Seaport Global Securities Downgrades A. Schulman (SHLM) to Neutral
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Seaport Global Securities downgraded A. Schulman (NASDAQ: SHLM) from Buy to Neutral with a price target of $33.00.
Analyst Michael Harrison commented, "We are downgrading SHLM to Neutral from Buy after shares breached our $33 price target and the company held an Investor Day meeting that included FY19 targets that were short of our model. We think these targets could be conservative, though we did reduce our FY18 estimates to fit more of a linear progression toward the high end of the $2.80-$3.00 FY19 EPS guidance range. We have confidence in SHLM's ability to cut costs ($9MM additional actions announced), whereas we see a challenging road ahead in the company's plans to improve organic sales growth, including expanding the sales force by 10%, increasing speed to market with new products, and eliminating management layers that had been hampering sales efforts. We believe other efforts are in place to capitalize on growing areas while de-emphasizing weaker and lower-margin markets, though SHLM did not provide details on these strategic efforts. The banker-led strategic review process was designed to validate SHLM's sales growth plan and market intelligence; as such, we are less inclined to expect divestitures stemming from this process. Our downgrade is in no way a repudiation of the go-forward strategy or management team; we simply believe the current share price fairly values the risks and opportunities over the next 12 months, and look for a better entry point as the transition unfolds during FY17."
Shares of A. Schulman closed at $34.35 yesterday.
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