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Lumber Liquidators (LL) Fears Overblown, Management Will Be Exonerated, Says Janney; Analyst Upgrades Stock to Buy

March 3, 2015 7:27 AM EST
Get Alerts LL Hot Sheet
Price: $1.70 -2.86%

Rating Summary:
    6 Buy, 13 Hold, 3 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 20 | Down: 14 | New: 22
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(Updated - March 3, 2015 7:48 AM EST)

Janney Capital upgraded Lumber Liquidators (NYSE: LL) from Neutral to Buy with a price target of $47 (unchanged). The stock tanked following a negative 60 minutes report accusing it of having higher levels of formaldehyde in its Chinese laminate products. Analyst David Strasser noted there were no victims on the show, US regulators did not participate, and he is satisfied the company is CARB compliant. Given this, he thinks fears are overblown.

"We believe 60 Minutes did not provide a complete picture of the issue. It didn’t highlight victims, had no feed back from regulators and relied on anonymous Chinese factory workers making accusatory statements," said Strasser. "There was no attempt to discuss different testing methodologies used, and account for the fact, that the testing that LL uses, makes them CARB compliant."

"We are also confident that unless the LL management team is entirely untrustworthy, and willing to risk everything for what would have been a few million dollars in annual savings, when they fully tell their side of the story they will be largely exonerated. It simply does not pass the common sense test," continued the analyst.

Strasser added, "LL saw EBIT margin raise about 600bp in 2010-2013. To risk all that for a few million dollars, just makes no sense. This is not a critique of 60 minutes, they are good at what they do, but the commons sense test favors LL."

For an analyst ratings summary and ratings history on Lumber Liquidators click here. For more ratings news on Lumber Liquidators click here.

Shares of Lumber Liquidators closed at $38.83 yesterday.



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