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FBR Capital Raises Price Target on Methode Electronics (MEI) Following Better Than Expected 2Q

December 9, 2016 6:59 AM EST
Get Alerts MEI Hot Sheet
Price: $11.63 -7.11%

Rating Summary:
    2 Buy, 4 Hold, 0 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 20 | Down: 14 | New: 22
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FBR Capital reiterated an Outperform rating on Methode Electronics (NYSE: MEI), and raised the price target to $50.00 (from $42.00), following the company's 2Q earnings report. MEI reported diluted EPS of $0.66 , and sales of $209 million. Consensus for EPS and sales were $0.55 and $209 million, respectively. Management reiterated its FY17 revenue target of $820 million–$845 million, but noted that they expect to be nearer the low end. They raised EPS guidance to $2.30–$2.45, from $2.20–$2.35, given better productivity and continued benefits of commodity prices.

Analyst Christopher Horn commented, "Methode has several opportunities in automotive and other end markets that we believe set it apart from other auto suppliers that are more leveraged to industry production levels. F2Q17 EPS was better than expected, while sales were in line with consensus but short of our estimate. Importantly, the company is progressing smoothly with two main themes that we believe could keep share moving higher: Dabir Surface has been used in more than 6,000 procedures, and management continues to report burgeoning interest for additional evaluations; and the company's automotive business in North America grew, according to our estimates, faster than underlying industry production. Additionally, we think that MEI shares could be in a position to benefit from management's remaining $28 million repurchase authorization, and that the company has an appetite for M&A activity. With a net cash position of over $200 million on the balance sheet and an FY16 ROIC of 17%, we think that the company is well positioned to deploy capital to the benefit of its shareholders. All things considered, we reiterate our Outperform rating and are raising our price target to $50, from $42. We are also raising our FY17 and FY18 EPS estimates."

For an analyst ratings summary and ratings history on Methode Electronics click here. For more ratings news on Methode Electronics click here.

Shares of Methode Electronics closed at $42.55 yesterday.



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