the military capacity expansion will result in a lower-than-expected Q4/07 gross margin. As such, their Q4/07 EPS number is well below the Wall Street consensus. Long-term, they believe that SPAR can grow both sales and EPS as military production inefficiencies and parts shortages are worked out. For SPAR stock to work, Q4/07 and Q1/08 should see improvement in military gross margin and heavy MRAP new orders. SPAR is also strategically positioned to take advantage of a better 2008-2009 RV chassis market.