Ahead of the Bell: Gardner Denver

Analyst upgrades Gardner Denver on improved margins, cost-cutting

• On 9:10 am EDT, Thursday October 8, 2009

HARTFORD, Conn. (AP) -- An analyst upgraded Gardner Denver Inc. Thursday, saying the maker of pumps and compressors is benefiting from improved margins and cost-cutting.

KeyBanc analyst Jeffrey D. Hammond upgraded the shares of the Quincy, Ill., company to "Buy" from "Hold." He initiated a $42 price target, which would represent a 27 percent premium over its closing price Wednesday of $33.11.

"While industrial markets are still on the front end of a stabilization, we believe current valuation represents a solid entry point based on the long term, structural transformation at GDI," Hammond said in a client note.

Barry L. Pennypacker, who has been president and CEO since January 2008, will achieve his stated target of 14 percent margin expansion in industrial products by 2014, which would add $1.30 per share to $1.60 per share in earnings, Hammond said.

Management also is positioning Gardner Denver to better capture opportunities in its aftermarket business, he said. In addition, Hammond said the company will achieve incremental cost savings of $25 million, largely focused on its industrial products unit.

Hammond increased his 2010 earnings estimate to $2.10 per share from $1.95 per share citing the improving U.S. economy, "signs of stabilization" in Europe and increased confidence in better margins in the company's industrial products business.

Analysts surveyed by Thomson Reuters expect earnings next year to be $2.32 per share.

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