Longbow's David MacGregor upgraded Interface from Neutral to Buy with a newly established $30 price target.
The bullish case for Interface's stock is based on five factors, MacGregor said in the upgrade note. (See the analyst's track record here.)
- Organic orders rose 9.7 percent year-over-year in the second quarter to $290.9 million, which implies continued momentum after 8-percent growth in the fourth quarter of 2017 and 12.1 percent in the first quarter 2018.
- Investor concern over a fall in gross margins in Q2 can be attributed to transitory issues, including delayed productivity initiatives and a negative mix shift from the lower-margin Interface Services business.
- The company's LVT business should grow at 100 percent in 2018 and again in 2019, and the premium margin product should translate to topline growth.
- The acquisition of Nora Systems should be accretive to fiscal 2018 earnings per share by 3-6 cents and positively impact 2019 gross margins.
- The stock is trading at a P/E multiple of 13.9 times and EV/EBITDA multiple of 8.8 times versus the five year P/E average multiple of 17 times and EV/EBITDA multiple of 9.2 times.
Interface shares were trading up 3.9 percent to $23.28 at the time of publication Tuesday.
Benzinga's Top Upgrades, Downgrades For August 14, 2018
Interface Downgraded By Raymond James On Brexit Risks
Latest Ratings for TILE
|Aug 2018||Longbow Research||Upgrades||Neutral||Buy|
|Apr 2017||Nomura||Initiates Coverage On||Buy|
View More Analyst Ratings for TILE
View the Latest Analyst Ratings
See more from Benzinga
- Morgan Stanley Incrementally Bullish On Salesforce, Says MuleSoft Deal Underappreciated
- KeyBanc Downgrades Dycom After Guidance Cut, Awaits Revenue Re-Acceleration
- Switch's Guidance Shortfall Prompts JPMorgan Downgrade
© 2018 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.